Market Commentary (December 4th, 2023)

Crypto Market

As of the latest update, BTC is showcasing an impressive performance, boasting a ~22% increase since November 1st. This marks the first time since 2021 that BTC has demonstrated two consecutive months of 10%+ growth. Despite the upcoming holiday season, there's a distinct sense of sentiment reminiscent of December 2020 within the trading desk.

Our ongoing perspective, as outlined in the previous market commentary, remains anchored in the belief that recent developments can be attributed to the mounting pressure of a spot ETF and a hypothesis surrounding Bitcoin's supply, especially considering the upcoming halving event. November's market dynamics reveal a shift in influence, with institutions playing a more prominent role compared to the October rally driven by headlines and crypto-native spot buying.

During November, the CME basis surged to as high as 25%, signifying the premium institutions, lacking direct spot access, are willing to pay for a long position on BTC. Notably, institutions are also seeking exposure through equity markets, with noteworthy performances by COIN, HIVE, and DMG, all posting double-digit returns YTD. These movements underscore significant demand willing to pay a premium for exposure to the asset class, a trend expected to intensify with the potential approval of a BTC spot ETF.

Looking ahead, January 10, 2024, emerges as a pivotal time for the crypto market. This anticipation has kept industry participants engaged, not only during the year-end period but also positioning the market in anticipation of a potential ETF announcement and the potential new norm that may follow.

Shifting focus to some of the alts, their weekend performance aligned with expectations during a 4% BTC rally. ETH recorded a modest increase of about 5%, while other Layer 1 tokens showed a mixed range of results. Notably, ALGO and NEAR, less favoured recently, outperformed.


On the macroeconomic front, global liquidity is on the rise, creating favourable conditions for markets. In the United States, the Reverse Repo Market's balance has fallen to $768 billion from $1.55 trillion since September, signalling easing financial conditions on the horizon, coinciding with a crypto and major equity index melt-up. The remaining $768 billion is expected to re-enter financial markets by the end of this year and into early 2024. Once the balance nears zero, attention should turn to spikes in the Overnight Repo Market, indicating stress and potentially prompting the Fed to ease financial conditions ahead of schedule.

China remains a key focal point, grappling with the aftermath of extended COVID lockdowns. The country is expected to implement favourable fiscal and monetary conditions to stimulate economic growth, having already cut interest rates twice this year with room for further easing.

A significant shift in global economics comes from Argentina with the recent election of Javier Milei. Once in office, Milei plans to eliminate the national currency and central bank, replacing them with a Bitcoin and USD standard. If Argentina sees success similar to El Salvador in 2021, it could trigger a domino effect on Bitcoin adoption globally.

Equities, Fixed Income, FX and Commodities

Equity markets enter the final weeks of 2023 on a high note, bulls have propelled levels closer to 2023 peaks. Last week marked the 5th consecutive week of green across the broader market, hovering only 4% below all-time highs. The S&P 500 continues to face strong resistance at 4,600, a key support level; currently trading at 4,558. Expect the Federal Reserve's monetary policy and cooling economic growth to steer the market in the coming weeks.

The daily USD/CAD rate is hovering around 1.353, up slightly on the day, down close to 1% on the month, and nearly flat on the three-month chart. Crude oil prices have continued their decline over recent months, with WTI Crude Oil trading at around $73.38 at the time of writing.

Gold, after reaching a new all-time high of $2,150 in response to Middle East geopolitical tensions and expectations of early next year interest rate cuts, has experienced a slight decrease. Governments and central banks buying gold as a safe haven asset, driven by geopolitical uncertainty and upcoming elections in 2024, contributed to the record high gold price. However, the precious metal is currently undergoing a pullback as shorter-term future trades take profits following recent solid gains.

News We’ve been reading

China has more space to cut reserve ratio instead of interest rates, says ex-official After cutting rates twice this year, look to see China continue to ease financial conditions through both monetary and fiscal policy to stimulate economic growth- link - @Reuters

Argentina's bitcoin friendly presidential candidate Javier Milei wins election As the country struggles with hyperinflation, they’ve elected a candidate that wants to eliminate its national currency and central bank and replace it with Bitcoin link - @Bitcoin Magazine

Bitcoin Surges Past $42,000 as Crypto Rally Gathers Steam Attention has come back to Bitcoin and crypto as Bitcoin has tagged the $42,000 mark, levels not seen since Spring of 2022.  - link @Bloomberg  

WonderFi's grip on Canadian crypto market grows as Bitbuy buys Bitvo  “With the acquisition of Bitvo, WonderFi controls nearly half of the regulated crypto exchanges operating within Canada” - link - @TheBlock