In Markets
Bitcoin sailed through the US$40K (A$60.4K) mark yesterday and then broke the US$42K (A$63.45K) mark today thanks to ever-growing confidence about an early January approval of a Bitcoin ETF. There is the risk of a big fall of course, if those expectations are not met. Bitcoin finished the week up 12% to trade around A$63,420 (US$41,816), while Ethereum gained 10% to trade around A$3,395 (US$2,238) at the time of writing. Bitcoin is now at levels last seen in April 2022, before the Terra collapse, and the BTC market cap has overtaken Berkshire Hathaway’s (value investing icon Charlie Munger who passed away this week). Apart from anticipation over the ETF, the apparent peak of interest rates in the US has reportedly been met with a “dash for trash“, with gold, small caps and speculative tech stocks benefiting along with crypto. US crypto stocks surged on Monday, and Coinbase, Marathon Digital Holdings and Riot Platforms are closing in on astonishing 300% gains for the year. Elsewhere, XRP was up 3%, Solana gained 11%, Cardano 7% and Dogecoin 14%. The Crypto Fear and Greed Index is at 74, or Greed.
From the OTC desk
Softening US inflation data has seen risk assets strongly bid, and this includes cryptocurrencies. For the last few weeks, we have highlighted a general theme of profit taking, post the extensive November cryptocurrency rally. This now looks to have been halted and reversed, with a renewed interest in cryptocurrency allocation. The rally continues to be BTC-led, as the market is all but certain of an imminent US spot ETF approval. Any delay or complication in the approval process may result in a period of sharp volatility and is certainly something to remain attentive towards.
Of particular interest this week has been the forward profile of the BTC futures market, which is currently suggesting a price of US$ 44,000 to acquire 1 BTC at the June 2024 expiry (cash settled). Interestingly, this is only 4.75% away from the current spot price of US$ 42,000 (unadjusted for carrying costs). Right here and now, there appears to be a dislocation between retail market expectation of significant pricing moves, and the tradable price in the wholesale market.
We remain attentive to any changes in the ETH/BTC cross. Since the middle of October, the cross has remained range bound between 0.0520 and 0.0560. So far, Alt performance hasn’t aligned with ETH outperformance. This remains somewhat counterintuitive.
In macroeconomic markets, last week’s US PCE inflation data (the Federal Open Market Committee’s preferred measure of inflation) highlighted an October headline inflation rate of 3.0% (YoY). While this was in line with market expectations, headline inflation was materially softer than the September reading of 3.4%. On the Core, PCE inflation lowered to 3.5% (YoY) in October versus 3.7% (YoY) in September.
Correspondingly, US 10-year Treasury bond yields have lowered from 4.32% down to 4.25% this week. On the 31st of October, US 10-year Treasury bond yields were trading near 4.97%, making the rally in November one of the most profitable for bondholders in the last 30 years!
In the economic calendar, today, the Reserve Bank of Australia (RBA) met for their December meeting and, as expected, retained the current cash rate at 4.35%. The RBA doesn’t convene in January, making the next meeting Tuesday the 6th of February. Before this date, the RBA will receive Q4 inflation data on the 25th of January 2024. This data will almost certainly decide whether the RBA is required to continue to tighten monetary policy at the February meeting.
Additional economic data this week includes Australian GDP (Q3) on Wednesday at 11:30am (AEDT), US employment data (November) on Saturday at 12:30am (AEDT), and China inflation data (November) on Saturday at 12:30pm AEDT.
On the OTC desk, trading flows have finally quietened down. While this only feels to be temporary, those that have been long and holding remain on the sidelines and happy, while those that have taken profit are seeking better levels to add. With the rallying AUD/USD, (now at circa USD 0.6650) USDT to AUD conversion interest has reduced in line with more expensive conversion rates. We continue to expect liquidity to drop into the end of the year causing bouts of volatility.
For any further information, please feel free to reach out.
In headlines
ETF approval could happen Jan 8, 9, or 10
Crypto’s magic eight ball suggests that ‘All Signs Point to Yes’ for numerous Bitcoin ETFs to be approved in a narrow period between Jan 5 and Jan 10. “Mark your calendars people,” said Bloomberg ETF analyst James Seyffart, pointing out Monday, Jan. 8, Tuesday, Jan. 9 and Wednesday, Jan 10 were most likely. The increasing confidence is because the SEC started the comment period early for the Franklin and Hashdex applications, which Seyffart says “all but confirms for me that this was likely a move to line every applicant up for potential approval by the Jan. 10, 2024 deadline.”Scott Johnsson, a finance lawyer, said that interpretation was “really the only way it makes sense” while Seyfrart’s Bloomberg colleague Eric Balchunas said, “we basically now (are) as close to approval as you can get without a formal approval.” The SEC met with eight ETF applicants, most notably Black Rock, in November to revise and refine their applications on November 20 and 28. Revised S-1 filings are coming in this week, and a 13th spot Bitcoin ETF application has been received from asset manager Pando Asset.
MicroStrategy, El Salvador in profit
The surging Bitcoin price rise is making MicroStrategy’s Michael Saylor and El Salvador’s President Nayib Bukele look like geniuses again instead of fools who sold the farm for magic beans. The Wall Street Journal reports that El Salvador’s Bitcoin holdings are again back in the black, with the portfolio now at a 2.34% profit (US$3.6M/A$5.4M), according to Bukele. He took aim at the media coverage so far, complaining about “thousands of articles and hit pieces that ridiculed our supposed losses.” Meanwhile, Saylor recently bought another 16,130 Bitcoins and overall, the company’s Bitcoin investments are now US$1.6 billion (A$2.4B) into profit (about a 30% return). If he’d invested in ETH though, it’d be up 74%!
Presidential debate over crypto
The Stand With Crypto campaign has arranged a Presidential candidate forum about crypto in the lead-up to the New Hampshire primary on December 11. Confirmed speakers include Republican candidates Asa Hutchinson and Vivek Ramaswamy, as well as Democratic candidate Dean Phillips. Other invited candidates include Donald Trump, Robert F. Kennedy Jr. Doug Burgum, Nikki Haley, Ron DeSantis and Chris Christie.
SEC lawyers face sanctions for “misleading” court
A Federal Judge in the US has warned the SEC that he may sanction its lawyers for making “misleading” claims to secure an emergency asset freeze order. The attorneys reportedly claimed that crypto firm Debt Box had closed 33 bank accounts in 48 hours, was transferring funds overseas, and was running off to Abu Dhabi. However, Debt Box proved none of that was true, and the order was dissolved. The judge said the false claims “undermined the integrity of the case’s proceedings” and the SEC had two weeks to come up with a good rationale for why sanctions should not be imposed.
Bitcoin to A$189K in 2024?
Towards the end of October, Matrixport issued a prediction for US$45K (A$68K) by year’s end, and with two months left to hit the target, it looked like a pretty courageous call. Today, it seems prescient, and Matrixport’s latest analysis reaffirms its bullish stance, predicting US$63,140 (A$95.4K) by the halving in April and US$125,000 (A$189K) by the end of next year. The analysis is based on macro factors and Bitcoin’s cyclical nature, with the firm suggesting we should expect three years of bull market from here (with the usual disclaimer: past performance is no guarantee of future returns). Standard Chartered is also tipping a six-figure Bitcoin price by the end of 2024. Meanwhile Bitcoin OG and Blockstream CEO Adam Back has issued his own prediction that US$700K (A$1.01M) is in sight this cycle thanks to the Bitcoin ETFs. “My call is Bitcoin should flip gold’s market cap within the next halving cycle,” he tweeted.
Until next week, Happy Trading!
