9/21/23 Roundup
Hi all,
This is Dylan LeClair, presenting this week’s Onramp Weekly Roundup.
Before we get started… If you’re a HNWI or Institution looking for the best way to get exposure to bitcoin, Onramp Bitcoin could be the right fit for you – schedule a chat with us to discuss your situation & needs.
And now, here’s the weekly roundup…
Another FOMC Day in the Books
Yesterday’s FOMC meeting came and went, with the Federal Reserve maintaining its benchmark interest rate and signaling that one more rate hike is likely this year. While there was little uncertainty about yesterday’s rate decision, the major revelation came in the form of the Fed’s hawkish “dot plot,” which defied market expectations. The projections revealed that 12 out of 19 officials favor another rate hike in 2023, significantly reducing the number of rate cuts expected for 2024.
The chart below illustrates the dramatic repricing that has occurred in the interest rate curve compared to both seven and thirty days prior, revealing a bearish steepening in rate expectations.
One can use 2-year yields relative to the Fed Funds Rate as a gauge of the tightening cycle’s state. With the Fed Funds Rate currently above the two-year yield, the Fed’s work is nearly complete in terms of setting the terminal rate. Now the focus shifts to the duration of high rates, as interest rates soar to decade-highs relative to forward inflation expectations.
Jerome Powell’s language sent a clear warning to the market. He alluded to the concept of a “soft landing,” but quickly clarified that it’s not the Fed’s baseline scenario, even suggesting that the labor market might require further softening.
For those familiar with the history of Fed tightening cycles, this suggests one thing: a recession is likely on the horizon. Historically, rates like these have persisted until the brink of a recession, with easing occurring as conditions worsen before reaching an economic trough.
A review of the U.S. unemployment rate, its 24-month moving average, and its relationship with the Fed Funds Rate and U.S. recessions paints a clear picture:
The labor market materially weakens at the tail end of a hiking cycle.
This weakness manifests quickly and decisively.
The labor market’s frailty triggers the Fed’s reversal course to ease economic conditions.
In the meantime, the U.S. fiscal situation and long-term debt burdens continue to compound at an alarming pace, with annual interest expenses surpassing $1 trillion for the first time in history.
Podcast of the Week
E017: Tipping Points of Institutional Adoption with Fidelity’s Chris Kuiper, by The Last Trade
On this week’s episode of The Last Trade, hosts Marty Bent, Jesse Myers, and Michael Tanguma were joined by Chris Kuiper, Director of Research at Fidelity Digital Assets, to discuss the history of Fidelity’s involvement in digital assets, bitcoin’s continued evolution as a financial asset, its adoption by institutional investors, and its potential role in the broader financial ecosystem. Other key themes explored include the importance of custody in the digital assets space, bitcoin’s volatility, its parallels to gold’s monetization, and the difficulty humans face in appreciating rapidly accelerating technological progress.
Check out the full episode here.
Closing Note
Wrapping up this week’s digest, Onramp Bitcoin invites you to explore our offerings on our website.
With an industry-leading multi-party custody solution, Onramp allows Bitcoin withdrawals without triggering a taxable event. Onramp stands as an optimal solution for HNWI and institutions seeking Bitcoin exposure prior to transitioning to self-custody.
If Onramp’s offerings align with your needs, or those of someone you know, feel free to schedule a chat with us here.
Onward and Upward,
Dylan LeClair