This Week’s Top Headlines

i) Bitcoin breaks the $30,000 mark on its unstoppable bullish momentum. It is now up a whopping 87% since January and is at its highest since June.

ii) The US inflation cools to 5.0%, the lowest point since May 2021. What implications does this hold for the Federal Reserve and the equity market?

iii) The US dollar continues to weaken. Analysts forecast the ringgit to hover at 4.39 against the greenback, having surged by over 3% in the past 35 days.

iv) More good news for Malaysians. PM Anwar announces that the Employees Provident Fund (EPF) will increase the voluntary contribution limit from RM60,000 to RM100,000 per annum.

Scroll down to read the details.

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Bitcoin surges to a 10-month high

The crypto market has made an impressive comeback from one of the worst bear markets last year.

Bitcoin has broken above the crucial resistance of $30,000 and is at its highest point since June 10 - that was just before the crypto lending company Celsius froze withdrawals, which eventually led to its collapse and a 42% decline for Bitcoin, from $30,000 to $18,000.

What followed a few months later was yet another crisis: the implosion of the second-largest crypto exchange, FTX. This occurred in November and led to a 25% plunge for Bitcoin, from $20,800 to $15,600.

Bitcoin has since negated all the losses from both crises, rallying by over 87.28% since January. The recent surge has undoubtedly reignited interest in the cryptocurrency market and sparked FOMO among investors.

Nevertheless, it still faces a challenging journey to reach its all-time high of $69,000 in November 2021.

Why has Bitcoin shown such a strong performance?

i) Bullish US inflation data.

Released on Apr 12, the most recent US CPI data came in at 5.0%, well below forecasts of 5.2%. The reading is the lowest since May 2021 and has cooled significantly from its peak of 9.1% in July.

Core inflation, meanwhile, recorded a 5.6% y-o-y increase and is in line with expectations.

The deceleration of inflation is a strong indication for the Federal Reserve to adopt a more accommodating monetary policy, which would favor Bitcoin while posing a disadvantage to the dollar. Investors are currently focusing on the Fed to implement just one more 25 basis point hike during its upcoming FOMC meeting in May.

ii) The banking crisis and flight to safe havens.

The banking crisis in March saw three US banks collapse in the span of 2 weeks, which threatened to send the global economy into a recession in the likes of 2008.

The recent minutes of meeting released by the Federal Reserve show that the committee even considered a pause in rate hikes during the crisis to prevent a recession.

Investors have quickly come to realization that the banking industry is built upon a house of cards, prompting them to shift towards safe havens.

Gold initially led the rally, surging by over 13% from $1,800/ounce to $2,047/ounce. Bitcoin, previously viewed as a speculative asset, transitioned to more of a safe haven during this period, resulting in a similar trend.

iii) De-dollarization picking up speed.

The recent talks of China, Russia, India, and several other countries opting to ditch the dollar and use their own currencies for international trade have significantly reduced the dominance of the greenback.

As countries explore alternatives to the world's reserve currency, other payment methods such as gold and Bitcoin have gained increasing popularity. This has resulted in a notable surge in the prices of both assets.

iv) The dollar’s weakness.

Cooling inflation, flight to safe havens, and de-dollarization resulted in a serious decline of the dollar’s strength.

The dollar index (DXY), a measure of USD’s strength relative to a basket of other currencies such as euro, yen, and yuan, has plunged by over 12% since its peak in September.

A curious pattern I observed when placing Bitcoin’s chart above the dollar index is that these two are inversely correlated.

In 2022, when the Federal Reserve raised interest rates by over 400 basis points to combat multi-decade high inflation, the dollar reached a 20-year high due to the Fed's extraordinary pace of tightening compared to other central banks. During this period, speculative assets such as Bitcoin and equities suffered a significant setback.

However, with the Fed scaling back its interest rate hikes and projecting a pause this year, the dollar's strength has diminished while Bitcoin experienced a surge in value.

Dollar’s weakness is good news for the ringgit

The ringgit has had one of its best weeks since November.

As of Friday (Apr 14), our local note strengthened to RM4.386 against the dollar and is up over 3% in the past 35 days.

From the chart below comparing USDMYR versus the dollar index, you can see that the ringgit’s strength is mainly due to the dollar’s decline.

What’s next for the ringgit?

According to the chief economist of Bank Muamalat Malaysia, Dr Mohd Afzanizam, the ringgit should hover around RM4.39 against the greenback, with support and resistance levels at RM4.3466 and RM4.4236, respectively.

Anwar: Voluntary contribution for EPF increased to RM100,000 per year

The voluntary contribution limit for the Employees Provident Fund (EPF) will be raised from RM60,000 to RM100,000 per annum, according to PM Anwar Ibrahim.

The date for the implementation will be announced soon, he said.

Anwar explained that 55 y/o retirees must have at least RM240,000 to cover their expenses for 20 years. He hopes that the voluntary contributions, apart from the mandatory 11% employee contribution, will help to ensure that citizens have sufficient retirement savings.

Anwar also said that the tax relief of RM3,000 for life insurance premiums will be expanded to cover voluntary EPF contributions from YA 2023. This is to encourage members to save for retirement.

*For those unsure how to voluntarily contribute to EPF, here’s how to do it in four simple steps:

i) Download the i-Akaun app and login to your KWSP account.

ii) Select "Tambah Caruman" at the home page.

iii) Enter your amount (min RM10).

iv) Transfer funds via FPX.

That’s all for this week’s newsletter!

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 11.30 AM on 16th April 2023 and completed at 3.30 PM the same day. To get early access to our newsletter, be our patron for as little as $1/month!