After a week of euphoria and the end of the Fourth Witch Day, markets are finally calm and, no more than six days later, the prospect of another round of long-short combat looms. Instead of resisting in September and October, markets are now settling into a 56-year tradition, known as mid-term elections. It also placed the last bet of the year in November and December, and it was not the inevitable rate hike announcement next Thursday that was shaping the bet. It's the mid-rate interest rate at the end of 2022 that is not yet clear. This topic has been talked about for several days now, let alone for another time. In general, if the terminal rate is 4% by the end of the year, a 50 basis point increase in November and a 25 basis point increase in December can indeed generate momentum during the terminal election period. It is even possible that October will start anticipating a reduction in interest rates. Even if it doesn't go up, the magnitude of decline will probably weaken and the mood will ease. If it is 4.25% or higher, the emotional blow is likely to push the risk market below its previous low, and the BTC and ETH, which are highly correlated with the Nasdaq, are bound to try new lows, and are likely to remain at the bottom until the end of the year, with a turnaround likely in 2023. This is the worst-case scenario, and, as things stand, inflation is not easing, and core CPI is rising. A 4% or 4.25% chance is not unlikely, especially since before the CPI was announced and the Fed officials were silenced, several commissioners said the federal funds rate would be above 4% at the start of 2023. So September's CPI data, due out in October, could be the final nail in the coffin of the year's final rate. Two-thirds of the way through, September's CPI may not be any better, even if it is lower than August's. The best outcome, of course, would be a terminal rate of less than 4%, but that is too low a probability to be believed by few in the market. However, there is another important data coming out in October, which will hardly change the Fed's decision, but will make investors more disappointed. That is US GDP for the third quarter, which is now forecast to fall steadily, and is now up just 0.5%. And when it does, it will probably be a negative number, with three consecutive quarters of negative GDP. If this is coupled with a sustained decline in US stock prices, Wall Street and Silicon Valley will surely struggle. It is hard to imagine how the Democrats will have the courage to go into the midterm elections. So many investors are now waiting for the Fed to take the side of the economy, of inflation, or of the Democrats.
There is little to say about the dollar index, which is still waiting for the Fed to announce terminal rates, even though the situation is already clear. As it stands, a 75-basis-point hike in September is indeed expected, and it is unlikely to increase the dollar index too much. The terminal rate that will determine the dollar and the euro exchange rate is the terminal rate, and a 75-basis-point hike is likely in Europe next month, with a ceiling below 75 for the US dollar index expected.
After all, there are very few people who are pulling back. After all, they have all seen the trend of US Treasury bonds. The rising dollar index has driven up the yield on US Treasury bonds. But there do not seem to be many people buying these bonds. This is fundamentally due to the uncertainty of the terminal interest rates. After all, no one wants to buy at a loss. So you can only see a lot of money leaving the bond market, more and more overnight reverse repos, and it turns out that this part of the money leaving the market is not going to risk markets.
When the overall market environment is at a disadvantage, the amount of money in the currency market is particularly important, especially in recent days a large amount of money through the USDC exit, leading to a period of just a hint of a rise in the total value of the stable currency, and began to decline. Representing the main funds in Europe and Asia, USDT is still maintaining a narrow trend of volatility, up by 8 am this morning by about 50 million market value, but purchasing power is not keeping up.
USDC, which represents the main U.S. funding, is still on a downward trend, dropping $350 million by 8:00 this morning. Nor is it far from 50bn. Moreover, Binance's upcoming "stablecoin package" is bound to continue to hit USDC utilization, and the beneficiary, BUSD, seems to be on a good upward trend, but its market value is unchanged today.
In the ETH merger in fact, the DAI data is not very important, were pledged to achieve ETH spot leverage in the past, and as long as the official ETH revenue rules published after the merger, to come up with more chips or will choose the "pledge mining" program, of course, it may need a certain time. DAI's market value has dropped by more than $7 million since 8:00 this morning.
So the four main stablecoins, combined, are in a downward trend, and by 8 a.m. this morning, the combined value of the four stablecoins has dropped by about $300 million, meaning that the overall amount of money in the market continues to decline, and there is no clear evidence of new external capital inflows.
And judging from the purchasing power data, the arrival of the 4th Five-Day with the trend of ETH merger has led to a good trend in purchasing power this week. In particular, USDT, as the main trading force, almost no funds transferred to the stock exchange are increasing, which shows that although prices are trending downwards with volatility, purchasing power is still okay. Moreover, the volume of USDC transfers has also been at a recent high, indicating that American capital is appropriately beginning to come alive.
As of 8:00 this morning, the last major trading data before the end of the weekend, we can see that the BTC and ETH which were transferred to the stock exchange continue to show signs of decline. Moreover, the arrival and the end of the 40th Five-Day Day did not cause too much selling pressure on BTC. The overall circulation has returned to a lower position, while ETH is still at a higher selling pressure. We hope that after two days of calm over the weekend, the market will maintain its low-frequency fluctuation for a period of time before next Thursday.
In contrast, the shortage of funds and the emotional decline did not reduce the buying mood of BTC and ETH. The data from the exchange shows that although the volume of transfers both declined, we can still see from the data as of 8 am this morning that the volume of transfers is the perfect covered selling pressure, and even more chips can be pulled out from the exchange, especially for ETH. The stock is too high.
And the exchange data do reflect buying sentiment as BTC, which was at the bottom of the inventory pile, continued to reduce inventory, which is why BTC prices have fallen so little. And while ETH's exchange-traded inventory is declining, it remains relatively high for nearly six months, and more chips will remain in a hesitant state of mind, threatening to turn into downward selling pressure when prices drop below their psychological level.
From the perspective of sentiment, although it is true that prices are in a volatile downward situation, so it is normal that both BTC and ETH are bearish. However, relatively speaking, since the merger, ETH has not been a big bear any more, and is now more optimistic than BTC. And BTC is definitely bearish, but the weekend is likely to be more unstable, and both directions are possible. What we always say every weekend is that without the existence of the main force of funds and the main force of selling pressure, a small amount of funds can pull the market, a small amount of chips can also crash the market. There may even be a short-term boom and bust, pay more attention to safety .
