The Macro Pulse | Weathering the Storm: China is Stumbling post Covid, Bitcoin Resilience, and Riding the Low

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June 14, 2023



This is starting to look like the low 🚀

🛢️ OPEC continues cuts, fighting a losing battle

🌏 China's stumbling post-Covid emits a disinflationary pulse

😬 US data starting to show cracks

💥 Bitcoin Resilience in the face of SEC FUD

OPEC Cutting Back

WTI VS 5yr Inflation Breakevens (orange)

Saudi Arabia announced unilateral oil production cuts of 1mio b/d whilst the other OPEC+ members agreed to extend the production cuts agreed as recently as April to the end of 2024.

All looks a bit desperate from OPEC, who are battling against a global demand slowdown and oil quickly reversing announcement gains to now trade lower. Lower output at lower prices. Rekt.

Lower oil is essential to keep a lid on inflation, and as inflation expectations fall, nominal interest rates follow.

China’s Disinflationary Pulse

US CPI (yellow) Vs. China PPI - China leading inflation lower

China continues to stumble post Covid re-opening, and trade data this week saw imports down 4.5% while exports collapsed 7.5%.

CPI also fell 0.2% month on month. PPI down 4.6%

This week, under pressure from the government, China’s biggest state banks cut rates on demand deposits by 5bps and 15bps on three and 5-year time deposits.

Expectations are growing for official rate cuts to ease financial conditions further.

We warned that China was priming the liquidity pump 💦 and now with an ever-weakening CNY, China is emitting a disinflationary pulse across the world. One that could potentially slay the inflation dragon and drive global yields lower, reinforcing our “peak inflation, peak rates” view and providing a tailwind for crypto 🚀.

US Data Softening

Jobless Claims - heading higher

US data this week pointed to a softening which has seen markets price just a 25% chance of a hike on Wednesday. July is still priced 80% for a 25bp hike, but the odds have moved dovish 📉.

ISM Services is barely in expansion territory at 50.3, with services employment contracting at 49.2 👀.

Jobless Claims also spiked to 261k, up from 233k, and is the most significant rise in year-to-date claims, ex-Covid, since 2009.

Employment is the most lagging of indicators. Slowly, then suddenly.

Once the labor market cracks, all bets off and the pivot back to printer go brrr follows quickly.

SEC Drops the Hammer 🔨

This past week, Gary Gensler and the SEC dropped the hammer filing consecutive lawsuits against Binance and Coinbase as the US regulatory crackdown continues.

At the heart of both lawsuits are accusations that both have failed to register as a securities exchange with the SEC.

However, the charges leveled against Binance are more serious, including subverting controls to secretly allow US customers to trade on, commingling of customer funds, and accusations that CZ owned and operated an entity used for wash trading and artificially inflating Binance.US trading volume.

The SEC also identified a list of tokens that they classified as securities which hit the alt space hard over the weekend 😬.

As we await the release of the Hinman docs however, we’re reminded that Ripple have been embroiled in legal action with the SEC since Dec 2020. This is going to be a drawn out battle and the headline impact will taper out whilst Crypto BUIDL outside of the US💪.

What's Next?

With so much bad news baked in, these moments of despair typically mark price lows. The resilience in BTC and ETH is encouraging.

Now we head into a massive week of macro, with US CPI and the FOMC rates decision headlining.

Could this provide the spark to fire us back to the recent range highs?

David Brickell 💜

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