What happened last week

Impressive First Day of Bitcoin Spot ETF Trading

Following the ground-breaking decision to greenlight all 11 Bitcoin Spot ETFs in the US, the first day of trading on Thursday exhibited substantial demand. Over $4.6 billion worth of shares were traded in the first 24 hours, dwarfing the $1 billion first-day trading volumes seen following the approval of the futures-backed Bitcoin ETF back in 2021. The competition between all issuers of the ETFs is substantial, given that the ETFs are essentially identical, differentiating to each other predominantly through their fee structure. Based on the trading volumes from Day 1, it can be seen that Grayscale (GBTC) has captured over 50% of the volumes ($2.3 billion), followed by BlackRock’s IBTC ($1.03 billion) and Fidelity’s FBTC ($712 million). It remains to be seen how the allocation across the ETF providers is playing out during the next couple days and weeks, however, it is undoubtedly a big step towards mainstream adoption and enabling traditional financial companies to obtain exposure to Bitcoin without holding the underlying themselves.

December Inflation Numbers Higher Than Expected

On Thursday, the US Bureau of Labor Statistics has published the December CPI Index, highlighting another increase in inflation numbers (3.4% year-on-year, vs. consensus of 3.2%). The hotter-than-anticipated inflation numbers were primarily driven by a rise in the Energy index as well as in costs for shelter. In fact, the index for shelter (housing costs) contributed over half of the monthly increase. Unchanged, however, are the market participants’ expectations about interest rate changes in the coming months. While it is consensus that the January meeting of the FOMC will leave interest rates unchanged (at a target range of 525-550bps), the March meeting is expected to yield a first interest rate cut of 25bps to a target level of 500-525bps. As measured by the CME fed funds futures contracts, the current expectation post-December CPI print, shows a probability of roughly 68.1% of a 25bps rate cut.

IPO Plans of Circle Internet Financial LLC

Circle Internet Financial, the creator of the USDC stablecoin, has taken a confidential step toward an initial public offering (IPO) for its equity securities. The company has filed a draft registration statement S-1 form with the U.S. Securities and Exchange Commission (SEC), aiming to transition into a publicly traded entity. Specifics regarding the quantity and pricing of shares remain undetermined, awaiting SEC review and contingent upon market conditions. Previously, Circle had explored a public debut through a merger with a Special Purpose Acquisition Company (SPAC) called Concord Acquisition Corp., but that arrangement ultimately fell through. Noteworthy investors in Circle include prominent financial entities such as Goldman Sachs, Fidelity, and BlackRock. The USDC stablecoin, tied to the U.S. dollar, boasts a market capitalization exceeding $25 billion, solidifying its status as one of the globe's leading stablecoins.

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Our take

The hotly anticipated ETF approval narrative finally has materialized in the second week of 2024 with the SEC greenlighting all 11 applications. The week had its fair share of volatility alongside a rapid increase in trading volumes, across all major crypto assets. Initially, the market was taken by surprise on Tuesday late evening, when the SEC’s X account got hacked and pre-announced that the approval was completed. Within minutes, the fake news have been invalidated by the SEC, causing an initial rally followed by a massive, long liquidation cascade throughout the market. Despite all of the turmoil, which ultimately will get the FBI involved in investigating the case, the approval finally was granted on Wednesday night, with ETF trading activity starting the following day. As outlined above, the first day of trading was a huge success with over $4.6bn in trading volumes. The sharp correction after U.S. market opening (15.30 CEST), was then a combination of various factors, such as market participants taking profit (“sell-the-news” event) and potentially further fueled by the higher-than-expected inflation numbers that dampen the rally across all risk assets.

The crypto space is now calibrating, and it can be expected that further ETF applications on other crypto assets are being lined up, in particular on Ethereum. Interestingly, following the Bitcoin Spot ETF approval, it can also be seen that Litecoin (LTC) and Bitcoin Cash are showing stronger appreciation (+6.5% and +10.58%, respectively on the 24h-chart).

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The week ahead

Tuesday, 16 January 2024

• German CPI

Wednesday, 17 January 2024

• China Q4 GDP
• U.K. CPI
• Eurozone CPI
• U.S. Core Retail Sales

Thursday, 18 January 2024

• U.S. Initial Jobless Claims