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What’s shaping the markets right now: AI hype, Bitcoin’s calm, and the Fed’s next move

What’s shaping the markets right now: AI hype, Bitcoin’s calm, and the Fed’s next move

Global markets are currently riding a wave of optimism, with risk sentiment surging as investors appear to shrug off a host of economic and political uncertainties. This buoyant mood stems mainly from two key drivers: the anticipation of earlier-than-expected Federal Reserve rate cuts and growing excitement about the potential for artificial intelligence to fuel economic growth.

Beneath this surface of confidence, there are substantial risks that could easily unsettle this delicate balance. From escalating trade tensions to shifting monetary policies and fluctuating commodity prices, the global financial landscape is anything but stable. Adding to the complexity is the cryptocurrency market, where Bitcoin’s price volatility has recently hit its lowest point in over a year, offering a curious contrast to the broader market dynamics.

Let’s begin with the economic and political risks that, despite being overlooked by many market participants, remain critical to understanding the current sentiment. One of the most prominent issues is the resurgence of trade tensions, highlighted by former President Donald Trump’s recent threat to raise tariffs on Indian goods substantially. His reasoning ties to India’s continued purchases of Russian oil, a move that has irked US policymakers amid geopolitical strains.

This isn’t just a bilateral spat between the US and India. It has the potential to ripple across global trade networks, disrupting supply chains and increasing costs for businesses worldwide. India plays a vital role in the global economy, particularly in technology and manufacturing, so any escalation in tariffs could dampen corporate earnings and slow economic momentum. This is a reminder that geopolitical posturing can quickly translate into economic consequences, and investors ignoring this risk might find themselves caught off guard if tensions boil over.

Turning to monetary policy, the Federal Reserve’s next moves are shaping up to be a linchpin for market sentiment. San Francisco Fed President Mary Daly recently indicated that the Fed might need to implement more than two rate cuts this year if the labour market weakens further and inflationary pressures from tariffs fail to materialise.

This comment caught my attention because it suggests a willingness to adopt a more supportive stance, which could bolster markets by lowering borrowing costs and encouraging investment. However, it also underscores the Fed’s challenging position. Cutting rates too aggressively risks reigniting inflation, especially if trade disruptions push up prices. On the other hand, holding back could stifle growth if the labor market deteriorates. Fed is walking a tightrope, and its decisions will likely amplify market swings in the coming months. For investors, this means staying attuned to economic data like employment figures and inflation readings, which will heavily influence the Fed’s path.

AI hype changes things

Meanwhile, the optimism around AI-driven growth is injecting a dose of excitement into the markets, and I can see why. Advances in artificial intelligence are no longer just theoretical. They’re starting to reshape industries. Companies are pouring resources into AI, betting that it will streamline operations, boost productivity, and open new revenue channels.

This enthusiasm is most evident in the tech sector, which has powered a recent rebound in US stock markets. The S&P 500 climbed 1.5 per cent, the NASDAQ jumped 2.0 per cent, and the Dow Jones rose 1.3 per cent, reflecting a clear risk-on attitude. I find this rally encouraging because it signals confidence in innovation as a growth driver. I also think it’s worth tempering expectations.

AI’s economic impact is still unfolding, and while the long-term potential is immense, short-term gains might be overstated. If other risks like trade disputes or policy missteps intensify, the AI narrative could lose its luster, leaving tech-heavy indices vulnerable.

The bond market offers another lens into investor sentiment, and here I see a mix of caution and opportunism. US Treasuries consolidated their gains on Monday after a strong showing the previous Friday, when renewed expectations of Fed rate cuts drove demand. The 10-year Treasury yield dropped 2.4 basis points to 4.192 per cent, inching close to its support level at 4.185 per cent.

