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Bitcoin continued to behave as a high beta and risky asset similar to most of the overvalued tech sector. As announcements of Russian military intervention proliferated in financial markets, US stock markets fell as much as -3% during the overnight session, with bitcoin also fell to a low of $34,300, before bottoming and rebounding aggressively to a high of $40,000 in a big short squeeze.
Bitcoin Price Falls From All-Time Highs
As of this writing, bitcoin is down 43% from its November highs and 12% from lows set late last night. At the end of the day, the Nasdaq closed 3.4% in the green in the daily session, with risky assets trading as if peak fear and uncertainty were priced in shortly after the lows. declarations of war. Gold initially jumped and hit a one-year high, touching $1974 an ounce before falling sharply, in an inverse pattern to US stock markets and bitcoin.
Price of Bitcoin against the price of Gold over a one-day period
In the aftermath of the dispute, markets quickly priced in lower-than-Federal Reserve rate hikes for 2023. In the Eurodollar futures market, the implied federal funds rate has now fallen more than 10 bps. basic for March and a little more for the rest of the year.
Eurodollar Fed funds futures implied rate for 2023
One development that will be important to watch is if the Fed pushes back the timing of monetary policy tightening due to the outbreak of war in Ukraine. If history is any precedent, it very well could be, as central banks cherish the opportunity to deflect blame for policy mistakes and continue to ease markets.
