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HEALTH, WEALTH, AND HAPPINESS

April 11, 2022

"All the breaks you need in life wait within your imagination. Imagination is the workshop of your mind, capable of turning mind energy into accomplishment and wealth."

- Napoleon Hill

Janet Yellen Remarks on Digital Assets (U.S Treasury): Treasury Secretary Janet Yellen recently delivered these remarks on where the U.S. is going with bitcoin and cryptocurrency. This is the transcript: here's the link if you'd rather watch the video.

Investor takeaways: There are a few notable things about this speech.

First, she legitimizes bitcoin and cryptocurrencies, even pegging them with a $3 trillion market cap. This means the Treasury accepts that digital assets have value.

Second, she compares digital assets to other financial innovations, like electronic payments and ATMs. This means the Treasury sees digital assets as a technology evolution.

Third, she lays out five lessons learned from previous financial technologies. This shows the Treasury is willing to work with incorporating digital assets into the U.S. financial system.

As opposed to countries like China that have outright banned crypto, this is a very positive development for crypto in the U.S., at least during the Biden administration. Worth a read (or a watch).

Yellen pegged the crypto economy at $3 trillion. To give you a sense of how large that is, it's larger than Tesla, Microsoft, and Apple (but not as large as gold):

Graphic courtesy Revix

Investor takeaway: There's still a long road ahead for the U.S. to embrace cryptocurrencies, but there's now an acceptance of them as a legitimate asset class. That's a Very Big Deal.

The news is rather lite. There are no major developments involving Elon Musk or Twitter, or any other industry changing announcements worth mentioning.

The U.S. Department of Labor is set to release March inflation figures tomorrow, and UBS economists have predicted that the data will show the consumer price index increased at an annualized rate of 8.5% in March. 

This comes at a time when many analysts expect U.S. economic growth to slow sharply, and Federal Reserve policymakers realize that the juice is no longer worth the squeeze. 

Bumping the Fed

So, it's not just the Mondays that are getting the market down, but the very real fear that with inflation trucking ever higher, Fed policymakers might be compelled to raise the central bank's interest rates faster than previously expected.

Meeting minutes from the Federal Open Market Committee's March meeting revealed that the members were in fact considering hiking rates by 0.5%, rather than the traditional 0.25% increase.

Current price action in the Fed funds futures market indicates an 82% chance that FOMC members are going to go for that big bump at their next meeting on May 4.

Higher interest rates from the Fed means tighter monetary conditions, which usually translates into less investment into risky assets like digital currencies. 

Don't let it bring you down

Most likely due to either of the above conditions (concerns surrounding the Fed rates or the Mondays), but possibly for some other reason, bitcoin and many other cryptocurrencies are falling today.

The 50-day moving average (red line), which until yesterday seemed like a good place to build support, has now failed, leaving traders to question where the next level of support might be. 

The logical place would probably be right where we are at the time of this writing. Finding support at the psychological level of $40,000 per bitcoin would be a really positive sign on a not-so-positive day.

The dotted orange upward trendline would certainly welcome some sort of bounce, but as we know, past performance is not any indication of future results.

However, the entire area below $40,000 probably has about a hundred levels that different analysts might point to, going all the way down to this year's low of approximately $32,950.

In any case, no matter what happens today, tomorrow will be Tuesday.

Have an awesome week ahead!

Mati Greenspan

Analysis, Advisory, Money Management

Not at these prices, it isn't.

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