Lower yields typically suggest investors are seeking safety, which seems at odds with the equity market’s rally. To me, this divergence hints at underlying unease; some investors are hedging their bets even as others pile into stocks. The US Dollar Index fell 0.4 per cent in response to these lower yields, while gold edged up 0.3 per cent to US$3,373 per ounce. Gold’s modest gain reinforces my view that safe-haven assets still hold appeal, despite the risk-on vibe dominating headlines. It’s a subtle but telling sign that not everyone is fully convinced by the current optimism.

The case with commodities

Commodities, too, are part of this intricate puzzle. Brent crude oil slipped 1.3 per cent to US$68 per barrel after OPEC+ agreed to increase production by over 500,000 barrels per day starting in September.

This move surprised me a bit, given the group’s usual caution, but it could ease inflationary pressures by keeping oil prices in check. For consumers and businesses, cheaper oil is a welcome relief, potentially supporting spending and investment. However, it also raises questions about global demand. If OPEC+ feels confident boosting output, does that mean they see economic growth slowing? I lean toward the idea that this is a strategic play to maintain market share, but it’s a development worth watching. Lower oil prices might give central banks like the Fed more room to cut rates without stoking inflation, indirectly supporting the risk sentiment driving markets.

Now, let’s shift gears to Bitcoin, where an intriguing story is unfolding. The cryptocurrency’s price volatility has plummeted to its lowest level in over a year, a stark contrast to its historically wild swings. According to Blockforce Capital, Bitcoin’s annualised 60-day volatility fell to 28.53 per cent on July 30, the lowest since August 28, 2023. Its 30-day volatility hit 25.26 per cent on July 23, the calmest since October 15, 2023. This happened as Bitcoin’s price oscillated between US$105,000 and US$122,750 in July, per Coinbase data from TradingView.

I find this stability fascinating, especially given the broader market turbulence. Part of it stems from regulatory progress, including the passage of three US House bills on crypto and the enactment of regulations in July, with the GENIUS Act signed into law by President Trump. These steps likely reassured investors, reducing uncertainty.

But there’s more to this story. Institutional players are flexing their muscles, and I see this as a game-changer. Strategy, formerly known as MicroStrategy, acquired US$2.46 billion worth of Bitcoin between July 28 and August 3, increasing its holdings to 628,791 tokens, valued at over US$71 billion. That’s a massive bet, averaging $117,526 per token, and it shows how Michael Saylor has turned his company into a Bitcoin juggernaut.

Similarly, Japan’s Metaplanet grabbed 463 BTC for US$53 million, pushing its stash to 17,595 BTC, worth about $2.02 billion. These firms are treating Bitcoin like a treasury asset, buying even as retail enthusiasm wanes. I think this institutional muscle could steady Bitcoin through choppy waters, though it also ties the crypto’s fate closer to corporate strategies.

My view? Enjoy the ride, but keep your eyes wide open. The next few months could be a wild one.

 

Source: https://e27.co/whats-shaping-the-markets-right-now-ai-hype-bitcoins-calm-and-the-feds-next-move-20250805/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

What the EU Gets Right with its New AI Rules

What the EU Gets Right with its New AI Rules

The European Union’s latest effort to rein in artificial intelligence, the AI Act, marks a pivotal step towards regulating a technology that is as pervasive as it is potent. With its public unveiling on January 21, the Act lays a framework that seeks to harness AI’s capabilities while safeguarding the fundamental tenets of trust, ethics, and human rights.

As we unpack the Act’s dimensions, we will weigh its merits against its potential impediments to the trajectory of AI, not just within the confines of Europe but as a precedent for the global stage. The discourse around this groundbreaking legislation is as much about its current form as it is about the dialogue it engenders concerning the future interplay of artificial intelligence with our societal mores and economic frameworks.

Does it strike the right balance?

The AI Act introduces a risk-based regulatory schema, categorizing AI systems into unacceptable, high-risk, limited-risk, and minimal-risk. The Act prohibits ‘unacceptable risk’ AI systems, such as manipulative social scoring and covert emotional manipulation, to protect individual rights. ‘High-risk’ AIs, pivotal in healthcare, education, and law enforcement, face rigorous requirements including human oversight. ‘Limited-risk’ AIs, like chatbots, must disclose their AI nature to users. Lastly, ‘minimal-risk’ AIs, like video games, have minimal regulatory constraints, promoting innovation while safeguarding against abuses.

