Market Commentary (February 1st, 2024)

Crypto Market


At the time of writing, Bitcoin is trading at $43,000 and ETH is trading at $2,300. The long-anticipated Bitcoin ETFs have finally arrived, and so far, they have been characterized as a success, bringing in $1.46 Billion of net new money since launch. Note that this accounts for GBTC outflows, which has seen its Bitcoin under management fall from 619,000 to 487,000. Net inflows will be used to gauge institutional demand going forward. Ideally, we want to see daily new demand for these ETFs greater than the daily supply of Bitcoin, which is 900 BTC. Another area of interest will be the pace at which Bitcoin flows out of GBTC, which appears to be slowing down for now as bankrupt entities like FTX unwind positions that have been held since its collapse.  

Looking forward to the rest of 2024, investors are anticipating a spot Ethereum ETF to be approved in May. Although it's not a guaranteed approval, the Bitcoin ETF sets a precedent that can’t be ignored. If approved, the focus will likely again be on the ETHE Grayscale Ethereum Trust, which holds 2.96 million Ethereum and has had ties to bankrupt entities like FTX, Genesis, Celsius, and BlockFi.  

In the Altcoin space, Solana continues to gather a lot of attention following last year's run up. Notably, just yesterday, the JUP airdrop took place at a $5.9 Billion Market Cap. The token was distributed to those who had ever used the Jupiter decentralized exchange. Scalability and efficiency continue to be the narrative for the Solana ecosystem




Yesterday, the Federal reserve left its interest rate policy unchanged, which was aligned with market expectations. Jerome Powell stuck to his talk track of maintaining stable employment and prices for the economy, something we’ve heard many times now. A notable comment was wanting the ability to keep options open to respond to unexpected increases in inflation, which makes sense at this point of the tightening cycle.

There will be some questions come March 11th, when the Feds BTFP ends. As it stands, there is approximately $167 Billion of liquidity provided by the program and if it ends as planned, there could be turmoil for some US Regional banks. This also comes at a time when the Reverse Repo Market is at its lowest level since June of 2021, the velocity of future declines would likely provide guidance on interest rate decisions.  

Globally, Evergrande is back in the headlines as judges ruled in favour of liquidating the bankrupt property development company. There are possibilities for spill over affects for other developers as projects are revalued and sold to pay back creditors. China has also been making headlines with a proposed $278 Billion stock purchasing program to help prop up its markets, which are at levels which were first observed in the 1990’s.  

In Canada, our economy shows signs of life. The economy grew 0.2% in November, its first expansion in six months, with preliminary data projecting 1.2% growth for last quarter. This surprising growth gives the Bank of Canada a little wiggle room to keep interest rates higher for longer and has some experts cautiously optimistic about a soft landing.


Equities, Fixed Income, FX and Commodities


2024 has started profitably, yesterday's FED meeting brought the first day of real negative price movement across major indices, 2% inflation remains the goal. However, it cannot be overlooked that January brought all-time highs to both the S&P 500 and the Nasdaq, both of which continue to trade within striking distance of those levels.  

This week also brought earning reports for some market heavyweights, Alphabet and Microsoft, both released earnings close to expectation. Alphabet emerging on the downside based on lower than anticipated advertising revenues, meanwhile Microsoft has dethroned Apple as the world's most valuable company, partially attributed to heavy investment in generative AI.

The USD/CAD rate is hovering around 1.34, recovering over the past week after USD had gained strength in mid-January. Crude oil prices after being heavily range bound in early 2024 have begun to creep up, trading at the time of writing at $76.69, up over 6.5% on the month. Commodities prices in January have been fluctuating. At the start of the month, investors were optimistic due to the expected fall in inflation and the Federal Reserve's dovish stance. However, the increasing geopolitical tensions eroded investors' confidence, and have led to a loss of optimism.  The prices of gold and silver remained under pressure due to the strengthening dollar index.


News We’ve been reading


China is weighing measures to prop up its stock markets, could reportedly mobilize $278 billion - After 3 continues years of falling prices on the Mainland China 300 Index, the country is finalizing a package to directly stimulate its equity markets - link @CNBC

Bankrupt FTX won't be restarting, but former customers will get money back in full – The repayment is based on petition dated valuations, which are much lower than where the market sits today. - link - @TheBlock

Celsius Emerges from Chapter 11 and Commences Distributions of Over $3 Billion of Cryptocurrency to Creditors - “This milestone marks the conclusion of an eighteen-month process during which the Company built consensus among a wide range of stakeholders, resolved complex novel legal issues,...” - link - @BusinessWire

SEC likely to approve spot Ethereum ETFs on May 23: Standard Chartered Bank – ETH ETF approvals are on target for May 23rd . If denied, the SEC could face lawsuits from applicants such as BlackRock, Grayscale and Ark. - link - @TheBlock