Markets:

• Gold down $2 to $2157
• US 10-year yields down 4.8 bps to 4.29%
• WTI crude up 53-cents to $83.25
• S&P 500 up 0.6%
• USD leads, JPY lags

The Bank of Japan decision continued to reverberate in a strong ‘sell the fact’ reaction for the yen. Perhaps the market was looking for more of a commitment to a hiking cycle but corporate Japan won’t be happy with both higher interest rates and a weaker currency. USD/JPY initially stalled at 150.65 early in US trading and slipped to 150.30 but quickly found its footing as risk sentiment improved and rallied as high as 150.96 before running into offers at the figure. Those gains were despite 4-5 bps declines in yields across the curve.

It was notable that short-dated US rates fell after softer Canadian CPI. Perhaps there is some kind of North American read-through there as the market continues to question what’s really driving stronger US inflation, particularly in light of more softness in US used auto sales today.

As for CAD, it fell 40 pips to the lows of the years initially, but only marginally. It steadied from there and then reverted back to pre-data levels with much help from oil and equities.

The euro and pound both finished basically unchanged in a reversal of some decent losses earlier (50 pips in GBP/USD). Again, it was a turn in tech stocks led by NVDA and AAPL that added fuel to the fire.

Of course, tomorrow is FOMC day so much of the moves today are built around benign expectations for Powell tomorrow. As always, the volatility will follow. See you then.

Important DisclaimersThe content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party’s services, and does not assume responsibility for your use of any such third party’s website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.Risk DisclaimersThis website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.

Epic crash or minor correction?

The difference between a market crash and a correction lies in their severity and duration. A correction is characterized by a gradual decline over several days, where prices drop by more than 10%. It indicates a temporary pause or reversal in an upward trend, often caused by exhaustion among bullish traders.

In contrast, a market crash is a sudden and severe decline in prices, typically occurring within a single day or even hours, resulting in a significant loss of value across the market. Crashes are often triggered by external events or systemic issues, leading to panic selling and widespread investor fear.

A cryptocurrency “flash crash” involves a sudden and steep decline in the price of a specific crypto asset, triggered by a surge in selling pressure. Unlike regular crashes, flash crashes see prices rebound swiftly, often returning close to their initial levels. These events are difficult to explain fully, and afterward, there is often speculation within the crypto community about the cause or catalyst behind the crash.

Greed

Fear and Greed Index provides a comprehensive measure of sentiment in the cryptocurrency market, ranging from 0 to 100. A low score indicates overselling, while a high score suggests a potential market correction.

Extreme fear may present opportunities for market engagement, as investors are overly concerned, while extreme greed could signal a shift in market conditions. Low index values may indicate potential price increases, guiding traders in their engagement strategies.

Conversely, high index values may indicate a need to reassess market conditions. Understanding these dynamics helps traders incorporate additional data and improve their grasp of market dynamics for informed decision-making. Currently, the indicator for Bitcoin is at “Extreme Greed.”

Huge whale movements

It is crucial to monitor the behavior of large holders, or “whales,” in the cryptocurrency market as they can influence prices and potentially engage in manipulative practices. Additionally, staying informed about the ongoing technological developments and potential vulnerabilities in blockchain networks is essential.

Realized price provides valuable insights into potential price movements for Bitcoin. This metric calculates the average price at which Bitcoins were acquired by different types of wallets on the blockchain, such as whales holding between 10 and 100 BTC.

Realized price is widely regarded as a more reliable metric for gauging the “true” value of a cryptocurrency. It serves as a valuable tool for investors and analysts looking to gain deeper insights into the market.

RSI

RSI, or relative strength index, measures the strength of buying pressure compared to selling pressure on a scale of 0 to 100. Higher RSI values typically indicate stronger buyer control and a robust uptrend. However, when RSI values become excessively high across the cryptocurrency market, it may indicate overheating and signal an impending sell-off.

When the average RSI value surpasses 70 and enters the “overbought” territory (highlighted in red), the likelihood of a market pullback increases. It is important to note that the market can remain overbought for extended periods, with prices continuing to rise.

Low trading volumes

Indeed, a sudden decline in trading volumes and liquidity serves as another red flag in the market. This decrease could signal a loss of confidence among investors and a decrease in overall market activity.

With reduced liquidity, markets become more susceptible to price swings and volatility, potentially paving the way for a market crash. Therefore, monitoring trading volumes and liquidity levels can provide valuable insights into the health and stability of the market.

