The Big Standoff - Interest Rates, Earnings, and Bitcoin Battle

What’s on the Menu 🍴

The heat is on, and the kitchen’s BUSY!

Today we’re looking at the nearly half a year standoff in bitcoin…

Massive earnings this week…

And the big interest rate debate.

• Bitcoin's 5-Month Standoff Between Bulls & Bears 🐮🐻

• A Flurry of Corporate Earnings 🎢

• The Formula For Interest Rate Cuts In September ✂️

• Will the U.S. Trigger a Bitcoin Buying Frenzy? 📺

Today’s newsletter is a 5 minute read.

Bitcoin's 5-Month Standoff
Between Bulls & Bears 🐮🐻

Bitcoin’s current consolidation zone between $60k and $70k has everyone on edge.

The big question is: will we break upwards or downwards from here?

Let’s dive into the data and see what history can teach us.

Current State

We’ve just seen the 12th move through the $65k magnet zone since March, and July’s candle closed above the critical $60k support line, holding steady for five months.

Historically, what happens when Bitcoin consolidates for five or more months?

Historical Analysis

Here’s a breakdown of Bitcoin’s behavior during past consolidation periods:

1. Early 2012 - Accumulation: Prices built a strong base, leading to significant upward movement. Chart

2. Late 2013 - Trend Continuation: A pause before continuing its bullish trend. Chart

3. Most of 2015 - Accumulation: Similar to 2012, a period of accumulation before a big move up. Chart

4. Early 2016 - Trend Continuation: Another period of consolidation followed by a continuation of the bullish trend. Chart

5. Late 2016 - Trend Continuation: More consolidation leading to further upward movement. Chart

6. Mid 2018 - Breakdown: The only period where consolidation was followed by a significant breakdown. Chart

7. Early 2019 - Accumulation: Prices consolidated and then moved upward. Chart

8. 2020 - Trend Continuation: Consolidation led to a continuation of the bullish trend. Chart

9. Late 2022 - Early 2023 - Accumulation: Consolidation before a move upwards. Chart

The Numbers

• Accumulation: 4 times (45%)

• Trend Continuation: 4 times (45%)

• Breakdown: 1 time (10%)

What Does This Mean?

Historically, there’s a 90% chance that consolidation leads to a bullish outcome (accumulation or trend continuation).

Only 10% of the time does it result in a bearish breakdown.

Notably, we haven’t seen a consolidation near all-time highs (ATH) followed by a breakdown, but it’s always wise to consider the bear case.

Factors to Watch

Several external factors could influence the next move:

• Government Adoption: Increased adoption or regulation could impact prices significantly.

• ETF Flows: Shifts in ETF investments might provide a bullish or bearish push.

• Stock Market Trends: A boom or bust in the stock market could spill over into crypto.

• U.S. Election Outcomes: Political changes can have ripple effects across markets.

Current Price Action

Bitcoin is nearing the $60k support for the 9th time since March. The 200-day moving average (200MA) also sits at this support level, suggesting strong foundational support.

Conclusion

While it’s easy to get lost in the details of consolidation zones, zooming out and looking at historical data helps.

The probabilities favor a bullish outcome, but we must remain vigilant for any black swan events. Keep an eye on the external factors, and stay tuned for more insights.

A Flurry of Corporate Earnings 🎢

This week has seen no shortage of market moving events, from turmoil in the Middle East to central bank meetings to important economic data.

And yet much of that has taken a back seat to Q2 earnings announcements, which have injected volatility into even the biggest stocks out there.

Here’s a quick recap of some of the biggest names and biggest earnings moves this week:

Microsoft

The software giant reported 16% growth in revenues and operating income, but initially gapped down due to a slight slowdown in Azure cloud revenues. However, management said that cloud can re-accelerate in the back half of the year and the stock recovered to end flat by Thursday.

Meta

The social networking company is still firing on all cylinders with 22% revenue growth and 45% adjusted operating income growth. Users, ad impressions, and prices per ad all increased. The stock finished up 5% on Thursday, which was no small feat given the heavy overall market selloff.

Amazon

The retailer & cloud platform produced 10% revenue growth and 44% operating income growth in Q2 as it continues to focus on margin improvement. Weaker growth in international e-commerce weighed on investors minds as the stock initially dipped about 5% after the report however.

Apple

The iconic consumer device & software company reported 5% revenue growth and 11% earnings per share growth, both better than in the prior quarter. Investors seemed to be mostly ambivalent about the report with the stock roughly flat in after hours trading on Thursday.

PayPal

PYPL stock gapped up about 10% after reporting better than expected results on Tuesday. The payments company grew revenues by 8% and EPS by 17%, a good sign for the turnaround.

AMD

The semiconductor manufacturer’s stock initially gapped up as earnings beat expectations and management called out new enterprise GPU customer wins. However, a high valuation and selloff in the SOXX index this week caused the stock to finish below its pre-earnings level as of Thursday.

Snapchat

For the 8th time in the last 10 quarters, SNAP stock gapped down after its quarterly report. This time a weaker than expected Q3 guidance was to blame for the disappointment.

Intel

The chipmaker continues to struggle in its turnaround, delivering slightly worse than expected results in Q2 and weak Q3 guidance. Intel also cut its dividend and announced it would layoff up to 15% of its workforce by the end of the year. INTC stock slumped almost 20% in after hours trading.

DoorDash

While some consumer companies seem to be struggling in Q2, DoorDash is not, delivering 20% growth in orders and a 23% jump in revenues. DASH stock rose more than 10% on the news.

We’re just scratching the surface here, and we’ll have a broader look at Q2 earnings season trends next week so stay tuned to the Daily Dough!

The Formula For Interest Rate
Cuts In September ✂️

We heard from the Federal Reserve this week and they’re holding interest rates steady at 5.25-5.50%…for now.

Fed chair Jerome Powell certainly gave us a lot to snack on in the press conference, including a formula for what it would take to see cuts begin.

First off, he was clear that there is NO guarantee that we will see cuts in September.

However, he knows the market is antsy about this (and you could sort of tell he was tired of answering the question about September).

He essentially gives us the formula for rate cuts in the next meeting:

• Inflation trajectory continues lower

• The labor market stays where it is or further weakens

• The overall economy isn’t TOO strong (he wants it “reasonably strong” and I read into this as him not expecting the economy to fall off of a cliff)

Powell doesn’t want to make a policy mistake by jumping the gun on rate cuts too early and risking inflation staying sticky. That is pretty clear:

When pressed by a reporter if there will be 3 cuts in 2024 like the March 2024 dot plot outlines, this was what Jerome Powell said:

The hilarious part is that the market is calling the Fed’s bluff on their lack of certainty that they’re trying to portray.

The markets are betting a 100% chance of a cut in September with a 73% chance of a 25 basis point cut, and a 27% of a 50 basis point cut.

With the way jobless claims (unemployment) has been trending, it does sound like the chips are falling in the September cut camp.

The market is likely guessing that even though unemployment claims are still low, they could be the sign that the Fed NEEDS to get the ball rolling on cuts if that want their “soft landing”.

Video of the Day: Will the U.S. Trigger a Bitcoin Buying Frenzy? 📺 

The big news this month was the U.S. potentially starting to stack sats... AKA HODL bitcoin. Will this create a global bitcoin buying frenzy with governments around the world? We cover that and the bitcoin price charts in today's video! Click here to watch - “Will The U.S. Trigger a Bitcoin Buying Frenzy?”

Food For Thought 🧠

"The best stock to buy is the one you already own.”
- Peter Lynch

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.