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Tonight's Fed Meeting

The Fed chose to keep interest rates unchanged. However, out of the 12 votes, there were 4 dissents, with 3 of those opting for a rate hike, and 1 vote for a rate cut. This was highly surprising as markets expected the Fed to not hike into an inflation spike due to an oil supply shortage, and yet now some Fed members are leaning more towards rate hikes. This situation/environment will likely remain the same, and even increase the odds, should the conflict in the Middle East continue to go on without a resolution - which as of now, looks unlikely in the short-term. 

Another surprise was that Chairman Powell committed to staying on as a Governor (despite stepping aside for Kevin Warsh to become the new Chair) until the 'DOJ probe is fully concluded', although Powell said that he'd continue serving 'while keeping a low profile'. 

To summarise this Fed Meeting, it's bearish risk assets. The market is pricing in an increased likelihood of rate hikes this year, and with oil prices moving higher, and no resolution to the conflict in the Middle East in sight, this environment is unlikely to change, and if it does, it's likely to worsen rather than get better (for risk assets) in the short term. 

For context, Brent Crude Oil is now just shy of $120/barrel, with price being up 34.1% in the last 12 trading sessions. 

Big Tech Earnings

After the market close and Powell's press conference, we had 4 of the Big Tech companies report their Q1 earnings. 

Expectations going into the reports were as follows:

• Microsoft: EPS est. $4.04-$4.07 (+16%-18% YoY growth)
• Amazon: EPS est. $1.61-$1.65 (modest YoY growth)
• Alphabet/Google: EPS est. $2.62-$2.67 (YoY decline, pressure from depreciation)
• Meta: EPS est. $6.64-$6.71 (strong YoY growth)

The earnings that came in were:

• Microsoft: EPS $4.27 - beat. Shares down slightly.
• Amazon: EPS $2.78 - big beat. Shares down slightly.
• Alphabet/Google: EPS $5.11 - huge beat.  Shares up 3.5%.
• Meta: EPS $10.44 - big beat. But, shares pull back by 6.7% on larger upcoming capex spend.

Overall, this is very positive, even though the share prices haven't been rewarded other than Alphabet. The Big Tech companies continue to be hugely profitable, however the market is battling with their huge capex spend in their attempts to win the AI race.

Cryptonary's Take

Ultimately, the Big Tech companies are likely to perform and therefore support the stock indexes. However, this doesn't directly benefit Crypto and the Crypto eco-system. What drives that is liquidity. And following this evening's Fed Meeting with 3 hawkish dissents, the likelihood of rate hikes has increased whilst the odds for rate cuts this year has decreased. This is bearish for Crypto, particularly as the Dollar, and Bond Yields move higher, whilst Oil remains elevated. 

Bitcoin looks to have rejected into the key on-chain resistance area of $78k-$82k with the mechanics that initially drove the move now having changed i.e., Spot demand and the Coinbase Premium have softened.

In our view, Bitcoin has locally topped and we're expecting the longer-term downtrend to now continue.

This content is for informational and educational purposes only. Cryptonary is not authorised or regulated by the Financial Conduct Authority (FCA) or any other financial regulatory body. Nothing in this publication constitutes a personal recommendation or advice to buy, sell, or hold any virtual asset. Virtual assets may lose their value in full or in part and are subject to extreme volatility. You can lose all invested amounts and do not benefit from any form of financial protection. Past performance does not indicate future results.