Notes from the Trading Desk #1

Pionex Trading Desk 2/23/2023

Thoughts and Trades

People's Bank of China injects record-high liquidity. PBOC. Cryptocurrency, crypto
$632 Billion Yuan Injection

Last week’s momentum was driven by the rumor of a proposal in Hong Kong to allow retail traders to purchase crypto currency. The narrative was then expanded into China is behind this and using this opportunity to dip its feet back into the crypto waters through Hong Kong. This was a big narrative as China represented 25% of the BTC mining hash rate and was 4th in transaction volume worldwide before they banned both.

The crypto market has been holding on strong on the backs of the Hong Kong news. However, the market sentiment has dampened following higher expectation of rate hikes and Federal Reserve Governor Michelle Bowman saying we are a long way until 2% inflation target. Traders are now expecting a rate of 5% on the 1YR US treasuries up 4% from last week.

On the desk we have seen $25,500 as a well telegraphed resistance for BTC. So investing in short-term Covered Gain with a strike price above $25,500 is a strategy we have been following. BTC has also been decoupling and holding stronger than S&P500 however we still expect a drag on prices if traditional equities continue to fall. For this current trend to continue we should not see BTC break under the $23,500 level.

Fed Minutes

With the release of the Fed Minutes yesterday we got more clarity with the direction the Fed will be taking in terms of interest rate decisions and further financial condition tightening. A quick summary of what was said.

  • 3 or more Fed members supported a 50 BP hike during the last FOMC meeting
  • Financial conditions have not tightened inline with their policy and they need to keep conditions tight or risk inflation rising again
  • The pivot narrative is once again wrong
Financial Conditions Tightening
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