The frustration of market confidence brought about by the “5·19” waterfall in the crypto asset market was somewhat eased on June 14. The market “weathervane” Bitcoin (BTC) returned to the $40,000 mark, reaching a maximum of $41,064, a 24-hour increase It is 3.83%.
The fund-level news comes from MicroStrategy, a listed company in the US stock market. After just issuing bonds to complete US$500 million in funding and buying BTC, the business consulting company has a new plan to increase its position-to sell Class A common stocks worth US$1 billion. The use of funds includes the purchase of BTC. As of mid-May this year, the company already owns 92,079 BTC.
In addition, the founder of Tudor Investment (Tudor Investment) Paul Tudor Jones disclosed for the first time in an interview that in his current portfolio, Bitcoin accounts for 5% of positions. The adjustment of most of the remaining positions will be awaited by the Federal Reserve. Judgments can only be made after the policy is clearer.
Wall Street celebrities are not on a whim to Bitcoin. The rising US inflation rate is making financial markets give feedback.
On June 14th, the Federal Reserve Bank of New York released the survey results showing that US inflation expectations rose significantly in May, and the median one-year inflation expectations rose for the seventh consecutive month and hit a new high of 4%; the median three-year inflation expectations rose To 3.6%, the highest since August 2013.
The feedback from the financial market hedging the impact of inflation is not only reflected in Bitcoin. At the close of trading on June 14, the S&P 500 Index, an important indicator of US stocks, closed at 4247.44 points, up 0.18%, just one step away from breaking the record high of 4249.74 points.
At this time, Wall Street financiers stood at the crossroads and looked at the Federal Reserve. This week, many central banks around the world will announce interest rate decisions. Whether the Federal Reserve will raise interest rates or when to raise interest rates has become a turning point of general concern in financial markets. If the United States tightens its monetary policy, the financial market may face a downturn, and some buyers will be ready.
Already stocked more than 90,000 BTC MicroStrategy to increase positions
Bitcoin returned to $40,000 after 21 days, which slightly boosted market confidence. On the 19th of last month, the crypto asset market suffered heavy losses. The “weathervane” Bitcoin fell one after another. It once fell to US$29,000, down 54% from the bull market high of US$640 million, and its market value evaporated in a short period of time.
Amber attributed the increase to MicroStrategy, a US stock-listed company that is heavily invested in Bitcoin, once again increasing positions.
On June 14, the business consulting company MicroStrategy filed a document with the US Securities and Exchange Commission (SEC), planning to sell $1 billion worth of Class A common stock, and the funds will be invested in general corporate purposes, including the purchase of Bitcoin.
A week before the plan was exposed, MicroStrategy had just raised funds through non-public development bonds to purchase Bitcoin and other encrypted assets. This batch of bonds is for qualified institutional investors, mainly senior secured notes due in 2028. On June 14, the company disclosed that the bond financing was US$500 million and it was preparing to invest US$488 million to buy Bitcoin.
Last December, MicroStrategy issued a $400 million convertible bond and invested the financing in Bitcoin.
According to the latest statement, as of mid-May this year, MicroStrategy’s BTC held by the newly-built subsidiary has reached 92,079. According to statistics, the average purchase price of these bitcoins is about 24,000 US dollars. Based on the current 40,000 US dollars, the floating profit exceeds 60%.
MicroStrategy’s plan to issue another $1 billion in Class A common stock indicates that its “buy, buy, buy” action on Bitcoin will continue. This company has become the world’s most listed company holding the largest number of bitcoins. It has continued to increase its position since last year and once regarded the reserve of bitcoins as a strategy to “protect itself from inflation.”
Recently, Paul Tudor Jones, the founder of Tudor Investment, has been added to the ranks of using Bitcoin to hedge against the impact of inflation. In a recent interview, he disclosed that in his current investment portfolio, gold, Bitcoin, cash and commodities each account for 5% of positions. As for how to allocate the remaining 80% of positions, he said that the Fed’s policy will be more important. Only after clarity can a judgement be made.
