U.S. markets rebound as liquidity returns after six-week shutdown

The U.S. markets have shown signs of recovery after a steep decline following the six-week government shutdown, according to Ark Invest analysis. Liquidity in the U.S. financial system reached a multi-year low of $5.56 trillion on Oct. 30, according to the Federal Reserve and the U.S. Treasury.  

The sustained six-week period of government shutdown blocked roughly $621 billion from entering the U.S. market. To date, approximately $70 billion has been injected into the economy following the end of the government shutdown on November 12. According to Ark Invest estimates, roughly $300 billion more could be injected into the market over the next five to six weeks. 

Ark Invest buys $16.5 million worth of COIN shares

Ark Invest has disclosed through a filing that it has purchased $16.5 million worth of Coinbase (COIN) stock. The purchase consisted of 62,166 shares allocated across the three Ark exchange-traded funds, including ARK Innovation (ARKK), ARK Next Generation Internet (ARKW), and ARK Fintech Innovation (ARKF). The purchase marked the largest investment since August 1. 

COIN stock was up 4.27% at publication, trading at $264.97 over the past 24 hours. The stock jumped 1.4% in after-hours trading to $268.68 before the market closed. BTC, on the other hand, has regained trading above $90,000. The token was up 4.8% at the time of publication, trading at $90,650. 

ARKK ETF was trading at $78.47, representing a 1.51% increase. ARKW ETF was up 1.82%, trading at $ 150.10, and ARKF ETF was up 2.40%, trading at $48.78. The three ETFs added to Coinbase as equities and crypto benchmarks rose in response to the expected Fed easing rate cuts in December.

Meanwhile, Ark Invest CEO Cathie Wood wrote on X today that the current liquidity squeeze, which has been limiting the rise of crypto and AI-related markets, is set to reverse in the next few weeks. Wood’s company predicted in April a 2030 Bitcoin price target of $1.5 million in its bull case and a $300,000 price target in its bear case. 

Wood affirms the net $1.5 million bull price remains unchanged 

Cathie Wood, Ark Invest CEO, explained that stablecoins have accelerated, taking on some of the roles initially held by BTC, as expected, but the gold price appreciation has been greater than expected. She spoke during a webinar on Monday, noting that the net bull price for the company hasn’t changed despite the recent crypto market correction and stablecoins taking on the role of BTC as a safe-haven asset. 

The U.S. Federal Reserve officials have publicly signaled a potential rate cut in December. For instance, New York Fed President John Williams’ recent remarks were interpreted as a signal of support for rate cuts. According to CME data, the futures market forecasted a 90% chance of a near-term rate cut. 

Meanwhile, the Treasury General Account remains inflated at $892 billion, compared to its normal level of approximately $600 billion, indicating that liquidity is poised to return. The September unemployment rate stood at 4.44%. ADP reported that 13,500 jobs were lost last week, retail sales slowed, and the core Producer Price Index came in below expectations. All these statistics point to a potential rate cut in December. 

The Fed is also expected to end quantitative tightening (QT) on December 1, a process by which the Fed allows securities to mature without reinvestment. According to Ark Invest, the end of QT is likely to increase liquidity and a positive sentiment towards investors to reopen risk exposures.

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