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This piece serves as a springboard for brn's exploration of the broader macroeconomic landscape. As your trusted partner in navigating the digital asset space, brn goes beyond the realm of cryptocurrencies, recognizing the interconnectedness of traditional and digital markets.
The trading activity in the cryptocurrency market during March was highly remarkable.
CCData showed that the total trading volume of crypto spot and derivatives on centralised exchanges experienced an unprecedented surge, reaching an astounding $9.1 trillion, a significant increase compared to previous periods.
Moreover, the leading cryptocurrency, Bitcoin, achieved a new record high during this period.
This indicates the growing interest and adoption of cryptocurrencies as they continue gaining traction in the financial world.
Based on CCData's March Exchange review report, spot trading showed significant growth, surpassing derivatives.
The volume surged by 108% to reach $2.94 trillion, marking the highest monthly total since May 2021.
Trading volume at Binance, the largest cryptocurrency exchange globally, has reached its highest level since May 2021.
Spot has grown by 121% to $1.12 trillion, while derivatives have increased by 89.7% to $2.91 trillion.
US exchange-traded funds (ETFs) have played a significant role in the impressive 67% gain witnessed over the past two months.
As a result, the world's largest cryptocurrency, Bitcoin, experienced a notable 15% increase in March. The digital currency hit a new all-time high of $73,797 on March 14.
But the token has since traded in a volatile range well below the record high. Still, Bitcoin has managed to stay above the $ 60,000 mark comfortably.
Cryptocurrency investors are eagerly awaiting the Bitcoin halving this month, a highly anticipated event that occurs every four years and reduces the number of units.
However, there is growing scepticism surrounding the potential benefits of the halving event.
Last week's moves suggest that Bitcoin is trading as an independent, individual asset, with expected correlations thrown out of the window.
Friday is a day that offers valuable insights into Bitcoin's behaviour.
It is logical to assume it would move in sync with stock prices, considering its classification as a risk-on macro asset. Bitcoin would probably be one of the first assets affected by a significant decline in stock prices.
Recently, it hasn't.
On the other hand, Bitcoin can be seen as a reliable asset, often called "digital gold," which shields its owners from unpredictable fluctuations in currency values and irrational government decisions.
Bitcoin showed little movement on Friday, even though the market was influenced by risk-on and risk-off narratives. This underscores the importance of a wide range of narratives in building a strong foundation and reassuring investors.
While it is important to note that Bitcoin may continue to decline, it will find a higher level if that occurs.
Good News is Bad News for Stocks
Wall Street stocks reached new highs in the first quarter despite geopolitical tensions and interest rate instability. As a result, the demand for broad market insurance dropped to multi-year lows.
At the beginning of April, stocks fell on robust economic data, which weighed on early Fed rate cut bets.
Analysts predict that a Goldilocks scenario is questioning the Fed's pivot bets.
Still, Wall Street stocks experienced a positive end to the week despite a robust employment report.
The jobs report indicates that the US economy will continue to propel corporate America forward, even in the face of potentially elevated interest rates, likely boosting stock bulls.
The S&P 500 index saw a significant increase of over 1%, with gains observed across all major groupings.
Stocks rising without rate cuts is surprising but understandable.
On Friday, Wall Street was optimistic, suggesting the Fed may not feel compelled to start easing policy if the economy remains strong.
But beyond these daily moves, what needs to be seen is the sustainability of the stock market rally.
After a volatile week on the S&P 500 Index, traders who had been neglecting their hedges suddenly found themselves reevaluating their positions.
The Cboe Volatility Index (VIX) hit a level not seen since November on Thursday, and then it fell on Friday as US stocks climbed.
But the gauge, which measures the S&P 500's implied volatility over the next 30 days by utilising out-of-the-money options prices as a proxy, maintained the position above its 200-day moving average, suggesting extreme moves likely.
That changed this week as numerous measures were implemented to safeguard against a downturn.
Investors have been steadily adding hedges since late March, resulting in the steepest premium for bearish three-month put options compared to bullish contracts since mid-January.
These insurance policies have received significant media attention this year. They are known as tail-risk hedges and provide protection against catastrophic events rather than small downturns.
This suggests that another stock rally looks unlikely unless the Fed delivers on its rate cuts. The fear now is of a bigger correction.
Geopolitical tensions and the future of interest rates have raised concerns, leading to European stock markets experiencing their first weekly loss since January, following stronger-than-expected US employment data.
Nearly every market segment was negative as the Stoxx 600 Index fell about 1% by market close, stalling the index's greatest winning streak since 2012.
Bonds Sell-off Deepens as Fed Policy Pivot Stalls
Strong job numbers conflicted with predictions that the Fed will cut interest rates by June, exacerbating bond investors' already poor start to the year.
Following the March jobs report's revelation of the largest US payroll expansion in over a year and the subsequent decrease in the unemployment rate, traders stopped completely pricing in a Fed rate cut before September.
The benchmark 10-year rate rose to around 4.40% as Treasury rates neared their highest levels this year, with a 5% call looking more likely now.
Like other central bank officials earlier this week, Dallas Fed President Lorie Logan stated that it's too soon to discuss rate cuts.
The yield on the two-year note, which is more sensitive to the near-term rate outlook, hit its highest level of the day.
Despite the expectations of major Wall Street firms such as Citigroup and Goldman Sachs Group, predicting a June cut, the probability of the central bank lowering rates by then has diminished to around 52%, as indicated by swap contracts that predict the bank's rate decisions.
Traders projected a 65 basis point cut in rates for 2024, which was slightly lower than the 75-basis-point median projection made by Fed policymakers last month.
Additionally, the probability of a rate cut in July and September fell below 100%.
Many predicted at the beginning of the year that the eleven rate hikes the Fed had made in the previous two years would have the dual effect of reducing inflation and straining the economy, prompting the central bank to cut rates by 1.5 percentage points this year.
Instead, the economy doesn't seem to need lower rates just yet, as investors keep pouring money into equities and corporate bonds, progress towards reduced inflation has stalled, and growth measures have also stayed strong.
Auctions for 30-year bonds, 3-and 10-year notes, and other treasury securities will begin next Tuesday.
It will be crucial to see if higher yield levels increase demand for the auctions. The bond market is still riding high, believing that rates are above the Fed's effective overnight rate.
However, with yields nearing highs, bonds are likely to gain ground if the Fed changes its narrative significantly.
