2024-01-08 11:13

The Treasury's next quarterly debt announcement may not turn out as much a tailwind for risk assets as the previous one did. Once the SEC's decision on exchange-traded funds is out of the way, crypto market attention is likely to focus on the U.S. Treasury's quarterly debt program. The size and maturity mix of second-quarter bond sales will probably influence investors' attitude to risk. The crypto market is squarely focused on the U.S. Securities and Exchange Commission's decision on spot bitcoin (BTC) ETF applications due this week. Perhaps rightfully so, as observers have long said an exchange-traded fund investing directly in BTC rather than futures tied to the cryptocurrency will unlock billions of dollars in investments from retail and institutional investors. Once that's out of the way, the next major event to watch out for could be the quarterly refinancing announcement (QRA) from U.S. Treasury Secretary Janet Yellen's department, due Jan. 29. With debt and deficits surging in the post-Covid world, the detailing of three-month borrowing needs and the size and duration of bond auctions have begun drawing more interest than usual. In August, the Treasury said it would boost sales for the first time in over two years while predicting further increases. Then, on Nov. 1, it said it planned to borrow $776 billion for the quarter, significantly less than expected, with slower sales of the 10-year Treasury note. The positive surprise saw the 10-year yield, or long-end rates, drop from the widely watched 5% level and end the year at 3.86%. Bond prices and yields move in opposite directions. U.S. 10-year debt is seen as one of the world's safest investments, and its interest rate is a global benchmark. The decline in the so-called risk-free rate likely incentivized risk-taking in financial markets, helping maintain demand for both bitcoin and stocks. (The ETF speculation catalyzed the rally, and supportive yield moves added to the momentum.) The upcoming announcement, however, might flag higher-than-expected borrowing and not be that helpful, according to Quinn Thompson, head of capital markets and growth at decentralized credit market Maple Finance. At the Nov. 1 announcement, the Treasury said it expected to borrow $816 billion in the first quarter, a record for the quarter, according to CNN. "Coming down the pipe, we have the upcoming QRA from the Treasury set to be released on January 29th, which should not provide the same gleeful result for markets as last quarter's," Thompson wrote in the Jan. 7 edition of his newsletter. "Long-end rates are now ~100 bps lower, and Yellen should be looking to take advantage of that by terming out some debt. This should be a headwind for USTs." Higher-than-expected borrowing with more sales of 10-year notes could put upward pressure on the benchmark yield, potentially slowing risk assets' ascent. At press time, bitcoin was trading at $43,780, with the 10-year yield at 4.01%. https://www.coindesk.com/markets/2024/01/08/after-bitcoin-etf-decision-us-debt-announcement-may-be-pivotal-for-crypto-traders/

2024-01-08 09:02

Two influential analysts have tipped odds at over 90% ahead of the Securities and Exchange Commission decision. Odds of a spot bitcoin (BTC) exchange-traded fund (ETF) being approved in the U.S. have risen to more than 90%, two influential analysts at Bloomberg said, while crypto market participants at betting platform Polymarket became more pessimistic, trimming the odds to 85%. Referring to the likelihood of the Securities and Exchange Commission (SEC) rejecting proposals after Friday's flurry of updated filings, Bloomberg ETF analyst Eric Balchunas said in a Saturday post: “I probably go with 5% at this point. But you gotta leave a little window open for these things.” He previously tipped the odds at 90% in November, saying that updated forms at the time indicated providers were moving in the right direction. Crypto market participants, however, have a dimmer view of approval being granted before Jan. 15, a betting market on Polymarket suggests. Participants have cumulatively wagered about $500,000 on the approval being delayed, or even denied, lowering the odds from last week’s 90%. Even so, much of the crypto market still expects key decisions by the SEC this week will lead to the first spot bitcoin ETFs being offered to professional investors in the country. A regulated offering is expected to attract billions of dollars in bitcoin demand, making it one of the most-watched catalysts in the asset’s history. More than a dozen applicants hope to launch the first spot bitcoin ETFs in the U.S. On Friday, several amended 19b-4 filings, filed on behalf of BlackRock, Grayscale, Fidelity and other issuers, joined last month's amended S-1 filings, addressing feedback from the SEC. Both the 19b-4 filings and the S-1 filings need to be approved before the ETFs can launch. https://www.coindesk.com/markets/2024/01/08/bitcoin-etf-approval-odds-raised-to-over-90-at-bloomberg-drop-on-polymarket/

