A Macro View: The Fundamentals of Bitcoin Investing
Chart of the Week
- As expected, the Federal Open Market Committee reduced its target federal funds rate by 25 basis points to a range of 1.50% to 1.75%. In his public statements, Chair Jerome Powell signaled a possible pause on future rate adjustments, as the Committee continues to monitor economic data in its effort to sustain the economic expansion in such a complicated geopolitical environment.
- Labor markets showed some strength, as nonfarm payrolls increased by 128,000 for the month of October. Much of the job growth came from food services and financial activities, offsetting the job losses from General Motors’ unsettled strike. Overall, unemployment ticked up slightly to 3.60% from 3.50%.
- Tensions in Hong Kong continue to escalate, as protesters, seeking universal suffrage, plan a large weekend rally, and China warns it will not tolerate any challenge to Hong Kong’s governing system. The two sides appear to be at a stalemate, as violence continues to be more common.
- Domestic equities rose for the week, with small cap stocks appreciating the most and growth stocks outpacing value. International equities and emerging markets stocks also ended the week in positive territory but failed to keep pace with their domestic counterparts.
- Treasury yields across the curve were down through end-of-day Thursday, with shorter-term yields falling more than longer-term yields.
- The US dollar weakened against a basket of major trade partners’ currencies during the week, as the Federal Reserve cut rates by 25 basis points.
- Commodities declined for the week, as lower energy prices outweighed the upward move for gold.
- In other economic news, US gross domestic product (GDP) grew at a rate of 1.90% for the third quarter on continued expenditures from the government and the consumer. Despite the contracting business investment, the US economy grew at a faster rate than most economists expected.
Last Friday, October 25, was a big day for bitcoin, rallying as high as 42% and closing out the day up almost 30%. This was the third-largest, single-day run-up in bitcoin’s history! The strong price appreciation came on the back of comments from Xi Jinping, president of the People’s Republic of China, on the potential of blockchain technology, stating that China needs to “seize the opportunity… and accelerate the development of blockchain technology…”1