The Return Of Roaring Kitty, CPI-triggered Breakout, 13F Filings & BTC Spot ETF Inflows

We have decided to test something new this week, you can now listen to a summary of this week's Weekly Wrap on Spotify and Apple Podcasts. It is a summary with the help of  AI-voices. 

What Happened This Week

A Friday Dump Into The Last Weekend

At the time of sending out last week’s Wrap, Bitcoin and the crypto markets looked like they were recovering from last week’s downward price movement. Bitcoin was trading above $63’000 until the U.S. markets opened, and then corrected down to $60’000 within a couple of hours on Friday afternoon. The weekend then once again did not bring any meaningful price action for Bitcoin or altcoins, with low volatility and low volume overall. It’s quite interesting to visualize it. In the chart below, we are looking at the price action and volume of BTCUSD on Coinbase over the last weekend. We can see that the volume started to slow down around 7 hours before 00:00 CEST on Saturday morning. Bitcoin then traded sideways in a roughly 3% range on muted volume until roughly 8 hours after 00:00 CEST on Monday morning.

Last week was the first inflow week for digital investment products, after four weeks of outflows. We have been keeping track of this in the Weekly Wrap, and the inflows last week totaled $130 million. It’s no surprise that most of that money went into Bitcoin, with a total of $140 million in net inflows, bringing the total YTD inflows to $12.6 billion, while Ethereum once again saw outflows totaling $14.4 million last week, resulting in YTD outflows of $34 million. Solana on the other hand saw inflows of $5.9 million last week bringing the total YTD inflows up to $17 million. The table below shows the Flows by Exchange Country: It is interesting to see that Switzerland is in second place after the U.S. when it comes to Assets Under Management (AUM), closely followed by Canada in third place.

Trump Turning Crypto Into U.S. Election Topic?

Over the weekend, a video of former U.S. president Donald Trump started circulating where he stated that “if you are in favor of crypto, you’re going to vote for Trump because they want to end it”. He also mentioned that "We have some incredible things happening. I mean crypto, if you go back to crypto a couple years ago, people said it wasn’t going to make it but now it's up in record numbers. I guess you could say it's a form of currency, and I think I’m for that; more and more I’m for that." Trump has been eyeing crypto for a while. During his presidency, he did not speak favorably of crypto but later sold millions of dollars’ worth of NFTs. Crypto seems to be turning into one of the major topics during the U.S. presidential elections, also regarding the approval of Ether spot ETFs, or in fact any other crypto asset spot ETFs, as the acting president and his or her administration appoint, for example, the Chairman of the U.S. Securities and Exchange Commission (SEC). The current Chairman Gary Gensler, was appointed by the Biden administration and is known for his stance against crypto in the U.S.

Roaring Kitty’s Return – GME, AMC And Other Meme Stocks

On early Monday morning, Keith Bill, better known as “Roaring Kitty”, who was at the center of the meme stock mania during 2020, reappeared on X by posting the picture below, a meme used by gamers when things are getting serious.

At Monday’s opening bell, it appeared that Roaring Kitty had revived the long-lost spirit of the meme stock frenzy of 2021, as shares of GME more than doubled. They closed Monday up 74%. It’s the biggest intraday trading jump for GameStop since the meme craze of early 2021. Other meme stocks like AMC were pushed higher as well. Trading in GME was halted eight times before noon on Monday due to volatility. The craziness continued on Tuesday, GME was up more than +100% during pre-market trading while AMC was up 88% and other meme stocks were trading higher as well. The momentum was lost during Tuesday’s trading hours, however, with GME losing more than 50% of its value by Wednesday afternoon.

When it comes to Bitcoin spot ETFs, Monday was accompanied by net inflows into U.S.-based products with $66 million of net inflows, while the products in Hong Kong (Bitcoin and Ether spot ETFs) saw $39.3 million of net outflows. Monday marked the first day with meaningful inflows since Monday, May 6, and seemed to have started a trend for the week to come.

Bitcoin and the crypto market experienced positive price action on Monday, with Bitcoin rebounding from $60’000 back above $63’400. U.S. stocks traded sideways on Monday and seemed to be awaiting the much-anticipated CPI data release set for Wednesday afternoon. While the market participants were waiting on the release of the above-mentioned inflation data, ChatGPT maker Openai announced on Monday evening that it would release a new AI model named GPT-4o, capable of realistic voice conversation and able to interact across text and image.

