Weekly Market Update: Bitcoin Breaks $50K

In crypto news, the big event this week was Bitcoin breaking $50k , while ETH topped $2,600. Pundits are saying that the dynamics of the Bitcoin ETF players have stabilised and we are consistently in a net inflow scenario… $3bn to be exact.

Essentially, we have a lot of buy pressure while at the same time Bitcoin hodlers have gone full diamond hands. On the ETH front the dynamics are different there due to a new shiny token standard driving volume. 

Another major talking point was how little impact the 5 hour Solana outage had on the SOL price. In the wider ecosystem we continue to see big institutional plays; Metamask and Robinhood have partnered up, while Fidelity is adding crypto into its conservative ETF offer. What a time to be alive!

It’s been a slightly slower news week due to the Lunar New year. That said, tensions in Ukraine and the Middle East remain high. 

In the US, CPI for January was higher than forecast and of particular concern was the core inflation reading which didn’t move due to higher housing costs.

The market immediately cottoned onto the Fed message of higher for longer and risk assets felt the pinch in a rapid sell off.  Markets clearly misread the room as in the lead up to the announcement  the US share market was ripping, as was the Nikkie which hit a 34 year high. 

In Europe, the ECB is taking a conservative approach, talking down rate cut expectations. France is calling a small GDP growth in Q1 while the German story is unchanged and remains pretty grim. 

In Asia, India looks like it is getting control of its inflation, Japan’s central bank continues to steer its own course and has said any changes won’t be dramatic and finally China looks to continue its deflationary spiral. 

Across the ditch, the RBA has said they are open to more rate rises, while locally, the ANZ has revised its position on the OCR, now calling for 2 more rate hikes. We find out more on Friday when Governor Orr speaks.

This week’s sharp rise in prices means the market sentiment has moved into extreme greed territory. 

Highlights this week: 

• We had another week where all of the top 30 assets were posting positive gains, a rare occurrence in our space. 
• Looking at our trading flows we can see a small increase in sell activity particularly in BTC and US stablecoins. 
• At the time of writing BTC and ETH were up 14% and 12% respectively,  SOL posted 17% gains while BNB a more modest 6%.
• Nervous Network (CKB) was our best performing asset this week, up 90%. In the large cap space, Stacks (STX) was up 43%.  
• Chiliz (CHZ) was our biggest loser, down 2%. 

View all top gainers:Visit the top gainers page to find out more.

Highlights from the crypto space

Bitcoiners have gone full diamond hands with just under 80% of supply unmoved in the last 6 months. No one is selling with the perceived wall of demand coming …plus a halving. 

The outage on Solana last week went on for 5 hours, its 5th largest. Interestingly, the price of SOL barely dipped. 

Metamask has partnered with Robinhood to allow people to buy crypto using Robinhood’s order flow, Robinhood users can also send crypto to Metamask now. 

The New York attorney general isn’t done with Gemini or DCG over the Gemini Earn product.

We are big fans of stablecoins, hence the launch of NZDD. Castle Island Ventures research points out stablecoin volumes are comparable with tradfi volumes. Staying with stablecoins, RBNZ governor Orr isn’t a fan… turkeys don’t vote for Christmas. 

There is a new Ethereum Token standard called ERC 404 which is a hybrid Token and NFT. It has a cool name to boot, Pandora.

Withdrawals from Greyscales ETF appear to be slowing down. The ETF complex is in growth mode though, 

Other notable updates from around the crypto space:

• In ETH ETF news, Ark 21Shares amended their application to include the possibility of staking rewards. 
• Fidelity Canada has a 1% Crypto (Bitcoin) allocation ….in their conservative bundled ETF offer. 
• Microstrategy is pivoting towards being a Bitcoin development company, a necessary move now that it has severe competition for funding due to the Bitcoin ETF’s. 
• OKX is opening in Argentina and in particular promoting its Peer 2 Peer service. Kraken is also expanding, having secured licences in the Netherlands.

And that wraps up our highlights from around the crypto space. Stay tuned below for other macroeconomic updates from around the world.

What is going on in the world of Finance … 

Shipping container rates are basically flat this week, down 1% as the world digests what happens next in the middle east.

🌎 Macro news TLDR: …PMI’s are showing gains across the globe

U.S. economic news

The US trade deficit for December was slightly up, but on an annual basis shrunk by 18%. A $95bn bill to fund Ukraine and Israel plus a deal on immigration appears to be moving through the bureaucracy. 

In the run up to Wednesday’s CPI announcement, the equities market was running very hot, with the benchmark S&P 500 going through the 5000 mark for the first time ever.  This didn’t hold on today’s CPI print. 

Things cooled rapidly for all risk assets when the January CPI number came in 0.3% for the month or 3.1% annualised.

While down on December’s numbers, this was higher than the consensus forecast of 0.2%. Core CPI was unchanged, remaining stubbornly set at 3.9%.

The impact of this inflation reading is a rapid delay in the timing of rate cuts according to the CME’s fed pricing tool. Yesterday there was a 50% chance of a cut in May, now that is June. Higher for longer it is.

Meanwhile in Europe….

The commentary coming out of the ECB is distinctly cautious, with quite a few members saying that they need more evidence of reducing inflation before they will consider rate cuts. The next ECB meeting is on the 7th of March, watch what they do… not what they say. 

France is calling for a small amount of growth going forward, while things are not so good in Germany with industrial production for December down a full 3% on November, and down 1.6% annualised.

Staying in Germany, commercial property is down 12% for the last quarter of 2023. Remember last week’s call out on bank exposure to commercial property?

And in Asia Pacific…

I feel like a broken record. China has got problems, this time CPI which is down 0.8% for the January year, its largest fall in 14 years.

It looks like deflation is across multiple sectors and deeply affected by weak domestic demand. 

The India central bank held their benchmark rate at 6.5% and CPI declined to 5.1%. In Japan the Nikkei hit a 34 year high on the back of a weak Yen and the BoJ saying that they will not aggressively change monetary policy. 

In New Zealand, ANZ’s chief economist has come out saying the RBNZ will LIFT rates twice this year to 6% due to the compounding effect of employment, non-tradable inflation and immigration.

Kiwibank respectfully disagrees and says the RBNZ has done enough. We’ll find out how the RBNZ is thinking on Friday. Today Stats NZ data came out show food prices are up 0.9% in January and 4% annually.

That’s a wrap for this week. Hope you had a great holiday and are ready for 2024. 

Stay tuned for the next update.

Did you miss the last weekly update?

Catch-up on the previous market update.