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What Happened This Week

A Strong Ending to Last Week For U.S. Equities

Market participants were awaiting the April PCE inflation data in the U.S. last Friday. The personal consumption expenditures (PCE) price index increased 0.3% last month, which was in line with expectations while the core PCE, subtracting food and energy prices, rose 0.2% month over month, less than the forecast of 0.3%. While the price action was mixed last Friday, there were signs of things turning to the positive side, with the S&P 500 increasing more than 1.5% during Friday’s last trading hours, as seen in the chart below.

Last Week: $185 Million Inflows For Digital Asset Investment Products

Digital asset investment products saw total net inflows for the fourth consecutive week last week, with a total of $185 million of net inflows, bringing the total monthly inflows for May to $2 billion and pushing the year-to-date inflows across $15 billion. Interestingly, Ethereum saw its second consecutive week of inflows since the U.S. spot ETFs were approved; net inflows for ETH were $33.5 million last week.

These numbers give an indication that crypto sentiment and activity are picking up again, as also seen in the number of new tokens issued by blockchain: there are currently over a million new crypto tokens created every month. Solana, Base and Ethereum are among the blockchains with the most newly issued tokens over the last two months, with Solana in the number one spot, seeing nearly half a million tokens issued during the month of May. The chart below shows the development of new tokens created on a selection of different blockchains.

Australia’s First Spot Bitcoin ETF & Approval of the BTC Spot ETF in Thailand

On Tuesday, Monochrome Asset Management’s Monochrome Bitcoin ETF (IBTC) started trading on the Cboe Australia exchange. The product is the first and only ETF that holds bitcoin directly in Australia. According to reports, the Australian Securities Exchange (ASX) is also planning to approve spot Bitcoin ETFs before the year's end. The race to offer crypto products seems to continue worldwide. The Bangkok Post reported that the Securities and Exchange Commission has endorsed One Asset Management as the first firm to launch a spot Bitcoin ETF in Thailand, which is limited to wealthy and institutional investors.

A Quiet Weekend Without Surprises And A Strong Start to The Week

Bitcoin and the crypto market started to pick up on Monday morning after yet another quiet weekend of muted volume. Bitcoin traded above $70’000 again for a longer time period on Monday and Tuesday, while holding steady above $3’800 after last week’s visit into the low $3’700 region. The S&P500 started the week on a quieter note on Monday, but then started rallying to the upside as well on Tuesday alongside other U.S. equities indices such as the Nasdaq.

Positive Sentiment: $886 Million Net Inflows Into Spot ETFs on Tuesday

The U.S.-based Bitcoin spot ETFs recorded their second highest net inflow day on Tuesday, with a total of $886 million inflows. IBIT amounted to $274 million, while FBTC saw net inflows of $378 million for the day. The spot ETFs have now seen daily net inflows for almost three weeks now, and the total net inflows since inception are now above $15 billion. Even GBTC saw net inflows on Tuesday and Wednesday this week. In the chart below, we can see how this week’s inflows show a change in the behavior of investors when compared to the last few weeks, with the highest net inflows since March, when Bitcoin was trading at its all-time high.

New All-Time Highs For U.S. Equities on Wednesday

U.S. equities really took off on Wednesday, with the S&P 500 and the Nasdaq both reaching new all-time highs. The S&P 500 closed the day up more than 1% and the Nasdaq closed Wednesday up more than 2%. The U.S. Dollar Index is down from last week’s highs, and Gold traded to the upside this week as well, reaching a high above $2’400 this morning.

Bitcoin’s On-Chain Volume On The Rise Again

Bitcoin’s on-chain volume has been increasing again during May and early June, after a period of decline from mid-March to the end of April. The development of the transaction volume as a measure of the economic throughput of BTC on the Bitcoin blockchain is an interesting metric to observe, along with other on-chain metrics like the number of transactions or the number of active addresses on the Bitcoin network. The Block has a collection of such metrics on their website.

European Central Bank With The First Interest Rate Cut Since 2019

The European Central Bank on Thursday confirmed a widely anticipated interest rate cut at its meeting, despite remaining concerns regarding inflationary pressures in the eurozone. The cut puts the central bank’s key rate at 3.75%. The ECB has raised its annual average headline inflation outlook for the year 2024 to 2.5% from the previous 2.3%.

