Fed Meeting Next Week – Michael Saylor Dump BTC Possibility?

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2023-01-15 18:27:46

Market situation

The market has overreacted and worried about the third quarter report of big technology companies, so yesterday they seemed to have stabilized and stocks had a rally at the end of the week. The Dow Jones Industrial Average rose 2.59%, the S&P 500 gained 2.46% and the Nasdaq gained 2.87%. Gold fell slightly to 1647 USD/ounce. And oil price is still around 88 USD/barrel.

Bitcoin rose slightly to $20,700. Most altcoins followed suit.

The CPE results report has also been released, along with the CPI trend. This is an economic measure the Fed closely watches that shows inflation remained strong in September as expected. The core personal spending price index increased by 0.5% month-on-month and by 5.1% over the past 12 months, well below experts’ estimate of 5.2%. Including food and energy, PCE inflation rose 0.3% on the month and 6.2% year-on-year, the same as in August.

This CPE index is also the basis for the Fed to consider raising interest rates. This report comes a week before the next Fed meeting in November. In an effort to combat inflation, which is at its fastest pace in nearly 40 years, the Fed has raised interest rates by a total of 3% so far. Markets expect the Fed to raise 0.75% at its November meeting, but could slow down the pace thereafter. The whole market is still waiting for the decision and announcement of the Fed in the next meeting.

Meanwhile, pending home sales fell more severely than expected from August to September due to a sharp rise in mortgage rates. According to the National Association of Realtors, pending home sales fell 10.2% in September.

Economists had predicted a 4% drop. Sales were down 31% year over year. With the exception of April 2020, at the start of the Covid pandemic, the pending home sales index is at its lowest level since June 2010.

The Fed continues to raise interest rates, making the dollar stronger. But Japan’s central bank continued to keep interest rates low despite the continuous depreciation of the yen. Japan’s prime interest rate remained at negative 0.1%. Central banks in other countries around the world have also started to raise interest rates to control inflation. So, the DXY has leveled off but remains high.

The Fed still does not recognize a recession even though the first two quarters of the year were negative. Because they think the unemployment rate is still low. Unemployment is low but has gradually rebalanced. The company’s report also predicts a worse fourth quarter, and some companies are also laying off employees to cut costs. It will cause the unemployment rate to gradually increase.

In addition, the Fed must also consider the phenomenon of yield curve inversion that occurs when the three-month bond yields are close to the 10-year and 30-year bond yields. This is also a sign of a financial downturn.

Binance invests in Twitter

Binance CEO Changpeng Zhao (CZ) has confirmed that the company invested $500 million in Elon Musk’s acquisition of Twitter and holds a 1.136% stake in the company. With this investment, Binance becomes the fourth largest contributor out of 19 investors who provided $7 billion to Elon Musk.

On Twitter, CZ confirmed that the funds were transferred earlier this week and clarified that the transaction was done through traditional banking services using fiat currency, not through cryptocurrencies or blockchain protocols. .

Shortly after, according to reports on October 28, Binance announced that it was planning to set up a working group on crypto and blockchain solutions for Twitter.

Currently, Twitter allows users to tip influencers on their platform in crypto, which can send NFTs directly to the wallet. In the near future, Twitter can let users buy and sell NFT directly through this social networking platform.

Elon Musk has officially taken over Twitter, a number of senior managers of this company have left the company. It can be seen that the purchase of technology companies, especially social networking companies, is growing. Indeed, these social media companies are increasingly making money or being valued by their influence and control over media and people. It can also be both of these factors.

Chances of Michael Saylor Dumping BTC

Michael Saylor really shows his great faith in the long-term future of Bitcoin. To date, his company Microstrategy is the largest holder of BTC in the world. Microstrategy has accumulated 130,000 Bitcoins.

Microstrategy spent huge amounts of money and split many times buying BTC. The company even raised capital to invest in BTC through both debt and bond issuance. Bitcoin’s drop to $18,300 on October 13 could temporarily jeopardize the company’s financial health.

MicroStrategy’s first repayment is due in 17 months. By December 2025, the company will have to pay $885 million in debt and pay it off in full by early 2027. According to a Fortune report, the company’s core software business is generating very little cash flow. and interest payments in Bitcoin can negatively affect the cash flow of the company.

Is Michael Saylor betting the price of BTC will grow more than the average price at which his company bought BTC by 2025. If the price of BTC does not grow as expected, MicroStrategy will have to sell some of the BTC it holds. hold to pay off debt.

The $46 million annual interest that Saylor company has to pay on its debts for accepting investments in BTC. So what makes shareholders accept MicroStrategy to invest in BTC. We need to look more broadly at the benefits this company has achieved. Since the company announced its investment in BTC, MicroStrategy (MSTR) stock has increased by more than 125% in the year since August 2020. This increase is higher than BTC’s growth rate and exceeds away from other assets (S&P 500, Nasdaq, gold, ..) or other technology companies during the same time period.

MicroStrategy’s BTC investment may have lost money so far, but the company’s shareholders have made a lot of money when the company’s stock surged. Therefore, when evaluating we need to look at all sides to see the whole thing. Regarding personal investment, Thuan always adheres to the principle of investment without borrowing in his long-term investment process. It helps to reduce the pressure of investment psychology and can make more informed decisions.

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