In this report:
- China M1/Liquidity.
- Bessent's Comments and Rates.
- Markets.
- Cryptonary's Take.
Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.
China M1/liquidity
Over the last few days, we've seen a chart doing the rounds (in DM's and just on Crypto Twitter in general). The chart is the following.China money supply M1:
In the above, we can see that China's M1 chart has shot up drastically. However, this isn't due to the Chinese actually growing their money supply. This is due to a new way in which they calculate M1. They now account for residential demand deposits and prepaid funds received by nonbank payment institutions.
This is why M1 has risen so dramatically and in such a short period of time, it's just a new way they're calculating it, it's not QE, nor is it any added stimulus. For now, this isn't anything to get excited over.
If Trump and Xi agree on a wide and fully covering trade deal, this will likely allow the US to try to bring the Dollar ($DXY) down a tad, and the Chinese to stimulate their economy which it's in real need of. But until this happens, we don't expect significant stimulus out of China. The above is just a new accounting measure, it's not a new stimulus.
Bessent's comments and rates
Yesterday, Scott Bessent, Trump's new Treasury Secretary spoke on Bloomberg (30 min interview). It's a great watch so we're going to tag it below so those who would like to watch, can do it.Link: https://www.youtube.com/watch?v=vyH4e0z7pIo&t=22s
For those that want the TLDR:
- the administration wants to maintain a strong Dollar but that doesn't mean other countries can weaken their currency against the Dollar.
- Bessent doesn't expect to start terming out the debt anytime soon, this is likely now a 2026 story rather than a 2025 story (this point was key for markets).
- the goal is to bring inflation down by increasing the energy supply.
- FED is likely to end QT in the coming 1-3 quarters, which will allow Bessent to begin terming out the debt, again probably a 2026 story.
- the FED cut rates by 100bps, and Yields moved higher, which shouldn't be the result. But, Bessent said that now you're beginning to see the term premia in the Bond Yield begin to come down, as the Bond market has a growing faith that this administration will get the fiscal situation more in hand.
- the clear goal is to bring the US10Y Bond Yield down and to get growth without inflation.
- the Biden administration added to inflation with big government spending and a supply shock due to strong regulation: more money, but less deal flow.
- DOGE will target the fiscal deficits and the costs side of this.
- All the Gold reserves are in Fort Knox.
- Tariffs had an initial focus on stopping fentanyl from coming into the US.
Summary of Bessent's interview
From the market's point of view, the key takeaway was that Bessent and the Trump administration are focused on bringing down the US10Y Yield.In order to bring the US10Y Yield down, Trump and Bessent are focused on:
- reducing the labour supply (deportations)
- increasing the energy supply bring the cost of it down
- cost-cutting in the public sector (DOGE)
- improved trade deals
Markets
When Bessent spoke, the Bond market has so far tended to rally (Yields down), indicating that the market is confident he and the Trump administration will be able to achieve their objective.Bessent did actually note that Yields have come lower every week since Trump came in. The plan will likely be to see the US10Y Bond Yield come back to 3.00% to 3.50% by year-end.
US10Y bond yield:
Alongside the US10Y Yield gradually coming lower, we have seen the S&P and the Nasdaq both squeeze into all-time highs.
S&P:
Nasdaq:
Bitcoin has also remained close to its highs, currently down only about 10%, which is historically not a lot. As we well know, the pain has been in the majority, felt in Alts and Memes.
BTC is now on the verge of breaking out of the horizontal resistance of $98,900, and the local downtrend line. If we're to see a break out (a convincing close), it would be possible for BTC to then potentially trade as high as $102k to $104k (the orange box we've identified).
If BTC reaches the orange box, that's where we think the top of the price range might be and we'd expect a downside from there, the potential for the orange box to be a local top. If we don't get a breakout, that might provide some cause for concern.
Let's track this and see the response from Price over the coming days.
BTC:
Cryptonary's take
We still remain in wait-and-see mode. In the short term, we're not getting carried away with prices seeing a potential relief bounce here, and we are of the opinion this can go higher. This might be driven by some Short squeezes as we're seeing quite a few of the Funding Rates go negative.Ultimately, this is just short-term noise. We expect the coming month or two to remain choppy and price to likely be range-bound. We put the odds of the price breaking out to the upside (north of $106k say) as much lower than the price breaking the range lows and dipping into the $80k's.
So for now, we'll continue to just play the ranges, and for the more passive of you, remain cash-heavy for now until the risk-on environment returns.
We still believe the second half of the year is set up very positively. We expect Yields and the Dollar to be lower, the market to have digested Trump policies, and the Interest rate to start coming down again, which can likely juice risk assets again (or rather the further end of the risk curve).
In the meantime patience, but we have our fingers on the trigger for when the time is right. It's possible we get more favourable changes sooner, and if so, we'll be ready. Fingers on the pulse.
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