Market report

Turnaround in the unemployment rate in the USA? No recovery in the real estate market in the USA, Bitcoin at new all-time highs.

March 13, 2024
5 min.
Turnaround in the unemployment rate in the USA? No recovery in the real estate market in the USA, Bitcoin at new all-time highs.

Chart of the week

Source: Charlie Bilello, @charliebilello, 08.03.2024

The number of newly created jobs and the unemployment rate in the US were published last week. The number of new jobs created was slightly higher than expected, but the figures for January and February were revised downwards. As a result, the unemployment rate rose from 3.7% to 3.9%.
Why this is important
Is this the turnaround in the labor market? After an increase in unemployment, unemployment has only fallen again twice in history, in 1953 and 1689.

It is also noted with concern that the newly created jobs are mostly not full-time positions.

Source: Otavio (Tavi) Costa, @TaviCosta, 08.03.2024

The chart shows the development of newly created jobs, broken down into full-time positions and reduced workloads. A similar phenomenon was seen in 2000 before the dotcom bubble and in 2007 before the financial crisis. Full-time positions are decreasing, but part-time positions are increasing.
The question is whether this is due to the desire of employees, as they are satisfied with an 80% job, or whether it is the desire of companies to optimize costs and because they do not believe in the stability of the economy.
The unemployment rate is more important in the USA than in other countries. In almost all countries, the aim of the central bank is to control inflation. In the US, however, the central bank's mandate is to control inflation AND keep the unemployment rate low. The poor figures from the labor market immediately gave rise to fantasies of interest rate cuts.

The mainstream press and its investment recommendations - why is it often wrong?
Last week we wrote about why the mainstream press is so often wrong with its forecasts and gave some examples.

Source: Tradingview, Twitter

We wrote this article a week too early, because one of the most widely read stock market magazines in the USA published an even better example this week.

Source: Sven Henrich, @NorthmanTrader, 09.03.2024

This week's front page of the stock market magazine Barron's had the headline "Bet on the bull - stocks are doomed to keep rising".

The stock market rises when more investors buy than sell. Such front pages motivate the last possible investors to buy. Therefore, such front pages are mostly a harbinger of a trend change in the following weeks or 1-2 months.

No recovery in the real estate market in the USA
Somewhat unnoticed by the euphoria on the stock markets, the real estate market in the USA is continuing to deteriorate. The persistently high interest rates are causing problems for all those who need to refinance.

Source: Game of Trades, @GameofTrades_, 08.03.2024

The index shows the median house price in the USA. Prices are falling more sharply than during the financial crisis from 2007 to 2009, which was triggered by the real estate market.

Source: Game of Trades, @GameofTrades_, 08.03.2024

The chart shows the number of multifamily properties that are financed by the government real estate lender Freddie Mac and can no longer pay the interest. We are already at the highest level since 2013, but so far not at the highs seen during the financial market crisis.
Although the economy is still doing well and the unemployment rate is low, the crisis in the real estate market is worsening.

Bitcoin at new all-time highs
Bitcoin is back at new all-time highs. This means that anyone who has bought and held on to Bitcoin is in profit. Or a little more painfully: anyone who once held Bitcoin and sold it at a loss would now be back in profit. There is a saying in the stock market that "the boom nourishes the boom". Everyone who currently holds Bitcoin speaks only positively about it. This motivates many investors to (re)enter the market.
We have written about Bitcoin before. Once in November 2023, since when Bitcoin has risen by 93%. And once in January 2024, since when Bitcoin has risen by over 60%. Both times we referred to halving and spot ETFs.

Source: YouTube; InvestAnswers, 08.03.2024, Time: 6.19

The chart shows the large inflows of funds into the US spot ETFs on Bitcoin. The bars above the zero line show sales and the bars below the zero line show sales.

Since the launch of the spot ETFs, USD 10 billion has already flowed into the products. This means that USD 10 billion in Bitcoin has been withdrawn from the market and is available as collateral. This inflow of money has changed the market and played a significant role in the price increase.

