30th Oct: Bitcoin surges to $21,000, Musk acquires Twitter (memes included), Upcoming FOMC meeting projections, Meta shares crash - Weekly Newsletter

This week's top headlines:

i) Bitcoin reaches $21,000 while the US dollar falls, as investors expect the Fed to reverse its aggressive stance in 2023.

ii) Markets are largely pricing in a 75 basis point hike during the upcoming FOMC meeting on 1st and 2nd November. Future hikes remain scattered.

iii) Elon Musk has freed the bird. The billionaire acquired Twitter for $44 billion and fired top executives shortly after. (Memes included)

iv) Facebook's parent company, Meta, has lost a record $650 billion after it started venturing into the Metaverse a year ago.

Scroll down for the details:

Shoutout to all our current Gatherer members! Thank you so much for all your support.

Here’s a quick recap on what I covered in my previous issue (23rd October):

i) It was another peaceful week for Bitcoin. The world's largest cryptocurrency spent the entire week trading in the tight range between $19,000 and $20,000, again. My explanation for this is that traders are swing trading Bitcoin (i.e., buying below $19k and selling at $20k), which may be why we see Bitcoin refusing to break out of its tight range.

ii) UK PM Liz Truss resigns after only six weeks in office. In her speech last week, she admitted that she could not deliver the promises she made when she was running for Conservative leader and had lost the faith of her party. She was largely criticized for her "mini-budget" which sent shockwaves into the UK markets and almost caused a financial crisis.

iii) Malaysia’s inflation in September eased to 4.5%, slightly lower than August’s figure of 4.7%. MIDF projects another 25 basis point hike to the Overnight Policy Rate (OPR) in November.

iv) The Japanese yen regains strength amid reports of government interference in the forex market. This is the second time in a month of such intervention.

v) Turkey central bank slashed interest rates by 150 basis points even as inflation roared at 83%. The Turkish president’s pursuit of growth and export competition is counterintuitive and unorthodox. He believes that interest rates are "the mother of all evil". As a result, the Turkish Lira lost over 50% of its value against the dollar since the start of the year.

Now to this week’s news…

i) After more than 4 weeks of serenity, Bitcoin broke out of its tight range and surged to $21,000 on Wednesday. This movement caught many traders out of the blue because they were relying on Bitcoin's sideways action to swing their trades.

ii) The bears are holding the $21,000 mark for now. With the Relative Strength Index (RSI) at overbought levels, the market is overheated with buyers and they are starting to get exhausted. Therefore, I am expecting Bitcoin to retrace back $20,000 before any upside.

iii) Ethereum, on the other hand, has been on a roll. On Wednesday, it pumped more than 16% to $1520. Unlike Bitcoin, Ethereum continued its rally to a six-week high of $1670, before closing the week at $1620.

iv) The total crypto market cap is currently $984 billion, which is very close to $1 trillion.

Speculative assets (ie. tech stocks and Bitcoin) surged while the dollar slumped.

The rally we've seen in the crypto market this week is not without reason. When compared to tech stocks and the US dollar index, Bitcoin's upward momentum was supported by the greenback's weakness.

Dollar weakens in hopes that the Fed will pivot.

i) Unveiled on Thursday, the latest US housing data showed that home prices in the United States sank in August and sales of single-family homes weakened in September.

This provided evidence that the Fed's aggressive tightening cycle is slowing the economy. As such, investors are now looking at the Fed to possibly be less aggressive (or pivot) in 2023.

ii) Institutions such as Goldman Sachs and Ambank Research both believe that the Fed will continue raising rates until the second quarter of next year before pausing to reflect on a pivot.

David Solomon, the CEO of Goldman Sachs, expects the Fed to continue raising interest rates until a peak of 4.5%-4.75% before pausing (the current rate is 3%-3.25%).

However, if the Fed does not see inflation cooling, they will probably hike rates further, Mr. Solomon added.

The main issue is the labor market, which still remains quite strong. US reported 10.1 million job openings in August. Though it has fallen, it still remains historically high.

iii) Meanwhile, Ambank Research believes that the interest rate differential between Malaysia and the United States will shrink during the second half of 2023.

The research house also stated that Malaysia’s economy will be much more settled after the 15th General Election. Therefore, our ringgit should regain strength against the US dollar during the second half of 2023.

*Markets are quick to price in the possible scenarios of the Fed's stance, and the dollar weakened in response.

A 75 basis point hike is already priced in for the upcoming FOMC meeting on 2nd November. Future hikes remain uncertain.

The market should see no negative reactions during the next FOMC meeting on 1st and 2nd November. The Fed is largely expected to go with its fourth consecutive 75 basis point hike.

What's surprising is...

To continue reading our newsletter, subscribe to our Curious package for as little as $2 a month!

12 more spots remain for our Gatherer package!

Subscribe to our Patreon membership today and join our curious community of learners, traders, degens, developers, and more. As a Gatherer, you’ll have a plethora of learning options and opportunities to join our special events.

Disclaimer: I am not a financial advisor. This newsletter is based on my own analysis and research. Do not take any of it as financial advice.

*This newsletter was written at 12.30 PM on 23rd October 2022 and completed at 5.30 PM the same day.