The AI Act is crafted with the dual goals of fostering technological innovation and upholding fundamental rights. The Act’s targeted regulatory focus seeks to minimize undue burdens on AI practitioners by emphasizing the control of applications with the most potential for harm. However, it is not without its detractors. Critics point to its ostensibly broad and ambiguous language, which may leave too much open to interpretation, potentially leading to legal uncertainties.

The Act’s broad definition of AI as a technology-neutral concept, its reliance on subjective terminology like “significant” risk, and the discretionary power it affords to regulatory bodies are seen as potential stumbling blocks, raising concerns over possible inconsistencies and confusion for stakeholders within the EU’s digital marketplace.

A significant challenge the EU’s AI Act faces is ensuring consistent enforcement across all member states. To address this, the Act constructs an elaborate governance structure that includes the European Artificial Intelligence Board and national authorities, bolstered by bodies responsible for market surveillance. The Act stipulates robust penalties for non-compliance, including fines of up to 7% of global annual turnover. Beyond punitive measures, it emphasizes the role of self-regulation, expecting AI entities to undertake conformity assessments and maintain risk management protocols. The Act also recognizes the importance of global cooperation, considering the divergent AI regulatory landscapes outside the EU.

The efficacy of the Act will ultimately hinge on the collective engagement and adherence of all parties to its stipulated frameworks.

Some pros and cons of the AI Act

The AI Act directly addresses the burgeoning field of advanced technologies, focusing on generative AI, biometric identification, and the nascent realm of quantum computing. These technologies hold transformative potential across diverse sectors including healthcare, education, entertainment, security, and scientific research.

Yet, with great potential comes a spectrum of challenges, particularly concerning ethical issues like bias and discrimination, as well as concerns over privacy, security, and accountability. The Act confronts these challenges head-on by instituting rules and obligations tailored to specific AI categories. For instance, generative AI systems — which can create new, diverse outputs such as text, images, audio, or video from given inputs — must adhere to stringent transparency obligations. This is particularly pertinent as generative AIs like ChatGPT and DALL-E find broader applications in content creation, education, and other domains.

The Act acknowledges the potential for malicious use of generative AI, such as spreading disinformation, engaging in fraudulent activities, or launching cyberattacks. To counteract this, it mandates that any AI-generated or manipulated content must be identifiable as such, either through direct communication to the user or through built-in detectability. The goal is to ensure that users are not deceived by AI-generated content, maintaining a level of authenticity and trust in digital interactions.

Additionally, the Act requires AI systems that manipulate content to be designed in such a way that their outputs can be discerned as AI-generated by humans or other AI systems. This provision aims to preserve the integrity of information and preclude the erosion of factual standards in the digital age.

The AI Act is intentionally crafted to harmonize technological progress with the protection of foundational societal norms and values. The Act’s efficacy is predicated on the meticulous application of these regulations, keeping pace with the rapid development of AI technologies.

Turning to biometric identification systems, these tools are capable of recognizing individuals based on unique physical or behavioral traits such as facial features, fingerprints, voice, or even patterns of movement. While they offer enhancements in security, border management, and personalized access, they simultaneously raise substantial concerns for individual rights, including privacy and the presumption of innocence.

The Act specifically addresses the sensitive nature of biometric identification, incorporating stringent controls over its deployment. It notably restricts the use of real-time biometric identification systems in public areas for law enforcement, barring a few exceptions where the circumstances are critically compelling — such as locating a missing child, thwarting a terrorist threat, or tackling grave criminal activity.

In cases where biometric techniques are employed for law enforcement, the Act mandates prior approval from an independent authority, ensuring that any use is necessary, proportionate, and coupled with human review and protective measures. This regulatory stance underlines a commitment to uphold civil liberties even as we advance into an era of increasingly sophisticated digital surveillance tools.

