“Fed Watch” is a macro podcast, true to the rebellious nature of bitcoin. In each episode, we challenge traditional narratives and Bitcoin by examining current macro events around the world, with a focus on central banks and currencies.
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In this episode, CK and I had the privilege of sitting down with David Lawan from Bitwise to discuss the macro and its relationship to bitcoin. We cover Bitwise and Lawant’s perspective on the current bitcoin market, price and ETF probability. On the macro side, we cover the UK’s emergency monetary policy shift and China’s pivot on Belt and Road lending practices.
Bitcoin market, ETF price and status
We start the podcast by talking about Bitwise and the general state of the bitcoin market. Lawant describes why he’s the most bullish he’s ever been on bitcoin.
As a starting point, we look at some charts. The first is the daily chart and shows a support zone around $18,000 and the diagonal trendline above the current price. This pattern formed over a four-month period, so when the price breaks out of the downtrend, the move should be relatively quick.
I temper the daily chart slightly bearish with the weekly chart below. As you can see, the green bar denotes a weekly bullish divergence. This is the first divergence of its kind in the history of bitcoin! If the price can close the week above $18,810, the divergence will be confirmed.
The next chart we look at during our live stream is below. It shows bitcoin’s price development since the June 2022 low in pounds, euros, yen, and dollars. It’s a fascinating chart because bitcoin acts both as a risk asset, selling off in times of financial crisis, and as a risk asset, performing against the worst currencies.
Emergency change in UK monetary policy
The big news of the day that we are covering is developments in the UK. Due to a financial emergency, the Bank of England restarted quantitative easing (QE) on Wednesday this week.
“In line with its objective of financial stability, the Bank of England stands ready to restore market functioning and reduce any risk of contagion to credit conditions for UK households and businesses.
“To achieve this, the Bank will make temporary purchases of long-term UK government bonds from September 28. These purchases will aim to restore orderly market conditions. Purchases will be made on the scale necessary to achieve this outcome. – Bank of England
The effect of this emergency policy announcement was immediate. Below is the UK 30-year government bond, showing a single-day move from 5.0% to 4% – a massive move as the Bank of England faces the acute financial crisis. At the time of writing, this rate has stabilized at 4%.
The 30-year gilt started the year with a return of just over 1%, rising slowly until August 2022, when the situation became more serious.
Our discussion covers many different aspects of the UK crisis, including whether this is the start of a global central bank pivot. You’ll have to listen to hear Lawant’s predictions and mine!
“Belt And Road 2.0” loans in China
The final topic we cover this week is what Chinese insiders are beginning to call Belt and Road 2.0. The leaders of the Chinese Communist Party began to realize that the financial philosophy guiding the Belt and Road was horrible. They have lent $1 trillion in financing to projects whose profitability is questionable. At present, 60 percent of countries receiving Belt and Road Initiative loans are in financial difficulty. In many cases, Chinese financiers are betting on International Monetary Fund and Paris Club loans to their debtors just to be repaid. The whole thing turns against him.
I recommend reading this Wall Street Journal article on the situation and how China is trying to solve the problem.
The last thing I’ll mention on this is that the Chinese are picking a moment to change their lending strategy, just as the world is entering a recession and emerging markets need lending the most. This could spell big trouble for countries that previously moved closer to China and now depend on them more than the West for funding.
This is a guest post by Ansel Lindner. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.