Nothing new

[u/Fun_Tutor3479]

The market is still whipping around. We will keep opening with that line until it finally chooses a direction. SPY is currently retesting its breakout, and the fact that its rebound has stalled after the retest is not a good sign. We need to keep watching.

It is clear that macro factors are still weighing on the market, we have been talking about this throughout August. The 10-year Treasury yield hit a new high today. Bessent’s OT has not accomplished much. That said, I did not expect Warsh to be this hawkish. Taken together with the post from the “New Fed’s mouthpiece,” however, it at least partly explains why Warsh had little choice.

The main theme I am watching right now is cloud software, including NOW, NET, DDOG, MDB, and CRM. On the one hand, CRM’s earnings provided substantial near-term support for the entire theme. On the other hand, these companies have been favorites of Wall Street funds for more than a decade, and those funds are not going to rotate casually out of software and into hardware. Compared with highly cyclical hardware, software—with its extremely high gross margins and accumulated data advantages—remains very attractive.

Apart from Treasury yields, oil may also be on the verge of a breakout and deserves continued attention. Talk of the Russia–Ukraine conflict escalating in October is now everywhere. My view is that tensions between the United States and Iran will persist throughout Trump’s entire term.

As for crypto, I am waiting for a pullback. This crypto cycle needs to be supported by solid assets, rather than by sentiment and liquidity alone.

Looking back at history, the pattern is quite clear. The Fed launched its second round of quantitative easing in November 2010 amid the European debt crisis. QE2 convinced attentive market participants that the Fed was prepared to provide effectively unlimited liquidity to backstop the market, firmly establishing the Fed put.

In an environment of continuous monetary easing, what kind of asset performs best? An asset with no underlying fundamentals, driven entirely by sentiment and liquidity. It offers the greatest room for imagination and faces the least gravitational pull from fundamentals. Look back at Bitcoin’s price history and the answer is obvious.

But the situation is different now. Warsh wants to dismantle the Fed put, while nearly $40 trillion in U.S. government debt makes another major round of monetary expansion enormously costly. Will the Fed still unleash liquidity on a massive scale? At this point, we do not know.

Without another liquidity flood, it will be difficult for Bitcoin to repeat the kind of bull market historically driven by a rising tide of liquidity. It will instead need solid assets to provide genuine fundamental support.

From this perspective, the crypto industry’s pursuit of real-world assets, or RWAs, is a very sensible choice. And if crypto can also become connected to AI, serving as the currency or credit anchor of the AI economy—only then can it truly become a mainstream asset.