Harnessed from the enigmatic realm of quantum physics, quantum computing emerges as a technological titan capable of calculations that dwarf the prowess of traditional computers. With the power to sift through vast data and unlock solutions to hitherto intractable problems, its potential spans the spectrum from cryptography to complex simulations, and from optimization to machine learning. Yet, this same capability ushers in novel risks: the crumbling of current cryptographic defenses, the birth of unforeseen security breaches, and the potential to tilt global power equilibria. The European Union’s AI Act, while not directly addressing quantum computing, encompasses AI systems powered by such quantum techniques within its regulatory embrace, mandating adherence to established rules based on the assessed risk and application context. Moreover, the Act presciently signals the need for persistent exploration and innovation in this sphere, advocating for the creation of encryption that can withstand the siege of quantum capabilities.

The Act’s influence on the vanguard of technology is paradoxical. It affords a measure of predictability and a compass for AI practitioners and end-users alike, weaving a safety net for the digital citizenry. Conversely, it may erect hurdles that temper the speed of AI progress and competitive edge, leaving a mist of ambiguity over the governance and stewardship of AI. The true measure of the Act’s imprint will reveal itself in the finesse of its enforcement, its interpretative flexibility, and its dance with the ever-evolving tempo of AI innovation.

Ethical considerations

The ethical tapestry of the AI Act is rich and intricate, advocating for an AI that is at once robust, ethical, and centered around human dignity, reflecting and magnifying the EU’s core values. It draws inspiration from the Ethics Guidelines for Trustworthy Artificial Intelligence, which delineate seven foundational requirements for the ethical deployment of AI, from ensuring human agency to nurturing environmental and societal flourishing. These principles are not merely aspirational; they are translated into tangible and binding mandates that shape the conduct of AI creators and users.

This ambitious ethical framework, however, does not come without its conundrums and concessions. It grapples with the dynamic interplay of competing interests and ideals: the equilibrium between AI’s boon and bane, the negotiation between stakeholder rights and obligations, the delicate dance between AI autonomy and human supervision, the reconciliation between market innovation and consumer protection, and the symphony of diverse AI cultures under a unifying regulatory baton. These quandaries do not lend themselves to straightforward resolutions; they demand nuanced and context-sensitive deliberations.

The ethical footprint of the Act will also depend on its reception within the AI community and the wider public sphere. Its legacy will be etched in the collective commitment to trust and responsibility across the AI ecosystem, involving developers, users, consumers, regulators, and policymakers. The vision is a Europe — and indeed, a world — where AI is synonymous with trustworthiness and accountability. This lofty goal transcends legal mandates, reaching into the realm of ethical conviction and societal engagement from every stakeholder.

In an era where artificial intelligence weaves through the fabric of society, the AI Act emerges as a pioneering and comprehensive legislative beacon, guiding AI towards a future that harmonizes technological prowess with human values.

The Act casts a wide net, touching on policy formulation, regulatory architecture, and the ethical lattice of AI applications across and beyond European borders. It stands as a testament to opportunity and foresight, yet it is not without its intricate tapestry of challenges and quandaries. The true measure of its influence lies not in its immediate enactment but in the organic adaptability and robust enforcement as the landscape of AI shifts and expands.

It’s crucial to articulate that this Act doesn’t represent the terminus of regulatory dialogue but inaugurates a protracted era of AI governance. It necessitates periodic refinement in lockstep with the march of innovation and the unveiling of new horizons and prospects. This legislative framework calls for a symphony of complementary endeavors: the investment in research, the enrichment of education, the deepening of public discourse, and the cultivation of global partnerships.

Embarking on this audacious path to an AI domain that is dependable, ethical, and human-centric is a collective venture. It demands a concerted commitment from all corners of the AI sphere — developers, users, policymakers, and citizens alike. It is an invitation to contribute to and bolster this trailblazing expedition into the domain of artificial intelligence — an odyssey that we all are integral to shaping.

