“And now we welcome the new year, full of things that have never been” – Rainer Maria Rilke ||
Hello everyone! Well, here it is, the first Crypto is Macro Now of 2024, and I would like to congratulate myself for getting the year right in the header. May this continue.
I most sincerely hope that you all got some time to disconnect and rest over the long weekend, because it seems like the year is not exactly off to a quiet, peaceful start.
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IN THIS NEWSLETTER:
The BTC ETF bump
Transitory expectations vs transitory inflation
The world’s second “legacy” tokenized security exchange has launched
WHAT I’M WATCHING:
The BTC ETF bump
So, BTC is having a pretty good start to the year. Yesterday evening, the price started climbing, and this morning it zoomed past $45,000. As I type, it above $45,800 for the first time since April 2022, before the Terra ecosystem implosion and all the horrors that came after that.
(chart via TradingView)
This is most likely due to ETF approval speculation. I’m hearing chatter that we could get a signal from the SEC as soon as tomorrow. This feels unlikely – it would be earlier than Bloomberg analysts James Seyffart (@JSeyff) and Eric Balchunas (@EricBalchunas) have predicted, and they have been following this closely. They’re suggesting Monday or Tuesday next week, since the window for rebuttal comments is open until January 5 (Friday), while the final deadline for a decision on the ARK/21Shares proposal is January 10 (next Wednesday). I recommend following James and Eric as well as Scott Johnsson (@SGJohnsson) on X for up-to-date and smart detail on the really convoluted process.
If the SEC nod doesn’t come tomorrow, does that mean BTC prices drop sharply? Maybe – speculation does seem to be getting a bit ahead of itself, and the BTC funding rate (the cost for long positions in perpetual futures, a useful trader sentiment gauge) has climbed sharply over the past week.
(chart via coinglass)
Even if approval does come tomorrow, we could get a “sell the news” reaction. Even just the possibility of this could lead to a self-fulfilling drop as traders rush to get out first.
Plus, SEC approval does not mean the ETFs start trading the very same day, and it’s not clear that all traders understand that.
Also, initial flows could be disappointing: the market is not exactly “hot” right now, unlike when BTC futures ETFs launched – you may remember that BITO saw more than $1 billion of assets in the first two days, making it one of the most successful ETF launches in history. The market is more muted this time around: in the two weeks leading up to the BTC futures ETF trading on October 19, 2021, BTC soared more than 40%. This time, the previous two weeks have seen BTC climb a more modest 9%.
That doesn’t mean the launch of BTC spot ETF trading isn’t good for the market. True, the BTC futures ETF launch marked the top of that bull run, with BTC dropping almost 70% over the following 12 months. But this time is different: the spot BTC ETFs herald a longer-term shift.
First, the BTC spot ETFs will actually hold BTC. The BTC futures ETFs don’t. This time, there will be accumulation, rather than speculation on spreads and a FOMO-fueled scramble for indirect exposure.
Second, the bigger impact is the marketing machines behind some of the largest ETF issuers in the world. And not just from them directly: registered investment advisors around the US will have an incentive to help clients diversify their investments with even a small crypto exposure in a safe, convenient vehicle. And did you notice that Google recently relaxed its ban on crypto advertising? I wonder why…
The likely constant drip of bitcoin communication from reputable tradfi names, seeing bitcoin mentioned in messages from BlackRock, Fidelity, Invesco and others, will cement bitcoin’s place in the pantheon of “established” assets. And the creativity behind some of the ads from crypto natives will burnish the asset’s “cool” factor.
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