Tuesday: The Quiet Before The Storm (Except For Memes)

One half of the market was sitting still, waiting for the release of the inflation data on Tuesday (PPI) and Wednesday (CPI) in the U.S., and the other half was trading meme stocks or meme coins on behalf of the return of Roaring Kitty over the weekend. While Bitcoin corrected back down to $61’000 on Tuesday night, meme coins like PEPE experienced spectacular price increases from Tuesday until Wednesday morning, as the chart below indicates, with PEPE up almost 40%.

U.S. equities did not experience much price action on Tuesday; the U.S. Dollar Index showed first signs of weaknesses during Tuesday morning; Gold traded slightly to the upside already as well; and Bitcoin seemed to have found a bottom during Tuesday evening, alongside with U.S. equities starting to slowly rally into the market close on Tuesday evening.

In other news, Tornado Cash developer Alekey Pertsev was found guilty and was sentenced to 64 months in prison by a Dutch judge. The Dutch court found the developer, who was first jailed in the Netherlands in August 2022, guilty of money laundering. The court argued that Tornado Cash does not pose any barrier for people with criminal assets who want to launder them.

A Rather Hot PPI Print

The Producer Price Index (PPI) increased by 0.5% in April and was up 2.2% on a yearly basis, resulting in the biggest increase in a year. The core PPI also rose by 0.5%, which came in higher than the expected 0.2%. While the data came in hotter than expected, Fed Chairman Jerome Powell called the report “mixed” and emphasized that the headline numbers were “backward revisions”.

Jerome Powell spoke to the Foreign Bankers’ Association in Amsterdam on Tuesday and mentioned a very strong U.S. labor market and that he sees the U.S. economy performing very well at the moment. Regarding interest rates, he does not believe that the next step may be to raise them, but that they will likely keep the interest rates at the current level. He maintained his stance that the policy rate is tight and that it remains to be seen whether it is sufficiently restrictive or not – only time can tell. He also repeated that the fight against inflation is no smooth road and that no one expected it to be so in the first place.

13F Filings reveal that 944 U.S. firms own Bitcoin spot ETFs

Over the last few weeks, but especially days, the market was flooded with 13F filings, which are quarterly reports that are required by all U.S. institutional investment managers with at least $100 million in assets under management. The form discloses their equity holdings and gives insights on what they have bought, sold, or held during the last quarter. The 13F filings of this year’s first quarter are particularly interesting because of the new Bitcoin spot ETFs and give us insights on which banks, insurance companies, hedge funds, brokers, corporations, pension funds, etc. have bought the new Bitcoin products since their inception. In total, 944 firms reported owning Bitcoin spot ETFs worth a total of $10.7 billion. Institutions indeed seem to be buying crypto assets.

We want to highlight one such 13F filing from Tuesday. The State of Wisconsin Investment Board revealed numerous investments in crypto entities such as the IBIT or GBTC ETFs, Coinbase, Marathon Digital or Riot Platforms. The State of Wisconsin Investment Board is a Wisconsin state agency that manages investments for public retirement and other trust funds and now holds Bitcoin spot ETFs worth more than $60 million by the end of March 2024.

CPI Print Triggered a Breakout on Wednesday

The release of the Consumer Price Index (CPI) on Wednesday showed a slight easing of inflation in April, with the number coming in at 0.3% versus the expected 0.4%. On a yearly basis, the CPI increased by 3.4% and is still well above the levels of the past ten years, before the pandemic in 2020. In the chart above, the 12-month percentage change of the CPI is visible over the last twenty years. While the chart below showcases the U.S. Consumer Price Index month-over-month percent change since 2021, we can see that, after rising in February and not decreasing in March, the month-over-month CPI has now decreased again compared to the previous month for the first time since last October.

New all-time highs for U.S. Equities

Risk assets went on a surge after these lower-than-expected month-over-month inflation figures in the U.S., Bitcoin, and the broader crypto market pumped seconds after the release and experienced an afternoon and evening of “up only,” as we like to say in crypto jargon. U.S. equities opened Wednesday higher and with new all-time highs for the S&P 500 and the Nasdaq, the U.S. Dollar Index (DXY) continued its downward move until early Thursday morning, and Gold traded at the highest prices since the end of April.

The U.S. Senate Voted To Overturn The SEC Crypto Rule

On Thursday, the U.S. Senate voted 60-38 to overturn the SEC Accounting Bulletin 121 (SAB 121), which was released in 2022 and required digital asset custodians to treat digital assets as liabilities and hold them at fair value on their balance sheets. On Thursday, 21 Democrats joined the Republicans to pass a bill to overturn SAB 121, which will now land on U.S. President Biden’s table to sign or veto – it is the first crypto bill to get to the U.S. president directly. If Biden vetoes the legislation, it will return to Congress and require a two-thirds majority vote to pass again.