 

 

Source: https://intpolicydigest.org/what-the-eu-gets-right-with-its-new-ai-rules/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Biden’s plan to close crypto tax loss harvesting loophole is a step in the right direction

Biden’s plan to close crypto tax loss harvesting loophole is a step in the right direction

President Joe Biden’s proposed budget plan has caused a stir in the crypto community due to its intention to terminate tax loss harvesting on crypto transactions. The reactions from the community have been mixed, with some perceiving this as an infringement on the freedom of crypto traders while others view it as a necessary step in regulating the industry and curbing tax evasion.

Tax loss harvesting is a technique used to minimize an individual’s tax liability by deliberately selling an investment at a loss to offset present and/or future capital gains. It reduces the amount of tax one pays for selling profitable investments. Although tax loss harvesting is usually carried out manually towards the end of the year, a systematic approach that identifies these opportunities automatically and acts on them throughout the year can be more effective, even for fixed income or income-generating securities. This approach allows individuals to decrease their tax liability by deducting the losses from their taxable income. However, this strategy has come under fire for being a loophole that enables affluent investors to evade taxes. The termination of tax loss harvesting on crypto transactions is estimated to raise up to $24 billion and reduce the deficit by $3 trillion.

Advocates of this proposition contend that it is an imperative measure to promote fairness and equity among taxpayers by ensuring that everyone contributes their fair share. They argue that the current tax system is biased towards the wealthy, who are able to exploit various tax loopholes and deductions to lower their tax bills. This ultimately results in middle-class and low-income earners being unfairly burdened with a disproportionate share of taxes. This imbalance creates an unjust and unequal tax system.

On the other hand, critics of the Biden budget plan assert that ending tax loss harvesting on crypto transactions is ill-advised as it could discourage innovation and investment in the cryptocurrency industry. They posit that this move could prompt some investors to relocate their assets offshore or to other countries with more lenient tax policies, leading to an exodus of talent and capital from the United States. Moreover, they contend that this change could disproportionately affect small and medium-sized enterprises that depend on cryptocurrency investment and trading for their expansion and growth.

The strategy of tax loss harvesting is commonly utilized by investors in the United States as a means of reducing capital gains taxes on their cryptocurrency investments. However, this approach is not extensively used in other countries due to differences in tax policies specific to cryptocurrency investments. For instance, in Canada, cryptocurrency investments are regarded as commodities and are thus subject to capital gains taxes. Meanwhile, in Australia, profits from cryptocurrency investments are also subject to capital gains taxes, with cryptocurrency considered property for tax purposes.

In the United Kingdom, gains from cryptocurrency investments are taxable under capital gains tax, but it is not possible to use losses to offset other gains. On the other hand, in Germany, cryptocurrency investments held for over a year are exempted from capital gains taxes, but those held for less than a year are taxed at the investor’s personal income tax rate. While other countries like Japan and South Korea have also established tax policies specific to cryptocurrency investments, these policies can differ significantly and may be subject to revision over time.Closing the crypto tax loss harvesting loophole could be viewed as a step in the right direction towards regulating the cryptocurrency industry and ensuring tax fairness. However, it is important to weigh the potential consequences of this policy change.

To summarize, I believe that closing the cryptocurrency tax loss harvesting loophole as proposed in President Biden’s budget plan is not a good policy. It could have negative impacts on small investors, innovation, and the market as a whole, while also not generating significant revenue for the government. Rather than this approach, I suggest exploring alternative policies that promote growth and innovation in the cryptocurrency industry while still ensuring that the government can collect revenue.

By Anndy Lian.

The author is an intergovernmental blockchain expert

Source: https://www.financialexpress.com/blockchain/bidens-plan-to-close-crypto-tax-loss-harvesting-loophole-is-a-step-in-the-right-direction/3013562/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j