Weekly Market Update: Magic to Move Markets

Fed Chair Powell still has the magic to move markets… but for how much longer can he keep them spellbound?

The latest U.S. inflation data hit like a rogue wave, murky and jarring. Consumer prices cooled slightly, but wholesale inflation roared back, leaving traders and investors stumbling in a fog of uncertainty last week, as patience for the Fed’s “wait-and-see” stance began wearing thin. 

Inflation is still not tamed and the real economy is starting to flash some red warning lights – constant downward revisions to employment numbers, a housing market that’s in the deep freeze and consumer debt teetering on the brink.

Markets are practically begging for a liquidity fix to juice up already frothy assets, like tossing fuel on a blazing fire, but Powell is in a boggy quagmire – accused of being “too late” by President Trump and now facing a market that smells blood. 

The Fed is caught in a bind, trailing its global peers on rate cuts while inflation’s stubborn hold suggests they’re equally late to tighten – a double-edged sword with the clock ticking fast. 

Global M2 money supply is surging, pushing stocks and Bitcoin to all-time highs, yet housing unaffordability is soaring too. More air for an already inflated bubble? 

Trump is desperate to refinance government debt at a lower rate as treasury interest payments hit $1 trillion over the past 12 months, outpacing defence spending – a blaring siren.

At the same time, investors are demanding steeper yields to tolerate runaway U.S. deficit spending, but Powell can’t slash rates and hope to raise yields at the same time. 

Meanwhile, the U.S. dollar, as tracked by the DXY, has already significantly weakened ahead of the rate-cutting cycle. Watch-out below! Usually good for exports, but maybe not in the new Trump trade war paradigm.

The Jackson Hole symposium was the economic equivalent of a tightrope walker juggling plates above a pit of hungry tigers – with massive near term implications for all asset classes. And of course, Powell didn’t disappoint all but guaranteeing rate cuts in September – and markets erupted in a buying frenzy, but the euphoria masks a grim reality. 

Reading between the lines, the Fed has quietly ditched their 2% inflation target, pivoting to a ‘balanced dual mandate’ framework that is focused equally on employment and price stability. Translation: they’re about to cut rates into stagflation, blaming a softening labor market while growth slows and inflation runs hot – producer prices (PPI) just hit a three-year high and consumer prices (CPI) have remained above 2% for over four years. 

Yikes.

Is this Japan in the 1990s all over again? Economic quicksand saw Tokyo trapped in a low-growth, high-debt spiral, resorting to yield curve control to cap bond yields and keep borrowing costs down. The U.S. is teetering on the same cliff. 

If you’re not holding assets now, you’re already late to the game! 

Bitcoin, born from the ashes of the 2008 crisis, has been a lifeline for those who saw the cracks ahead of time, with early adopters reaping massive gains. As the pressure mounts, the scramble for anything that holds value – Bitcoin, gold, tangible assets – will likely trigger a seismic wealth transfer. 

It’s like fighting for the last lifeboat on a sinking ship. The real question is: what is safety worth when the ship is going down?

Market sentiment has shifted a gear to: Neutral.

Crypto market moves: 

• Another wild week in the crypto markets saw Bitcoin hit record highs above $124k before ‘whale’ selling pressure spooked and shook out traders causing a sell off below $109k.
• Interesting to note that a total of $13.8 billion in BTC options are set to expire on Friday 29 Aug, causing this tug of war between the bulls and the bears.
• Polymarket is still showing 60% chance of Bitcoin breaking $130k in 2025, but the odds of a $150k run have dropped to 30%.
• Ethereum had another stellar week breaking to multiple new all-time highs and peaking out just below $5k. Noting a continued rotation from Bitcoin as FOMO kicks in!
• Bitcoin ETFs saw increased selling last week totaling >$1 million of outflows.
• The total crypto market cap dropped back and is sitting just below $4 trillion again as a majority of top 100 cryptos still managed to finish in the green on a 7 day timeframe.
• We’ve seen a noticeable pullback in Google search volume for both “Bitcoin” and “Crypto” terms suggesting retail has opted to sit out the volatility.
• The Fear & Greed index has now pulled back into “Neutral” territory as we saw a dip in the RSI key momentum indicators across longer timeframes.
• The big winner of the week is Aave (AAVE) +19.4%, as it went live in the Aptos ecosystem.
• The big loser of the week is FET (Artificial Intelligence Alliance) -3.3%, as traders take profits ahead of the Nvidia Q2 earnings report that has markets on edge (again). 