However, a large part of the effect is cushioned by Grayscale (black bars in the chart). Grayscale had the first and currently largest Bitcoin Trust. The reason that they are selling Bitcoins is due to the bankruptcy of large Bitcoin companies such as Genesis. The bankruptcy trustees have agreed in recent days to allow Genesis' holdings to be sold to pay creditors. Soon, however, Grayscale will have sold all its holdings and then the ETFs will have to stock up on the market.
When the big ETFs stock up on bitcoins on the market, they rarely go through the public marketplace. They cover themselves through over-the-counter purchases via the market houses (OTC - Over the Counter Transactions).

Source: YouTube; InvestAnswers, 01.03.2024, Time: 4.51

The chart shows the holdings of bitcoins held by the major market houses and sold to the ETFs via OTC transactions. The holdings are at a historically low level.
The market for Bitcoin is a market like any other. If more people buy than sell, the price rises. The supply is or will dry up almost completely in the next few weeks, but demand continues to rise due to the spot ETFs.
And the halving will follow in 40 days:

Source: Altcoin Daily, @AltcoinDailyio, 25.01.2024

The chart shows the halvings to date. Bitcoin is a decentralized currency. It was set up in such a way that no central authority can control or manipulate it, as central banks do. There are currently 18,825 nodes. These are like cash books on which every transaction must be recorded. If you pay with Bitcoin, the payment has only been made once the transaction has been entered in all 18,825 ledgers. This process requires a lot of computing power. The users who provide this are rewarded with bitcoins. And this process is called "mining". The reward has been fixed since the launch of Bitcoin and is halved at regular intervals, known as halving.

Source: YouTube; Wisdom Bites, 28.02.2024, Time: 3.26

The chart shows the price development of Bitcoin since 2011 and the previous halvings (green circle, 1). So far, there has always been a price increase 6 months before the halving. This accelerated even after the halving. 2-3 weeks directly after the halving, however, there is usually a correction of 10-30% until it turns upwards again.

It is also interesting to see how long the price increase lasted. So far, the halving has always marked almost exactly half of the period of the price increase (red arrows, 2). If this is calculated using the current figures, Bitcoin should continue to rise until the beginning of September 2024.

The next halving of the reward will take place on April 21, 2024 (Halving Countdown). This means that the expected supply shock described above will now be followed by an additional supply shortage.

There is therefore only one way forward for Bitcoin. Upwards! Or not?
As in every stock market story, there is also a BUT. What the press is currently failing to mention is the structure of the Bitcoin market. 80% of all Bitcoins that have ever been produced have never been traded. So we are currently only seeing 20% of the volume.

So far, miners have held on to their bitcoins in every correction, or even increased their holdings. However, we are currently reaching levels that are making some miners weak. There are many people who would be millionaires, multimillionaires or even billionaires if they sold.

However, there is one restriction here. Bitcoin's stock exchanges are not stock exchanges as we know them for shares. Most are domiciled in countries with weak laws and no investor protection. Most exchange platforms have restrictions on how much you can withdraw in cash per day. For many, the maximum amount is 25,000, so a lucky owner of 100 million in Bitcoin would have to withdraw the maximum amount every day for 10 years if they want to withdraw all their money.
We described above that every transaction in bitcoins is entered in an open cash book. You can therefore also see exactly who holds how many Bitcoins. However, you can only see names such as "bc1qp8rx0u6ef9pwg5pa0608e3g grp5p237cz2dhkw9085etl4ne034ss4s2yt" and do not know the real name of the user. Nevertheless, it can be used to track exactly who holds how many Bitcoins and to the minute. If the big investors start to sell, you can see this immediately and, depending on the seller, this could trigger an avalanche of sales and lead to the total collapse of the system.

This is also known as the prisoner's dilemma. If no one moves, everyone wins. If someone moves, they win everything (or lose nothing) and everyone else can lose everything.

Let's hope that no one moves.

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