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Good morning everyone,

Following last weekend's Bitcoin 2024 conference, Bitcoin started the week strong on optimism that the world's largest cryptocurrency could soon become a reserve currency.

But then selling pressure kicked in, sending the price lower.

Finally, on Wednesday, the US Federal Reserve (Fed) said that a September rate cut was on the table but not guaranteed, which was a more cautious statement than the market expected.

Let's look at the three biggest news stories of the week.

DISCLAIMER: This newsletter is not financial advice. It does not take into account your financial situation, is general in nature, and is for educational purposes only.

Also, this newsletter contains affiliate links. This means that I may receive a commission from them. But for Crypto Down Under, I only choose products I use myself and can recommend wholeheartedly. Don’t forget to do your own research.

1. Bitcoin is on its way to becoming a reserve currency

As mentioned in last week's newsletter, Bitcoin 2024, the world's largest Bitcoin conference, took place last weekend in Nashville.

There was a political breeze blowing through the conference this year.

• Independent candidate Robert F. Kennedy Jr. pledged to buy 4 million Bitcoin for the government’s reserves if elected.

• Republican Senator Cynthia Lummis announced plans to introduce legislation calling for a "strategic Bitcoin reserve" that would reduce the US national debt by buying 1 million Bitcoin over the course of five years.

And Donald Trump gave a keynote speech.

I mentioned in last week's newsletter that there were rumors that Trump was going to announce his plans for Bitcoin to become a reserve currency.

Well, guess what? It happened, albeit in a less bullish way than expected.

Trump announced a "strategic Bitcoin stockpile". He said he wanted to start building this stockpile by not selling the 200,000 units of Bitcoin that the US government holds from seizures from illegal operations. As you can see below, according to Arkham Intelligence, the US government currently holds 203,000 Bitcoin worth USD13 billion.

While a "strategic Bitcoin stockpile" would be a catalyst for Bitcoin, Trump's plan to not buy additional Bitcoin was less bullish than Robert F. Kennedy Jr.'s and Senator Lummis' plans.

As a result, Bitcoin traded mixed over the weekend before starting the week strong, reaching nearly USD70000 on Monday.

Key takeaway: The first Bitcoin book I ever read was "The Bitcoin Standard" by Saifedean Ammous. Ammous argues that the real use case for Bitcoin is as a reserve asset. Finally, we can see political leaders getting on board with this idea. As I've said many times, I'd like to see Bitcoin fully embraced by both political parties in the US, not just one. But I'm optimistic that we can get there. The Financial Times reported this week that the Kamala Harris campaign is seeking a reset with the crypto industry.

2. US Government sparks investor concerns

Just two days after Donald Trump's speech, the US government did the opposite of what the ex-president advocated: it moved USD2 billion worth of seized Bitcoin.

As previous movements often foreshadowed impending asset sales, Bitcoin began to retreat.

Key takeaway: As discussed in this newsletter, the market gets quite spooked every time government entities sell Bitcoin. This behavior is short-term and irrational, as most of the time governments are just following standard procedures for selling seized assets. But hey, markets aren't completely rational. The selling pressure from asset sales will only be temporary. And if Bitcoin is established as a reserve asset one day, we may not have this problem anymore.

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3. Interest rate soap opera continues

We also saw another episode of the soap opera "The Price of Money" this week.

In Australia, the Consumer Price Index (CPI), the Reserve Bank's (RBA) preferred measure of inflation, rose to 3.8% year-on-year in the June quarter. Although this was slightly higher than the 3.6% rate in the March quarter, it was in line with economists' forecasts.

While CPI inflation rose, a core inflation measure that strips out more volatile price movements came in at 3.9% year-on-year, beating expectations.

Long story short, with core inflation heading in the right direction, Aussies may be able to dodge another rate hike when the RBA holds its next board meeting and cash rate announcement next week.

Over in the US, as expected, the Federal Reserve left its key interest rate range unchanged at 5.25%-5.50%. Somewhat surprisingly, however, the Fed gave little indication that a September rate cut is guaranteed.

However, according to the CME FedWatch tool, markets still expect a September rate cut. Most participants (86.5%) expect a 25bp cut to the 5.00%-5.25% range.

Key takeaway: US interest rates could start to fall in September. But don't bet on it. Australia is taking a bit longer. The RBA hasn't raised rates as much as some of its peers, but it's struggling with sticky inflation. It could be next year before Aussies get their rate cut.

Have a great weekend, everyone!

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