View all top gainers: Visit the top gainers page to find out more.

Highlights from the crypto space:

Weakness in the broad markets last week, coupled with a tech sector sell-off, drove Bitcoin’s price from record highs to below $112k, testing its prior breakout zone. But Fed Chair Powell renewed hopes of rate cuts on Friday, sparking a short-lived buying frenzy that was halted in its tracks by heavy ‘big money’ selling pressure, briefly pushing the BTC price below $109k.

On Monday, a whale sold 24,000 Bitcoins, valued at $2.7 billion, triggering a rapid near $4k price drop in minutes causing over $550 million in liquidations. Whales are noticeably shifting focus to Ethereum, boosting exposure as it hits new all-time highs.

Willy Woo made an interesting comment about recent price action: “BTC supply is concentrated around OG whales who peaked their holdings in 2011 (orange and dark orange). They bought their BTC at $10 or lower and it takes $110k+ of new capital to absorb each BTC they sell.”

Ethereum Treasury Companies have rapidly gained popularity with 69 entities collectively holding over 4.1 million ETH valued at about $17.6 billion. 

Michael Saylor’s Strategy loosened its threshold for when it will dilute shareholders to buy more Bitcoin, leaving some to speculate about a “potential spiral of doom” looming. The stock (MSTR) is down 25% from recent highs but holding almost 630,000 BTC worth over $70 billion.

An open letter from Coinbase, Kraken and Copper has urged the U.K. government to form a National Stablecoin Strategy saying it “must act now to avoid being a rule-taker rather than a rule-maker in the digital asset era.” Someone send the memo to our government please!

A Goldman Sachs report predicts trillions of dollars could soon flood the stablecoin market, after a stunning $7 trillion in transaction volume last quarter – this after Treasury Secretary Bessent told Wall Street that stablecoins will play a growing role in demand for government bonds.

Popular cryptocurrency exchange Gemini, founded by the Winklevoss twins, filed for its long-awaited IPO last week with the help of a credit agreement with Ripple, allowing them to make lending requests up to the “initial commitment” amount of $75M.

NFT’s could be due for a comeback thanks to AI Companion tokens, combining artificial intelligence with NFT characteristics – like FURO. “Instead of being static, NFTs can now be interactive, dynamic, and personalized” fostering an ‘interactive relationship’.

Australian internet service providers will soon block access to blockchain-based ‘prediction market’ Polymarket, after the Australian Communications and Media Authority found Polymarket was in breach of Australia’s Interactive Gambling Act (2001).

In other crypto news…

• Kanye West launched his own Solana based Memecoin YZY which briefly hit $3 billion in market cap before crashing down, inflicting losses on the majority of investors.

• Thailand will launch a pilot programme to allow foreign visitors to convert cryptocurrencies into Baht to make payments locally. They get it!

• Coinbase is listing the World Liberty Financial stablecoin USD1, backed by President Donald Trump and his sons.

• MetaMask will launch its own stablecoin, mUSD, on Ethereum and Linea, later this year, issued by Stripe-owned Bridge and powered by M0.

• Gemini has teamed up with Ripple to provide an XRP credit card.

• The Philippines is reviewing a proposal for their central bank to buy 2,000 BTC annually for five years, with a 20-year lockup period.

• Canary Capital has just filed an S-1 with the SEC to launch a TRUMP coin ETF. Here we go again!

Over 440+ Cryptocurrencies Coming Your Way…

We’ve teamed up with Swyftx to bring you over 440+ cryptocurrencies, better fees, new trading tools and much, much more – all ready for you to explore as the market heats up. Stay tuned!

🌎 Macro news TLDR: A bubble looking for a pin

Stock market bubbles occur when asset prices soar beyond their intrinsic value, driven largely by speculation, only to crash spectacularly. 

Over the past century, there has been multiple examples including:

• 1929 Wall Street Crash: The Roaring Twenties fueled rampant stock speculation, but by October 1929 the Dow Jones plummeted 89% triggering the Great Depression.
• 1987 Black Monday: Program trading and excessive leverage combined with market panic led to overvalued stocks like the Dow crashing 22.6% in a single-day, exposing market fragility.
• Dot-Com Bubble (2000): Hype around internet startups inflated tech stocks until the NASDAQ peaked in March 2000 and then crashed 78% by 2002, wiping out $5 trillion.
• 2008 Financial Crisis: Risky mortgage lending and complex financial instruments inflated a U.S. housing bubble that caused global chaos when it burst, dropping the S&P 500 by 57% from 2007 to 2009.
• 2021 Meme Stock Frenzy: Retail investor mania fueled by social media drove speculative stocks to crazy heights, GameStop surging 1,600% before crashing.

