Tuesday, Dec 19, 2023

Red Sea tension and BTC, fund sentiment shift, ETF variety

“If you want something new, you have to stop doing something old.” – Peter Drucker ||

Hello everyone! This is the second-to-last Tuesday of 2024, and why does time seem to accelerate in December?

You’re reading the daily premium Crypto is Macro Now newsletter, where I look at the growing overlap between the crypto and macro landscapes. There’s also usually some market commentary, but NOTHING I say is investment advice. For full disclosure, I have held the same long positions in BTC and ETH for years, and have no intention to either buy more or sell in the near future.

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I completely forgot to tell you that I was invited on to the Real Vision daily show just over a week ago, if you’re interested you can see the video here – a great chat with Maggie Lake, she is so smart, knowledgeable and easy to talk to.

Also, until the end of the year, I’m host of the CoinDesk Markets Daily podcast – you can check that out here.

Programming note: This newsletter is going to take some time off around the holidays, for refreshing and planning and baking and wrapping – I figure the news flow will be light and so hopefully I won’t miss out on much (if anything major happens I’ll of course hop back on). I’ll publish tomorrow Wednesday 20th, then take a break and pick up again on Thursday 28th.

IN THIS NEWSLETTER:

• Red Sea tension and the price of BTC

• Funds flow: a shift in sentiment

• BTC ETFs with a twist

WHAT I’M WATCHING:

Red Sea tension and the price of BTC

The oil market seems to be finally waking up to the potential of supply disruption from the conflict in the Middle East.

(chart via TradingView)

The focus right now is on the Red Sea. Since I last wrote about this on December 12, the situation has gotten even more tense. In response to an escalation in missile and drone attacks from Houthi rebels based in Yemen, most of the large container shipping companies have halted passage through the Red Sea, which is the only way to get to the Suez Canal from Asia. Roughly 12% of global trade goes through the Suez Canal.

(map via Reuters)

Energy producers BP and Equinor are also halting shipping through the Suez Canal, and other containers are taking steps to mask their signals. Meanwhile, the US announced earlier today that it is putting together a multinational naval force to safeguard those ships brave enough to make the journey.

It would be really weird if the oil price didn’t continue rising on this. True, the oil markets have been weird anyway, totally ignoring this risk until a couple of days ago.

Could this be behind the climb in the BTC price today?

(chart via TradingView)

A higher oil price is not great for the global economy, not at all. The slowdown could weaken activity which should help with inflation and perhaps give central banks more leeway to lower rates.

But, a higher oil price is inflationary. While the Fed focuses on core PCE data, which strips out energy prices, higher fuel costs end up seeping through to the prices of goods and services. It’s not just from transportation; petroleum products are in plastics, cosmetics, fertilizers and pretty much affect most things we touch.