2024-01-08 07:46

The Solana ecosystem boomed in December as bonk tokens started a multiweek run of over 1,000%, grabbing listings on influential exchanges Binance and Coinbase. A frenzied demand for meme coins issued on the Solana network seems to have fizzled in the past week as newer tokens fail to gather a meaningful community and prices of recent favorites continue to plunge. Dog-themed token bonk (BONK) – whose prices rallied more than 1,000% in a three-month period – is down over 70% from a December peak that saw the token listed on prominent exchanges. Dogwifhat, which gained stickiness among crypto holders with a picture of a dog wearing a hat, is down nearly 80% after generating hype for giving early holders a more than 10,000% return on their capital. Other lesser-known tokens popcat (POPCAT) and chipi (CHIPI), two cat-themed tokens are down more than 90% since lifetime peaks, although their communities still continue to hope for a revival. The Solana ecosystem boomed in December as bonk tokens started a multiweek run of over 1,000%, grabbing listings on influential exchanges Binance and Coinbase. That seemingly kickstarted activity on the network, with prices of Solana's Saga phone flying to over $5,000 – despite being unable to sell out as recently as October – and SOL market capitalization quickly flipping other large tokens. Solana also became the strongest draw among on-chain traders, metrics from last week show, with trading volumes and network fees crossing those of Ethereum – usually the highest – on a seven-day rolling basis. Hype for the blockchain's speedy transactions, cheap fees, and a lottery of meme coin issuances seemingly jumpstarted the network since early December, pushing SOL token prices to nearly $120 from $38 at the start of November. Value locked on Solana applications grew in tandem, rising to $1.3 billion worth of tokens from the $400 million mark in November to reach levels previously seen in July 2022. But profit-taking started in the latter part of December as valuations grew wild, with newer launches not gaining enough momentum and an apparent shift of capital to opportunities on other blockchains. https://www.coindesk.com/markets/2024/01/08/solana-meme-coins-see-80-price-drop-after-december-frenzy/

2024-01-08 06:37

Friday's payrolls will likely compel the Fed to maintain flexibility in its policy decisions going forward, one observer said. Bitcoin (BTC) registered moderate losses early Monday, with Asian stocks taking a bigger hit as Friday’s upbeat U.S. nonfarm payrolls (NFP) data dented expectations for early rate cuts by the Federal Reserve. At 4:32 UTC, the leading cryptocurrency by market value changed hands at $43,600, representing a 0.8% drop on the day, CoinDesk data show. Most Asian equity indices traded in the red, with Hong Kong’s Hang Seng trading 2% lower amid a regulatory crackdown on gaming. The NFP data released Friday showed the U.S. economy created 216,000 jobs in December, beating expectations for 170,000 and above November’s downwardly revised 173,000. The jobless rate held steady at 3.7%, while average hourly earnings increased 4.1% year-on-year against a consensus estimate of 3.9%. Since the payrolls data, doubts have increased that the Fed will cut the Fed funds rate, the benchmark borrowing cost, as early as March. The CME Fed Watch tool shows traders now price a 60% chance of a rate cut in March, having fully baked in such a move in late December. The odds stood above 75% ahead of the payrolls report. Traders in the swap market now foresee roughly five 25 basis point rate cuts this year instead of six or seven similar-sized rate cuts priced before the payrolls data, per FT. The 10-year Treasury yield, the so-called risk-free rate, has risen by 15 basis points to 4.05% since Friday, also a sign of traders reassessing dovish Fed expectations or the possibility of the central bank delaying the rate cut. The benchmark yield fell by nearly 80 basis points to 3.86% in the final three months of 2023, offering a tailwind to risk assets, including bitcoin, thanks to expectations for aggressive Fed rate cuts and lesser-than-expected bond issuance by the U.S. Treasury. “The most intriguing aspect was the rise in wage gains, which stood at +4.1% year-over-year (Y/Y). This figure significantly exceeds the current inflation rates. Historically, wage-price spirals tend to be persistent elements of inflation psychology, which will likely compel the Fed to maintain flexibility in its policy decisions going forward," Greg Magadini, director of derivatives at Amberdata, said in the weekly newsletter. A continued rise in yields presents downside risk to risk assets, although anticipation of the spot ETF launch in the U.S. may cushion bitcoin against adverse moves in the bond market. The U.S. Securities and Exchange Commission is widely expected to approve one or more spot ETFs by Jan. 10. Per some analysts, the move has been priced in over the past three months, and the cryptocurrency could see a "sell the fact” price drop following the approval. https://www.coindesk.com/markets/2024/01/08/bitcoin-asian-stocks-drop-as-traders-pare-march-fed-rate-cut-bets/