Bubbles follow a familiar pattern: euphoria, overleveraging and then panic. Today’s U.S. stock market is looking more and more like a bubble looking for a pin: 

• The Magnificent Seven stocks now account for approximately 34% of the S&P 500’s total market cap. 
• Nvidia has the biggest valuation of all-time (over $4 trillion) having recently surpassed the entire German stock market. 
• U.S. GDP is 26% of global GDP but the U.S. stock market is 65% of global equities.

Tech giants dominate, driven by AI hype, excessive leverage, speculation and loose liquidity – where have we seen this before?

Overvaluation risks a sharp correction if sentiment shifts or when rates rise, so tread carefully.

Economic news from the Americas

The S&P 500 slid for five consecutive days last week leading the broad markets into a correction territory as traders nervously awaited news from the Jackson Hole summit on Friday.

Fed Chair Powell didn’t disappoint, in a ‘dovish tone’ he pointed to a possible rate cut at the next September meeting, but stopped short of committing. That was enough to ignite the markets into a bullish frenzy, pushing the Dow Jones to a record close.

FedWatch has priced in chances of a 25 bps rate cut at >80%. 

After months of persistent attacks on Fed Chair Powell, President Trump turned his sights on Fed Governor Cook, sending her a letter of termination over allegations of mortgage fraud – but she has refused to step down, appointing a lawyer to fight back. Trump has appointed 3 of the 7 current governors and this looks like a desperate attempt to place a majority.

Palantir is down more than -15% from its recent highs on growing ‘AI bubble’ fears – the stock achieved a record forward PE ratio of more than 250, which is more than double that of Cisco at the peak of the 2000 Dot Com bubble. Yikes! 

Meta has paused hiring for its new AI Division ending a spending spree that saw it acquire a wave of costly AI researchers and engineers.

A company spokesperson said that the pause was simply “some basic organizational planning” but it comes after OpenAI CEO Sam Altman told a group of journalists last week that he believes “AI is in a bubble”.

The U.S. government has taken a 10% stake in embattled chipmaker Intel, in the Trump administration’s latest effort to extend control over corporate America. Is this the beginning of nationalisation or a new U.S. sovereign wealth fund?

The world’s largest company by market cap, Nvidia, is due to present its Q2 earnings after the U.S. markets close on Wednesday – a crucial moment for tech and AI stocks. Watch closely!

Over in Europe & the Middle East…

Moscow threw President Trump’s Ukraine peace negotiations into disarray last week, insisting it must have veto power over any postwar support for the country, as its forces carried out the biggest wave of attacks in weeks. 

Russia’s Foreign Minister, Sergei Lavrov, went on to say that President Putin is ready to meet but “no meeting is planned’ and questioned the legitimacy of Zelenskyy to sign the deal.

Traders see a growing likelihood that the Bank of England will keep interest rates on hold for the rest of the year, after inflation came in at a higher-than-expected 3.8% for July.

Germany’s economy shrank by 0.3% in the Q2 vs the prior quarter, as demand from its top trading partner (the U.S.) slowed following months of buying in anticipation of U.S. tariffs.

And in Asia Pacific…

President Trump on Monday stated that the U.S. and China “are going to have a great relationship,” even as he warned that if he chose to, he could “destroy China” by playing the “incredible cards” at his disposal. Hard to tell if this is progress or not? 

India’s Foreign Minister has confirmed that trade negotiations with Washington are still ongoing but there are ‘lines’ that New Delhi needs to defend. Indian goods face additional U.S. tariffs of up to 50% due to its increased purchases of Russian oil.

Back in NZ, the Reserve Bank admitted to being surprised that house prices haven’t been increasing as they expected, forecasting that house prices will fall 0.3% for the full 2025 calendar year, before they start to rise again next year, up 3.9% by the end of 2026 and 5.0% by the end of 2027.

Retail sales volumes surprised to the upside showing 0.5% rise in the June quarter according to Statistics New Zealand. The RBNZ said it was expecting GDP to have shrunk by 0.3% in the June quarter after a 0.8% rise for the March quarter.

That’s a wrap for this week!

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