The Fed's interest rate decision and the direction of the Clarity Act have emerged as key variables for the Bitcoin market.
However, Bitcoin soon gave back its gains and turned bearish, while the stock market closed higher, showing contrasting trends. This is analyzed as the result of the rising dollar index and bond yields negatively impacting Bitcoin.
If an interest rate hike materializes, it could lead to a stronger dollar, putting downward pressure on Bitcoin. Currently, the market is sharply divided between a minority arguing for a rate freeze and a majority advocating for a hike.
The Fed's interest rate decision is currently in a complex situation, likened to a 'mess'. Although a minority opinion, the argument is being raised as to whether it's possible to raise interest rates ahead of the US midterm elections. The dot plot to be released at the September FOMC has emerged as a key issue, reflecting high market interest in the number of future rate hikes over the next two years.
The Fed's interest rate policy tends to move directionally once it starts, rather than making one or two minor adjustments. It appears that the market's bond prices already reflect four rate hikes.
The most convincing hypothesis for this is that investors who had taken large short positions on interest rate futures, anticipating a rate hike, reversed these positions, leading to bond price increases and falling yields. This is interpreted as the unwinding of excessive positions.
The content of the FOMC press conference is expected to be particularly important. A projection of four rate hikes in the dot plot could be negative, while two hikes might be positive.
US WTI crude oil prices surpassed $100, emerging as a key variable in the risk asset market. Simultaneously with the surge in oil prices, Bitcoin plummeted by $1,000, once again confirming the correlation between inflationary pressure and risk assets.
News broke over the weekend that Houthi rebels had advanced into Yemen and seized a strategic stronghold in the Red Sea. This has raised market concerns that free navigation in the Red Sea could become uncertain, potentially blocking not only the Strait of Hormuz but also the Red Sea. Although Saudi Arabia declared freedom of navigation, excluding itself, crude oil supply instability is intensifying.
Former President Trump retracted his statement that the Middle East war would end before the midterm elections, now suggesting it might end immediately after, thus reigniting concerns about the possibility of a prolonged conflict.
Saudi Arabia's supply chain, which accounts for 10% of global crude oil production, is simultaneously facing a crisis of paralysis. The Strait of Hormuz in the Persian Gulf is already blocked, and the Bab-el-Mandeb Strait leading to the Red Sea is also closed. Furthermore, the East-West pipeline has ceased operations due to missile attacks from Iraq, exacerbating supply instability.
News broke over the weekend that the Democratic party would hold a meeting on the Clarity Act. With the Republican amendment reportedly reflecting many of the Democrats' opinions, attention is focused on the bill's direction ahead of the cloture debate and final vote.
Although the meeting's conclusion remains undisclosed, the news was belatedly reported via the Politico Pro paid subscription service. The market reflected this with optimism, leading to an increase in the bill's passage probability on Polymarket.
In an interview with Representative Patrick McHenry, he presented several options. One proposal being considered is to set aside key contentious issues, such as ethics clauses, pass the bill first, and then discuss these issues separately. This appears to be a compromise aimed at passing the bill.
This is analyzed as a reflection of increased macroeconomic uncertainty and concerns over the passage of the Clarity Act. However, the scale of this outflow is not considered particularly alarming compared to past instances.
Altcoin Lisk experienced massive volatility, surging 912% in a single day and then plummeting 51% from its peak. This drastic fluctuation is mainly attributed to its deep connection with the futures market. The issue of blockchain termination on October 31st appears to have acted as a major trigger.
Concerns have been raised that foundations might artificially inflate prices by creating expectations of token burns, and then foundation officials could use this information to take speculative positions. This phenomenon could appear as a 'last gasp' of a disappearing chain, potentially leading to significant investor harm. Consequently, there is a growing need for regulations on the involvement of foundation officials in price manipulation.
BitMEX founder Ben Delo and Tether shareholder Christopher Harborne have each pledged to donate 36 million pounds to the UK Reform Party. This total of 130 billion won (approximately 100 million USD) in donations is the largest in UK history, framed as a move to break the two-party system's cartel.
This week, the cryptocurrency market is expected to see an increased likelihood of stablecoin regulation and a focus on common policy ground between Republicans and Democrats. Attention should be paid to the White House and Democratic Party's response regarding the Clarity Act. The market may show a downtrend early in the week but could see an upturn starting mid-week.
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