December 20, 2024

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Trading Desk Insights

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Risk assets remain under pressure following Fed Chair Jerome Powell’s signal this week that interest rate cuts in 2024 will be more limited than expected due to persistent inflation. The hawkish stance triggered Wednesday’s market sell-off, hitting equities hard and dragging crypto lower. BTC, which hit an all-time high above $108,000 earlier in the week, saw a swift and sharp correction, dropping 15% to touch lows around $92,000.

The broader crypto market is feeling the pain, with total market capitalization shedding over 11% in the last 24 hours — one of the steepest daily declines this year. Red dominates the top 100 coins. BTC ETFs recorded outflows of $671.9 million, snapping a 15-day inflow streak, as BTC continued its downward move toward $92,000. This bearish sentiment spilled into the derivatives space, where CME’s one-month BTC futures annualized premium slid to 9.8%, a one-month low. This diminishes the appeal of cash-and-carry trades and may dampen ETF demand in the near term. Adding to the uncertainty, long-term holders have offloaded 1 million BTC since September, further fueling selling pressure.

Key levels to watch: BTC between $92,000 and $94,000; SOL between $154 and $174; ETH near $3,040; and LINK around $19.

Meanwhile, the Fed’s preferred inflation gauge — the personal consumption expenditures (PCE) price index — rose just 0.1% in October, below the 0.2% forecast. Annual inflation came in at 2.4%, still above the Fed’s 2% target but softer than the 2.5% estimate.

Adding to the market’s unease, a Trump-backed Republican funding bill failed in the House on Thursday night, raising the risk of a government shutdown. Without a deal signed into law by Friday night, a partial shutdown will commence.

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The News Room

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El Salvador Buys 11 Bitcoin Daily After Reaching Deal with IMF

El Salvador purchased 11 Bitcoin on December 19, following a $1.4 billion loan agreement with the International Monetary Fund (IMF). Despite the IMF's requirement to reduce public sector involvement in Bitcoin activities, the National Bitcoin Office transferred over $1 million worth of Bitcoin to its Strategic Bitcoin Reserve, increasing total holdings to approximately 5,980 BTC valued at around $580 million. This move breaks the previous pattern of acquiring one Bitcoin per day. National Bitcoin Office Director Stacy Herbert stated that Bitcoin purchases may accelerate, emphasizing that Bitcoin will remain legal tender while the government winds down its Chivo wallet and limits Bitcoin transactions to the private sector. The IMF deal, which mandates making Bitcoin acceptance voluntary and allowing taxes to be paid only in U.S. dollars, is pending approval from the IMF Executive Board. This agreement marks the end of four years of negotiations influenced by President Nayib Bukele’s Bitcoin-focused policies.

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SEC Simultaneously Approves Hashdex and Franklin’s Bitcoin-Ether ETFs

The U.S. Securities and Exchange Commission (SEC) has approved Hashdex’s Nasdaq Crypto Index US ETF and Franklin Templeton’s Crypto Index ETF, both of which will hold spot Bitcoin and Ether. Hashdex’s ETF will trade on the Nasdaq, while Franklin’s will be listed on the Cboe BZX Exchange. The approvals were granted on an accelerated basis, as the ETFs’ structures and operations closely mirrored previously approved spot Bitcoin and Ether proposals. The SEC confirmed that both funds meet the Exchange Act requirements to prevent fraud and protect investors. Industry experts believe this approval may encourage other firms, such as BlackRock, to launch similar crypto index ETFs, responding to strong demand for diversified investment options in the emerging cryptocurrency asset class.

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MARA Acquires $1.5B in Bitcoin to Date Through Convertible Notes

Bitcoin miner MARA has significantly expanded its Bitcoin holdings, acquiring over $1.5 billion worth of Bitcoin in the past two months through the issuance of two convertible notes. This aggressive investment strategy has increased MARA's Bitcoin holdings by more than 50% this quarter and nearly 200% year-to-date, bringing the total to 44,394 BTC as of December 18, up from 15,174 BTC at the end of 2023. Utilizing approximately $1.53 billion from the convertible notes, MARA purchased 15,574 BTC at an average price of $98,529 each, valuing its holdings at around $4.45 billion with a quarterly yield of 22.5% and a year-to-date yield of 60.9%. The company raised a total of $1.925 billion through zero-coupon senior convertible notes, repurchased $263 million of existing notes due in 2026, and plans to use the remaining proceeds for further Bitcoin acquisitions. MARA's robust buying spree aligns with a broader trend among cryptocurrency miners, with firms like Hut 8 and Riot Platforms also increasing their Bitcoin investments in December, highlighting a competitive race to bolster Bitcoin holdings ahead of potential price rallies.

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Crypto Charts

ETF Flow

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Disclaimer

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This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

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Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

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