This week on Wednesday, Canada was the first G7 nation to cut interest rates in the current cycle, while the Swedish and Swiss central banks had already announced their own rate reductions earlier this spring. The next FOMC meeting is next week, where the U.S. Federal Reserve will publish their decision on the U.S. interest rate. Market participants are expecting the Fed to keep the current target rate; the probability of an interest rate cut in June is only 2.3%, whereas traders are also not expecting a cut in July, with 77.5% expecting that the rates will also remain at the current target range in July. Currently, the first interest rate cut by the U.S. Federal Reserve is expected to take place in September, with 54.2% of market participants expecting a cut at the September meeting. In the chart below, the current target rate probabilities for the FOMC meeting on June 12, 2024, are shown.

Franklin Templeton, Robinhood x Bitstamp & Kraken in the News

Franklin Templeton is considering the launch of a new crypto fund for institutional investors to give them the opportunity to invest in crypto assets beyond Bitcoin and Ethereum. The asset manager is also thinking about the possibility of passing staking rewards on to the fund’s investors. Furthermore, Robinhood announced that it will acquire Bitstamp, one of the largest cryptocurrency exchanges in Europe that has been around for a long time. The acquisition is expected to be completed in the first half of 2025. Robinhood expects the final deal consideration to be approximately $200 million in cash, subject to customary purchase price adjustments. Last but not least, Kraken, the second-largest cryptocurrency exchange in the United States, is in pre-IPO funding talks, seeking to raise more than $100 million and looking for a well-known company to join its board of directors and help it successfully conduct an IPO as early as next year.

Market Sentiment Check

The Crypto Fear & Greed Index is back in Extreme Greed territory (77) after spending some time in Greed over the last few weeks. Interestingly, the stock market is still in Neutral territory and actually still on the verge of Fear (45). This might be surprising to many, as U.S. equities are at all-time highs - a very interesting development. When looking at the AAII Investor Sentiment Survey we can observe that the number of members feeling bearish for stocks in the next six months has increased significantly over the course of this week, with 32% now being bearish, compared to 26.7% last week. The number of members being bullish stayed the same, at 39% and the number of neutral members decreased to 29% from 34.2%. So many members who were neutral last week switched camps to being bearish.

Funding rates across the major digital assets remain in healthy territory, with Bitcoin trading back above $71'000. This level was accompanied by high funding rates back in March, as we have highlighted many times over the last few weeks. The market is trading at high prices, and funding rates remain low, indicating a healthy situation right now. Even though we are back in Extreme Greed, there does not seem to be a lot of leverage in the market currently. A look at the total liquidations over the last few weeks shows a similar picture. The Exchange BTC Futures Open Interest has reached an all-time high this week, surpassing $37.7 billion on Wednesday. Of the $37.7 billion, traditional finance powerhouse Chicago Mercantile Exchange (CME) holds the highest bets at $11 billion, followed by crypto exchange Binance at $8 billion. The long-short ratio has been balanced; it is slightly on the long side right now (1.003) after being on the short side yesterday (0.946), indicating a balanced situation over all between bears and bulls currently.

Our Take

We are looking back in a week with positive sentiment when it comes to U.S. equities and digital assets. The S&P 500 and Nasdaq have reached new all-time highs, while the U.S. Dollar Index has been trading to the downside, indicating positive sentiment towards risk assets in general. Bitcoin and the broader crypto markets have profited from this situation, and Bitcoin is trading back above $71’000, with Ethereum trading at $3’800. The Bitcoin dominance is still trading in a price range, currently at 54.6%, but has been increasing again since the beginning of the month, after losing some steam at the end of May. 

U.S. stock market sentiment is neutral; on the verge of fear, investors seem to be cautious, despite the record high prices for U.S. indices, while the crypto market is in Extreme Greed with record high open interest but low funding rates and low total liquidation numbers. 

The market is now waiting for the interest rate decision of the Federal Reserve next week, while traders are expecting rates to stay in the same target range, despite the European Central Bank cutting its interest rate for the first time since 2019.

The Week Ahead

Sunday, 9 June 2024

• Japan – GDP

Tuesday, 11 June 2024

• Japan – PPI
• China – CPI, PPI

Wednesday, 12 June 2024

• Great Britain – GDP
• Germany – CPI
• U.S. – CPI, Core CPI
• U.S. – FOMC Meeting and Press Conference
• U.S. – Interest Rate Decision

Thursday, 13 June 2024

• Switzerland – PPI
• U.S. – PPI, Core PPI