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Good morning everyone,

At the end of last week, two news stories drove the price of bitcoin higher.

They were:

• FED chairman Jerome Powell saying the 'time is right' for the US to cut interest rates

• Crypto-friendly independent presidential candidate Robert F. Kennedy Jr. dropping his White House bid and encouraging his supporters to back former President Donald Trump instead

However, bitcoin began to plummet again yesterday, more than wiping out the gains made at the end of last week.

Poof. We're back to where we started last 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. The big money is in the waiting

The market is testing investors' patience.

Bitcoin has been trading sideways for about six months.

Yes, the largest cryptocurrency by market cap is up about 34% YTD, which is great compared to traditional finance. It's about double the S&P 500's 18% and the Nasdaq-100's 17%.

And that's after bitcoin's stellar return of more than 150% in 2023.

Still, we're all waiting for a big move.

2. Markets hate uncertainty

My riff on the price action is that in 2023 we saw a big recovery rally after a disastrous bear market in 2022 (-65%). Also, from October 2023, the market started to trade on the optimism that we would get bitcoin ETFs in the US, which finally happened in January 2024. The optimism culminated in an all-time high of USD 73000 in March.

Since then, the market has been in wait-and-see mode.

It's telling that the two news stories that drove the price higher last week were about interest rates and the White House.

That's because those are the two big stories that markets are looking for certainty on.

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3. A tale of two cycles

We've got two big cycles ahead of us. One is the interest rate cycle and the other is the US election cycle.

Investors are waiting for clear signals on how these two cycles will unfold.

On interest rates, Fed chairman Powell's comments last week suggest that we will see rate cuts on 18 September, a little less than three weeks from now. A few weeks ago, the question was whether we would get rate cuts. Now the question has moved to how big the cut will be, 25 basis points or 50 basis points.

If nothing major breaks in the economy between now and 18 September, I expect a rate cut of 25 basis points.

This rate cut will be a much-needed breath of fresh air for markets and the economy.

4. Uncertainty on the political front

The outcome of the US election cycle is less clear. On the prediction market Polymarket, the odds are almost even between Trump and Harris.

After Joe Biden dropped out of the presidential race, Kamala Harris enjoyed a honeymoon period in the polls.

But as the honeymoon period comes to an end, the toughest part of the campaign is yet to come for her.

After years of open hostility between the Securities and Exchange Commission (SEC) and the crypto industry, the Harris campaign is reportedly looking for a reset. But it's still unclear what the contours of that reset will be.

Crypto isn't mentioned in the official '24 Democratic Party platform, which runs to 92 pages. The Republicans, on the other hand, have included crypto in their platform.

Meanwhile, the SEC is not helping Harris mend fences with the industry by continuing to regulate it through enforcement.

As I have argued here, I think the US presidential election will lead to a friendlier regulation of the industry, regardless of who is in the White House.

But the markets want to know who will be in the driver's seat and how friendly that regulation of the industry will be.

5. In the meantime, read a book

In the meantime, just wait. Get a good book and learn some fun things.

I recently read Read Write Own: Building the Next Era of the Internet by Chris Dixon and really enjoyed it. I may share some thoughts on the book here soon.

And I am currently reading The Capitalist Manifesto: Why the Global Free Market Will Save the World by Johan Norberg, which I'm also enjoying.

After that, I'm going to turn my attention to the Vanderbilt family and read Vanderbilt: The Rise and Fall of an American Dynasty.

I'm spending more time reading because I have no reason to change my investment strategy at the moment. Bitcoin has been boring, which is perfectly normal. The markets just want certainty about how hard to invest in the next interest rate and election cycle.

I expect a big H1 2025. Only if H1 2025 turns out to be a disappointment would I change my investment strategy.

Have a great weekend, everyone!

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