Macro views

According to the Fed survey of bank lending rates, credit tightening is at 46% signaling that banks are wary of the present economic situation and their strict effort to maintain their cash reserve. When banks tightened credit it brings about bad effects on the economy and this serves as a metric for weighing the impact of the negative credit cycle. The economy thrives when there is the availability of liquidity and what spurned it is banks lending. The money supply is in constant contracting worse than in the great depression and the credit crunch is picking up the pace.

According to my recent blog, I stated that regional banks are going to bear the brunt of the negative cycle and some won’t survive this storm considering the deposit outflows, and unhealthy exposure to CRE, and Jamie Dimon attested to this. Jamie Dimon the CEO of JP Morgan the largest bank in the world calls for a ban on short selling of bank stocks and prosecution of such action. In 2008 SEC banned short-selling of banks' stocks to protect investors and the market.

US possible default has become a major concern and Janet Yellen the US Treasury Secretary has emphasized that the US is not a deadbeat Country and the possibility of Congress raising the debt ceiling is most likely.

Crypto landscape

Over the past week, the Bitcoin network witnessed a surge in transaction fees caused by tokens built on the Bitcoin network that allows users to create and send tokens via Ordinal protocol BRC_20. Miners earned more than $18m per day via transaction fees on the network congestion. The smart contract on the Bitcoin network was made possible by Segwit in 2017 and Taproot soft fork in 2021. As a result of this, Binance has to pause Bitcoin withdrawals for 2 hours before resumption. This created unhealthy fear in the market leading to a mild sell-off. We might experience selling pressure from miners that might bring the BTC price to $25k as miners try to lock in their profits from the earned enormous fees to cover the revenue shortfalls.

Using K33 research data, Spot volume over the past week is down by -24%. Historically, this trend has been consistent with other consolidations before the upward movement.

Bitcoin seems to repeat a pattern and the $25k region present a large buy wall. OI held by active participants on CME fell to a 14-month low. This signals low activities of institutions on BTC.

Final thought

I still believe that BTC will witness a more upward impulsive movement that will bring us to the range of $35k-$40k. The number of bitcoins that have not moved in 1 year or more is over two-thirds of the total supply, amounting to 13.1M of the 19.4M bitcoins that exist today according to NYDIG data. Proshares witnessed substantial net flows on May 2, the strongest daily net flows since November 2022 and the third highest since January 2022.

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