The latest moves in crypto markets, in context Was this newsletter forwarded to you? Sign up here. |
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Good morning, and welcome to First Mover. Here’s what’s happening this morning: Market Moves: Bitcoin steady as the U.S. real yield remains negative for Main street. Featured Story: Is rising real yield a blessing in disguise? And check out the CoinDesk TV show “First Mover,” hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Damanick Dantes, markets reporter, CoinDeskDr. Ryan Clements, assistant professor, chair, business law and regulation, University of Calgary Faculty of Law Steven Walbroehl, co-founder and chief information security officer, Halborn Michael Safai, managing partner, Dexterity CapitalToday’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra. Let us know what you think by replying to this email. |
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Risk assets remained bid early Wednesday. In traditional markets, the real or inflation-adjusted yield on the U.S. 10-year bond flipped positive for the first time since early 2020. However, for the general population, facing an above-8% inflation, the real yield remains negative. The 10-year real yield is considered the risk-free alternative to owning stocks or risk assets, in general. "Real rates are a clear tightening of financial conditions, and risk assets tend to face a higher risk premia in this backdrop," Chris Weston, head of research at Pepperstone, tweeted. Even so, bitcoin and futures tied to the S&P 500 traded higher at press time. Perhaps investors have come to terms with the idea that the era of cheap money is passe or the real yield as represented by the yield on the 10-year Treasury inflation-protected securities does not paint an accurate picture. The latter could be the case, as TIPS are bonds issued by the U.S. government that offer protection against inflation. So, the yield on TIPS is essentially a market-based measure of returns adjusted for inflation. It's the preferred tool on Wall Street. On the main street, inflation, as represented by the consumer price index (CPI), is at a four-decade high of 8.4%. If the nominal 10-year yield is adjusted for the CPI, the real yield comes to at least -5.5%. In other words, while Wall Street may press the sell button for risk assets, Main Street still has a solid reason to diversify into perceived store of value assets like bitcoin and gold. Whether that comes to fruition and powers a fresh crypto bull run remains to be seen. |
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10-year real yield as per TIPS versus CPI-adjusted. (Bloomberg, Deutsche Bank, Holger Zschaepitz) |
While speculation is doing the rounds that retail investors are bargain hunting, Blockchain data shows otherwise. "The amount of BTC added to addresses grouped by size over a 7-day period. According to on-chain data from Coin Metrics, holdings in addresses with 10k-100k have dipped, but they are being mainly picked up by addresses with 1k-10k BTC – not exactly retail size," CoinDesk's sister concern Genesis Global Trading said in a daily newsletter dated April 19. Dollar index drops The dollar index, which tracks the greenback's value against major currencies, including the euro and the Japanese yen, dropped 0.5%. The DXY is considered one of the biggest nemesis of bitcoin. However, the latest weakness is not necessarily bullish. That's because fears of an early rate hike by the European Central Bank and FX market intervention by the Bank of Japan have put a bid under the euro and the yen, driving the DXY lower. Policy tightening is bearish for risk assets, in general. |
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The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours: |
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Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges. |
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Rising Real Yield a Blessing in Disguise? By Omkar Godbole |
The U.S. 10-year real yield (market-based measure) has risen over 100 basis points in four weeks to turn positive. A similar positive crossover was last observed in early June 2013, following which investors fled emerging markets (EMs), leading to EM currency volatility. The jury is out on whether history will repeat itself, but if it does, EM investors may park their money into digital assets, especially stablecoins, Turkey's experience suggests. Turkey has been facing high inflation and currency market volatility since at least 2018. Last year, the lira tanked a staggering 78% against the U.S. dollar and Turks turned to crypto assets. "In the face of a quickly devaluing local currency, Turks have increasingly turned to crypto assets. Trading volume on Turkish-lira denominated markets on Binance reached $160B in 2021," Coin Metrics' analysts wrote in a report published in January. "Dollar-backed stablecoins have been particularly popular with Turks. Over $7B of Binance’s stablecoin BUSD traded against the lira in 2021 while $36B of Tether (USDT), the largest stablecoin by total supply, traded against the lira last year. The lira’s share of all Tether volume has expanded to surpass the euro, British pound, and other major fiat currencies," Coin Metrics' analysts added. |
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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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