In other news, Vanguard appointed a new CEO, Salim Ramji, who led BlackRock’s ETF business as the company spurred an industry double-take with its Bitcoin spot ETF filing last year. This is of significance for the crypto markets because Vanguard has been opposing crypto and is not allowing its customers to trade Bitcoin spot ETFs on its platform. Market participants are now speculating whether this will change with the new CEO or not.

Bitcoin Spot ETFs With Over $700m Net Inflows

The U.S. Bitcoin spot ETFs are looking back on four consecutive net inflow days, with $726 million flowing into the products during the first four days of the week. This marks the first week with four net inflow days since the first week of April, and if the spot ETFs experience a net inflow day today as well, then this week will mark the first week with five consecutive inflow days since the week of March 11, 2024, when we reached our current all-time high for Bitcoin.

What is up with Ethereum?

If you are an ETH holder or at least interested in the altcoin space, you might have been rubbing your eyes and wondering what is happening with Ethereum, especially when compared to Bitcoin. ETHBTC is, at the time of writing, reaching new lows and trading below 0.045 for the first time since April 2021. ETH, when compared to BTC, has traded in a broad range from May 2021 to September 2022 before starting a multi-year downtrend and reaching the new lows today. When looking at the historic price action, the last couple of years resemble the most with the period from February 2016 to December 2016, when ETHBTC also traded in a range for a couple of months before really trading to the downside before picking up steam again at the beginning of 2017.

The Mandatory Weekly Sentiment Check

The Crypto Fear & Greed Index is climbing up and currently in Greed territory (74) up from the mid-sixties level from last week. The level of 43 at the beginning of the month was the lowest level since last September, and as the prices recovered this week, the market sentiment has also been increasing. We will continue to track this in the Weekly Wrap to stay up to date with market sentiment. With the stock markets at new all-time highs, the Fear & Greed Index for stocks has (finally?) returned into Greed territory (61) as well after a couple of weeks in Fear and Neutral territory. It’s quite astonishing that stock prices are at all-time highs while the market sentiment just recently climbed into Greed levels. 40.9% of AAII members feel bullish for the stock market in the next six months; this number did not change much from last week (40.8%) and is only slightly up from the number at the beginning of the month (38.5%).

A look at the obligatory Funding Rate Heatmap reveals that even though prices have been trading to the upside, the funding rates remain in healthy territory. When we were trading at these price levels in March, for comparison, the funding rates were already quite overheated, and we have now seen low funding rates for more than a month, a healthy sign for the market, at least from a funding rate perspective.

Our Take

Given recent market developments, our outlook for the coming weeks and months remains optimistic. Despite Bitcoin experiencing several weekly declines, recent price movements suggest a potential reversal, with BTC rallying back above $66’000, although it has struggled to break above $67’000 for the third time this month. We believe a breakout from this range is likely for the following reasons:

• Genuine institutional and sovereign adoption is becoming evident, with pension funds and major investment banks reporting ETF shareholdings in their 13F filings, as noted in our market update yesterday. Additionally, GBTC outflows have slowed over the past week, with multiple days of inflows into the ETF, along with the total daily net inflows for all spot ETFs being back above +$100M.
• The post-halving dump appears to be behind us, as historical post-halving charts clearly indicate a positive trend ahead of us. Could this signal the next phase of the bull market?
• There is significant demand for December 2024 call options in the $100'000-$120'000 range, indicating strong bullish sentiment towards the year's end and substantial buying interest.
• Liquidity is returning: Stablecoin liquidity is increasing rapidly, nearing the previous cycle's all-time high of $180 billion, and continues to be a crucial directional indicator for the crypto market. For more insights on stablecoin liquidity and other in-depth analysis, check out our Industry Rollup Research Report.

Looking ahead, traders are focused on NVIDIA's upcoming earnings release on Wednesday, May 22nd, with AI-related coins expected to experience significant volatility before and after the release. Additionally, next week features important deadlines for two Ether spot ETF applications: VanEck's on May 23rd and Ark21Shares' on May 24th.

The Week Ahead

Monday, May 20, 2024

• BTDR Earnings

Tuesday, May 21, 2024

• Crypto Expo Dubai
• LSK Migration Snapshot

Wednesday, May 22, 2024

• NVIDIA earnings
• Bitcoin Pizza Day

Thursday, May 23, 2024

• VanEck ETH spot ETF application final deadline

Friday, May 24, 2024

• Ark21Shares ETH spot ETF application final deadline
• FET, AGIX, OCEAN – ASI token launch (expected)