2024-01-05 23:15

Releasing them suggests they’re confident the SEC will approve the first U.S. spot bitcoin ETFs soon. U.S. spot bitcoin exchange-traded funds (ETFs) appear to be on the verge of launching after the exchanges that will list them filed amended documents, suggesting they expect U.S. Securities and Exchange Commission approval in the coming days. The amended 19b-4 filings, filed on behalf of BlackRock, Grayscale, Fidelity and other issuers, join last month's amended S-1 filings, addressing feedback from the U.S. Securities and Exchange Commission (SEC). More than a dozen applicants hope to launch the first spot bitcoin ETFs in the U.S.; it's likely multiple issuers will be approved simultaneously. Individuals at two different issuers told CoinDesk on Thursday that their companies anticipate approvals sometime next week. One of the individuals told CoinDesk that filing the amendments did not mean approvals were guaranteed but said they were optimistic. A final deadline for SEC action for at least one application, by Ark 21 Shares, is Jan. 10, suggesting the regulator may approve all of the final applications it is comfortable with by that date. This filing "is another important step towards uplisting GBTC as a spot bitcoin ETF," Grayscale spokeswoman Jenn Rosenthal said in a statement, referring to the company's bitcoin trust that it wants to turn into an ETF. "At Grayscale, we continue to work collaboratively with the SEC, and we remain ready to operate GBTC as an ETF upon receipt of regulatory approvals." Earlier Friday, Bloomberg reported that the SEC's commissioners were "expected to vote on the exchange-rule filings next week." The regulatory agency needs to approve both the 19b-4 filings and the S-1 filings before the ETFs can launch. Jesse Hamilton contributed reporting. https://www.coindesk.com/policy/2024/01/05/final-bitcoin-etf-application-filings-get-posted-by-major-us-exchanges/

2024-01-05 19:04

Markets may relive last year's U.S. banking crisis as a crucial funding program is set to expire, Hayes said. Depletion of the Fed's reverse repo program and expiry of a crucial funding facility for troubled banks may trigger a market crash in March and force the Fed to cut interest rates, Maelstrom CIO Arthur Hayes said. Bitcoin could plunge 20%-30% in the rout but would quickly rebound, Hayes predicted. While crypto investors are fixated on an imminent spot bitcoin exchange-traded fund (ETF) decision that could propel BTC's price even higher, Arthur Hayes, the chief investment officer of family office Maelstrom and the ex-CEO of BitMex, warned about a potential 20-30% plunge in the next few months. In a Friday blog post, Hayes outlined looming risks for U.S. banks and markets potentially colliding in March and triggering a "liquidity rug pull" event akin to the banking crisis last March. "I am preparing for a vicious washout of all the crypto tourists in March of this year," he wrote. "I loaded up on crypto in the second half of 2023, and I believe now until April is a no-trade zone in terms of the addition of risk." Crypto liquidity rug pull The drawdown of the Federal Reserve's reverse repo program (RRP), where qualified banks and investment firms may park cash and earn interest on it, served as a tailwind for risky assets through last year, injecting capital into markets as participants took out cash from the facility and invested. However, the RRP balance is quickly declining, dropping to $700 billion from a record high of $2.5 trillion at the end of 2022, and Hayes is projecting it to reach its historical average of $200 billion by around March. "When this number gets close to zero..., the market will wonder what is next," he said. "Without any other new sources of dollar liquidity, bonds, stocks, and I believe crypto will also get the stick." Second, a crucial Fed facility called the Bank Term Funding Program (BTFP) that helped stave off last year's regional banking crisis is set to expire on March 12, with the potential to create turbulence in the banking system. The BTFP provided banks with funding to fulfill deposit withdrawals by lending them money at the notional value of their U.S. government bond holdings, at much better conditions than selling bonds on the open market at a loss due to the Fed's aggressive rate hikes. Hayes expects that the facility won't be extended during this U.S. presidential election year, which could bankrupt some banks who sit on massive unrealized losses on their bond holdings. "The combination of a lack of liquidity gushing from the RRP and the lack of printed money to cover the bond losses on the non-TBTF too big to fail banks’ balance sheets will decimate the financial markets globally," he said. As the market rout ensues, Hayes predicted the Fed will cut rates on its March 20 meeting and resume the BTFP funding line. What's next for bitcoin's price If this scenario plays out as Hayes outlined, bitcoin (BTC) will correct a "healthy" 20% to 30% from early March prices, according to the blog post. The decline could be as much as 40% if BTC rallies to $60,000-$70,000 in the coming weeks, he wrote. "Bitcoin initially will decline sharply with the broader financial markets but will rebound before the Fed meeting," Hayes said. "That is because bitcoin is the only neutral reserve hard currency that is not a liability of the banking system and is traded globally." Hayes joined a roster of crypto analysts who recently forecasted a correction for crypto markets. CryptoQuant said that a spot-based ETF approval would be a "sell the news" event and BTC could drop to $32,000, while K33 Research suggested reducing exposure as the market became overheated. Bitcoin is currently above $43,000. Matrixport head of research Markus Thielen warned about a bitcoin correction based on technical indicators with the SEC potentially putting off ETF decisions due to shortcomings in the filings. The report may have contributed to a near-10% decline in bitcoin's price earlier this week. https://www.coindesk.com/markets/2024/01/05/arthur-hayes-foresees-30-bitcoin-crash-amid-vicious-washout-heres-why/