Regulatory measures

In 2022, cryptocurrency markets faced increased regulation in major countries like China and the United States, resulting in stricter rules. This trend contributed to the beginning of the “Crypto Winter.” For instance, exchanges such as Bittrex were compelled to cease operations.

In August that year, the California Senate passed a bill mandating new licensing for cryptocurrency firms operating in the state. This legislation prohibits California entities from trading in stablecoins unless they are licensed by a bank with secure reserves or approved by the California Department of Financial Protection and Innovation.

The bill also stipulates that stablecoins lacking proven reserves and state licensure cannot be traded in California, essentially banning most existing stablecoins from the state’s market.

Important DisclaimersThe content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party’s services, and does not assume responsibility for your use of any such third party’s website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.Risk DisclaimersThis website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.

One crucial aspect for significantly raising foreign investment inflows will be the central bank’s ability to maintain a more flexible inflation-targeting regime allowing market forces to set the exchange rate. The uneven policy-making environment since October 2022 suggests that this process may not be smooth, with limited fluctuations of the pound since the 6 March devaluation suggesting central-bank intervention in currency markets.

If the authorities aim only to continue managing the value of the pound at lower levels instead of allowing the currency to fully float, this may fall short of IMF conditions for future disbursements and complicate co-operation with the official sector. For now, international partners remain supportive in the current political and economic context in the Middle East and North Africa.

Currency Devaluation Exacerbates Government Fiscal Challenges

The large devaluation of the pound puts upward pressure on public spending as the government offsets the impact of higher domestic prices and rising interest rates on households given low per capita incomes. The Central Bank of Egypt has raised its main operation rate by 800bp since the end of 2023 to 27.75%.

More restrictive monetary policy in response to rising inflation could weigh on the government’s net interest burden, projected at more than 70% of revenue, and wide fiscal deficits expected at above 10% of GDP on average until 2028.

Servicing foreign-currency denominated debt, accounting already for more than 40% of central government debt as of Q2 2023, will be more expensive too. This will test the government’s ability to maintain a recent record of running a primary budget surplus, which averaged more than 1% of GDP between 2019 and 2023. Mobilising domestic resources will take time.

Budget balances could be supported by higher foreign tax receipts once converted to local currency, Egypt’s commitment to scaling down mega infrastructure projects as well as reducing off-budget capital expenditure. Still, these options contrast with current plans by the authorities studying costly further widening of the Suez Canal.

Beneficial as the recently-announced international financial support and the exchange-rate devaluation are for easing external-sector stress, the uncertainties surrounding further reform and the difficult policy trade-offs required explain why Scope Ratings affirmed Egypt’s B- long-term credit ratings and maintained a Negative Outlook on 1 March 2024.

For a look at all of today’s economic events, check out our economic calendar.

Thomas Gillet is a Director in Sovereign and Public Sector ratings at Scope Ratings GmbH.

In a revolutionary remark, Coinbase director Conor Grogan, who goes by the name “Conor” on X, has envisioned a future where cryptocurrency stands shoulder-to-shoulder with digital payment giant Visa as blockchain transactions reach an astonishing 117 million.

Conor came to this deduction after observing 117 million transactions across 46 layer-1 and layer-2 blockchains within 24 hours. Conor believes that, collectively, cryptocurrency has the potential to compete with trad-fi rails like Visa. He envisages 117 million transactions as the least there could ever be.

This bold prediction comes at a time when the cryptocurrency industry is seeing unparalleled growth and transaction volume.

The recent growth in transaction counts on blockchain networks demonstrates the increasing demand for cryptocurrencies to conduct transactions, transfer value and engage in financial activities.

With various blockchain networks processing over 117 million transactions, cryptocurrencies are proving their utility and scalability in facilitating various economic activities.

Crypto momentum continues to build

Although challenges remain on the path to widespread adoption of cryptocurrencies as a mainstream payment method, the momentum behind cryptocurrencies continues to build, with increasing institutional interest, corporate adoption and consumer awareness driving growth on the market.

Regulatory uncertainty, scalability issues and security concerns are among the key hurdles that need to be addressed for cryptocurrencies to reach their full potential.

However, as more businesses and individuals recognize the benefits of cryptocurrencies, the stage is set for a future where blockchain-based payment systems rival traditional financial networks like Visa in transaction volumes and market dominance.