Stocks rally on transitory belief and improved tax outlook, bitcoin rebounds as retail mistimed potential bottom

US stocks are rallying as inflation fears ease, negotiations with 140 countries over a potential global minimum corporate tax rate is now at 15%, an improvement of the initial 21% proposal, and as crypto chaos subsides.  A wrath of Fed speak confirmed their dovish stance over handling of inflation and the labor market recovery.

The Nasdaq is leading the charge today as mega-cap tech bounces back and on the improved corporate tax outlook.  The broad commodity rally is hitting a rough patch after China intensified its campaign to cool the surging raw material market, announcing severe punishment for violations.

Global Tax

The race to the bottom for global tax rates has sparked the Biden administration’s drive into having a level tax playing field that could lead to lower rates for US-based businesses.  The 15% global minimum corporate tax rate would likely lead to a key reversal in his expected stance of raising the corporate tax rate in the US to 28%.  He would probably settle for keeping it steady at 21%, which should be enough for keeping it competitive for doing business in the US.

Bitcoin volatility remains firmly in place.  Follow-through selling occurred over most of the weekend on mounting regulatory concerns from China and the US.  China’s crackdown on crypto was mostly a reiteration but miners appear ready to move.  In the US, everyone is anticipating that the Fed’s summer paper on the digital dollar could contain harsh requirements that could cripple the use case argument for cryptocurrencies.

Wild swings across the cryptoverse will continue to dishearten new crypto traders, while institutional money seems poised to keep their long-term bets.  Many small retail traders seem to be recycling a playbook that will support massive purchases of bitcoin on the collapse towards the USD20,000 to USD25,000 range.  Today’s bitcoin bounce stemmed from a broad-based risk-on Wall Street session and as many retail traders mistimed the bottom.  Bitcoin is still down over 30% from the record highs made last month.

Bitcoin bulls need to see some calm in the market, but leverage trading across Asia keeps the rollercoaster ride going strong.  Bitcoin’s rollercoaster ride could eventually have prices trading over and under the USD40,000 level over the next month.

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