Bitcoin rebounds to $63,000 as China steps up stimulus campaign
Halogen Capital
Licensed fund manager specialising in digital assets. The safest and easiest way to invest in crypto.
Key event for investors to watch: US presidential election in November?2024
Market Movements
Global Macro Market Observations
Last week, the S&P 500 and the Dow reached new record highs, with the S&P 500 surpassing 5,800 for the 45th time in 2024. Financial stocks led the gains after banks reported strong quarterly results.
Inflation in the US continues to pose challenges. The Consumer Price Index (CPI) for September was 2.4%, slightly above the expected 2.3%.
Meanwhile, the Producer Price Index (PPI) showed mixed results: it remained unchanged on a monthly basis, contrary to the 0.1% rise economists had predicted, but rose 1.8% year-over-year, exceeding the forecasted 1.6%. These figures suggest that while some price pressures are easing, inflation remains a concern that could impact economic growth.
In China, the government announced plans to “significantly increase” debt to help revive its slowing economy. Finance Minister Lan Fo’an outlined measures to support local governments, low-income families, the property market, and state banks. However, the government did not specify the size of the stimulus package, leaving investors unsure about its effect on the stock market.
Meanwhile, South Korea’s central bank cut interest rates to 3.25%, the first rate cut since 2020. This decision follows a drop in inflation to 1.6%, the lowest in three years.
Malaysia Market Observations
All eyes in Malaysia this week are on the upcoming Budget 2025, set to be unveiled by the prime minister on Friday (18 October 2024). The budget is expected to introduce policies, including tax proposals, aimed at strengthening the country’s economic foundation. Early signs suggest that the government is optimistic about Malaysia’s growth prospects, with a projected GDP increase of 4.5% to 5.5% for 2025, compared to a revised 5% to 5.5% for 2024.
Additionally, Malaysia’s Department of Statistics will release external trade data for September on Friday. Economists expect export growth to slow to 7%, down from 12.1% in August, signaling potential headwinds for the country’s trade performance.
The Malaysian ringgit weakened against the US dollar over the past week, following a series of strong US economic data that suggested the US economy is on track for a soft landing.
From Friday to Friday, the ringgit declined to 4.2865/4.2910 per US dollar, down from 4.2155/4.2240 a week earlier. Additionally, the ringgit also fell against other major currencies during the same period.
Crypto Market Observations
领英推荐
Cryptocurrencies made a strong rebound on Friday, with Bitcoin (BTC) surging back above $63,000 after briefly dipping below $59,000 the previous day.
Despite concerns over higher-than-expected U.S. inflation data, investors quickly shifted their focus to China’s upcoming fiscal policy update. This fueled a 7% rally for Bitcoin, breaking this week’s trend of losing steam during U.S. trading hours. Over the past 24 hours, BTC rose by 5.5%, outpacing the broader CoinDesk 20 Index’s 4.7% gain.
Among altcoins, Solana (SOL), Avalanche (AVAX), and Render (RNDR) led the charge with 6%-8% gains. Uniswap (UNI) was the only token in the CD20 index to post a slight decline, giving back some of Thursday’s gains that came from its announcement to launch a layer-2 network.
What We Are Monitoring For The Week Ahead
Looking Ahead: Our Insights
The market is used to Federal Reserve or European Central Bank (ECB) style, or even Japanese style stimulus plans in the form of large programs announced off the bat. Following the initial announcement, Chinese stocks got off to a hot start as it was indeed a combination of fiscal and monetary measures announced, with expectations then ramping up for a larger package.
However, China’s National Development and Reform Commission (NDRC) on Tuesday disappointed many who had waited for more concrete stimulus plans out of it. The pullback in Chinese stock index barometers was ghastly — the Hang Seng Index pulled back 13% to the lows at one point, while the FTSE China A50 index gave half its gains in the recent rally. As it stands, the west is also heavily conditioned to be sceptical of China, which leads to a hastiness to fade the moves (which had indeed gone too far).
That is not to say that China’s stimulus plan will not be big overall. Rather, it’s likely that this will come in drips (even the initial package was announced over many days). Saturday’s Ministry Of Finance briefing did point out that local governments had RMB 2.3 trillion of debt available for spending over the next 3 months, and ‘relatively large’ room to expand the deficit. That said, the market likely focuses on the lack of a concrete number in that statement, as it does not put certainty on how far the central government is willing to go. While the opportunity on China remains for now, the weekend announcement probably doesn’t rekindle the fire from the past weeks.
US Consumer Price Index (CPI) coming in hotter than expected has the market wondering if Powell had been too hasty to pivot to an easing cycle. Markets had predominantly moved ahead in the wake of the NFP print though, pricing out 3 rate cuts in 2025 and also the additional half a rate cut for 2024. But US large cap equities remained largely unchanged over the data, with the CPI impact on rates perhaps offset by jobless claims data coming in much higher than expected (funny how 2 months ago, this started the events which led to Black Monday 2024).
Options dynamics going into CPI and PPI indicated that this was a well hedged market, which then fed into supportive price action as the ‘vol unclenched’ sparked buying pressure. As common, indices made new all time highs going into the Friday close. With no major macroeconomic event left until the US election, there’s really only one play for US risk assets — keep staying invested until the election.
Crypto assets were chopped around over the week, with leverage being flushed out mainly to the downside. Majors drifted lower throughout the week, notably during US hours. Traders observed a persistently large discount on Coinbase’s orderbook compared to other exchanges during those times — indeed, Bitcoin ETFs did experience outflows over that period according to Farside Investors. This culminated in a quick break through $60,000 in BTC that pushed prices down to $58,900 before recovering slightly. Interestingly enough, ETH and SOL did not breach the previous week’s lows on this move, though most of the sector remained broadly weaker on the week.
Friday’s price action was a different story however. Traders reacted to moves in betting odds on both Polymarket and Kalshi, with Trump widening his lead over Harris on both platforms. The bounce from $58,900 gained momentum into US hours, ultimately culminating in BTC crossing above $63,000 once more (though the weekend action usually sees retracements from these Friday pumps).
As mentioned previously, the coming US election remains the single most important event for crypto for the year. With little in the way of economic data to swing things till then, we will start to see the market jostle for positioning and reacting to election expectations (as was the case on Friday). In terms of unexpected surprises, it’s more likely that Trump’s odds are underpriced according to polling venues (though Polymarket odds are likely skewed due to its more crypto native audience).
Of course, there will be more asymmetry to the upside if Trump does emerge the winner, and this would likely lead to more dip buying behaviour in the coming weeks as traders look to position for that. The current range will likely remain well established but with expected drift to the upside. If we do get another leverage flush on little data, bids are likely lined up all the way to back to $60,000 and down to $57,000.
Thank you for reading and we’ll see you next week!
Team Halogen
Disclaimer: The information, analysis, and viewpoints presented here are intended solely for general informational purposes and should not be construed as personalised advice or recommendations for any specific individual or entity. For personalised investment decisions, individual investors are advised to consult their licensed financial professional advisor. The opinions expressed by the Manager are based on certain assumptions or prevailing market conditions, and they are subject to change without prior notice. This material is being distributed for informational purposes only and should not be regarded as investment advice or an endorsement of any particular security, strategy, or investment product. While the information provided herein may include data or opinions from sources believed to be reliable, its accuracy and completeness are not guaranteed. Reproduction of any part of this material in any form or reference to it in other publications is strictly prohibited without the express written permission from Halogen Capital Sdn Bhd. Halogen Capital Sdn Bhd and its employees assume no liability regarding the use of this material or its contents.