As a legendary Wall Street trader who specializes in digging money out of the macro economy, Jones pays close attention to the inflation situation in the United States and the Fed’s response.
In mid-May of this year, the April Consumer Price Index (CPI) announced by the United States increased by 4.2% year-on-year, a month-on-month increase of 0.8%; at the same time, April’s producer price index (PPI) increased by 6.2% year-on-year and a month-on-month increase of 0.6%. .
Both data exceeded market expectations at the time and were regarded as important signals of rising inflation in the United States, as well as the obvious impact of the Fed’s quantitative easing policy.
At that time, the market was worried that this unexpected inflation would cause the Fed to raise interest rates and tighten monetary policy. The market also reacted quickly, with the three major US stock indexes plummeting. A few days later, the “5·19” waterfall in the currency market came. On the contrary, the 10-year U.S. Treasury yield has climbed to around 1.7%, which is often the result of high inflation data, and outsiders predict that this is likely to stimulate the Fed to tighten monetary policy.
After the financial market was hit hard, the Fed stated that inflation is only temporary. This attitude released the message that the central bank will continue quantitative easing, and subsequently, the US stock market ushered in a rebound.
One month has passed. In Paul Tudor Jones’s opinion, inflation is not temporary. “The year-on-year increase in CPI in the last two months far exceeded the 2% policy target. Actual economic data is challenging the Fed’s policy stance.”
Inflation rises, Wall Street waits and sees the Fed’s interest rate meeting
A number of data are corroborating Paul Tudor Jones’ judgment.
According to data released by the US Department of Labor on the 10th, after seasonal adjustment, the US Consumer Price Index (CPI) increased by 5% year-on-year in May, the largest year-on-year increase since August 2008. This means that the cost of living of American residents continues to rise.
On June 14, the Federal Reserve Bank of New York released a survey result that showed that US inflation expectations rose significantly in May-the median one-year inflation expectation has risen for the seventh consecutive month and hit a new high of 4%; three-year inflation expectations The value rose to 3.6%, the highest since August 2013.
Under the high inflation environment in the United States, not only did Bitcoin rise and return to $40,000, but the three major U.S. stock indexes also rose and fell. At the close of trading on June 14, only the Dow Jones index fell 0.25%; the Nasdaq index rose 0.74%, and the S&P 500 index closed at 4247.44 points, up 0.18%, which was only one step away from breaking the record high of 4249.74 points.
Against the background of rising inflation expectations, Wall Street’s focus has fallen on the Fed’s two-day (15th, 16th) interest rate meeting. Whether to raise interest rates or when to raise interest rates has once again become the focus of market attention.
It is worth noting that, unlike in May, on June 14, U.S. bond yields did not rise but fell. This has become the basis for the market to judge that the Fed will not tighten monetary policy in the near future.
Last month, Fed Chairman Powell calmly stated that the Fed will inform in advance the time to reduce the scale of asset purchases in order to avoid a repeat of the “scaling panic” of 2013.
There are also 51 economists surveyed by the media. More than half of them expect the Fed to raise interest rates in 2023; about 40% of the economists interviewed predict that the Fed will hint at the end of August that its plan will begin to reduce the current 120 billion yuan per month. The scale of dollar bond purchases; about 24% of economists expect this signal to appear in September.
Paul Tudor Jones Jones believes that this meeting on interest rates will be the most important one in Fed Chairman Powell’s career. “If the Fed is still careless about rising inflation at this meeting, I will fully bet on inflationary transactions. I will buy commodities, cryptocurrencies and gold.”
JPMorgan Chase also believes that “inflation is not temporary,” but they are hoarding cash to deal with the possibility of higher inflation forcing the Fed to raise interest rates. The company’s CEO Jamie Dimon said at an online financial conference JP Morgan Chase has 500 billion US dollars in cash, “We have been accumulating more and more cash, waiting for the opportunity to invest at higher interest rates.”
It is expected that this Thursday, in the early morning of June 17th, Beijing time, the Federal Reserve will announce the interest rate resolution, and the moment of another impact on the financial market will come one day later.