Today’s episode is sponsored by CME Group.
To get the show every day, follow the podcast here.
Today’s Stories:
Bitcoin ETF Ad War Officially Underway With Bitwise Campaign
Small ESG-Focused Crypto Asset Manager Is Another Late Entrant to Bitcoin ETF Race
From our sponsors:
CME Group Cryptocurrency futures and options provide market-leading liquidity for bitcoin and ether trading. These cash-settled contracts give full exposure to crypto performance without the hassle of holding the physical position. No digital wallet? No problem. Trade nearly 24/7 in a transparent, CFTC-regulated market. Visit cmegroup.com/crypto to learn more.
Disclaimer:
This communication is not directed to investors located in any particular jurisdiction and is not intended to be accessed by recipients based in jurisdictions in which distribution is not permitted. The information herein should not be considered investment advice or the results of actual market experience. Past results are not necessarily indicative of future performance. Trading derivatives products involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation.
This episode was hosted by Noelle Acheson. “Markets Daily” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl. All original music by Doc Blust and Colin Mealey.
Audio Transcript: This transcript has not been edited and may contain errors.
It’s Tuesday, December 19th, 2023 and this is Markets Daily from CoinDesk. My name is Noelle Acheson, CoinDesk collaborator and author of the Crypto is Macro Now newsletter on Substack. On today’s show we’re talking about market moves, bitcoin ETFs, interest rates and more. So you don’t miss an episode, be sure to follow the podcast on your platform of choice, and turn on notifications. And just a reminder, CoinDesk is a news source and does not provide investment advice.
Now, a markets roundup.
After a few days of weakness, crypto markets are up today. According to CoinDesk Indices, at 9 a.m. Eastern time this morning, bitcoin was up 3.6% over the past 24 hours, trading at 42,853 dollars. Ether was trading up 3%, at 2,221 dollars.
Elsewhere, Solana and Binance Coin are up 6%, Cardano is up 4%, and the NEAR protocol token is up 12%.
In macro matters today, we head over to Europe to look at its latest inflation data. This morning, we saw the Eurozone headline CPI come in softer than expected – but even more notable, it delivered the steepest month-on-month contraction since March of 2020, just as the pandemic was freezing global trade and European countries were imposing strict lockdowns.
The Eurozone headline CPI and core CPI both dropped 0.6% in November. In the case of the headline inflation, this was a revision downward from the preliminary figure announced at the end of last month. On an annual basis, headline inflation in the Eurozone is now down to 2.4%, with core at 3.6%.
If you’re wondering why I say Eurozone and not European Union or EU, it’s because the aggregate inflation data only includes those countries that use the euro – not all EU countries do.
Back to the inflation results – this matters for the outlook for European interest rates. Yesterday, European Central Bank policymaker Yannis Stournaras said in a media interview, and I quote: “We need to see inflation sustainably below 3% by the middle of the year before cutting rates.” End quote.
It’s not the number that is startling, because November is the second consecutive month with headline inflation below 3%. It’s the insistence on waiting until the middle of the year before deciding.
This suggests that the ECB is not confident that inflation will stay low. In other words, it’s worried that it could tick up again. Contrast this to the euphoria in U.S. markets based on the assumption that the Fed has totally won the inflation battle and rate cuts are coming soon.
The ECB stance is especially worrying since economic activity is dropping sharply. Last week we saw its Purchasing Managing Index data contract for the seventh consecutive month, making this the sharpest slump since 2012 if we exclude pandemic data.
In yesterday’s episode, I talked about the U.S. Purchasing Managing Index, which showed a net increase in activity in November. And yet markets expect the U.S. to start lowering rates before Europe. Something isn’t adding up.
In stocks, the main indices were more muted yesterday as Fed officials are pushing back on the assumption that U.S. rate cuts are imminent. The S&P 500 rose half a percent, Nasdaq climbed six tenths, and the Dow Jones was largely flat. Futures today are pointing to a flat opening.
In Europe, the FTSE 100 was up half a percent yesterday, with the German DAX down seven tenths and the broader Eurostoxx 600 down three tenths. So far today, the main European indices are slightly positive.
In Asia, Japan’s Nikkei index dropped six tenths of a percent as the Bank of Japan kept interest rates unchanged and pledged to keep them low without saying for how long. The Shanghai Composite fell four tenths while the Hang Seng lost one percent.
In commodities, oil prices are still climbing as tensions mount in the Red Sea. In yesterday’s trading session, the Brent Crude benchmark gained 1.8%, and so far this morning is climbing a further half a percent to trade at 78 dollars and 44 cents a barrel.
The gold price is holding steady at around 2,030 dollars per ounce.
Stay with us – after the break we’re going to look at a couple of intriguing ETF updates.
Welcome back!
In this section, it’s time for an ETF update, because there have been a couple of interesting developments. We’re starting to see the first ads for the spot bitcoin ETFs. If you’ve been on X, formerly known as Twitter, at all over the past day, you’ll know which one I’m talking about.
This tells us two things:
One is that the issuers must be pretty confident that approval is around the corner to have invested in marketing so soon. And another is that, since the funds all hold the same asset and there’s not much difference between them, success in attracting investors will depend on the fees and on marketing.
But wait – they’re not all the same!
Yesterday a new entrant entered the bitcoin spot ETF race. ESG-focused fund manager 7RCC filed a prospectus for a spot bitcoin ETF. Yes, an ESG-focused fund manager wants to list a product linked to the price of bitcoin, the asset that just a few years ago we were told was going to destroy the planet. The fund will hold a mix of spot bitcoin and carbon credit futures, so it’s not a pure spot bitcoin vehicle.
But, if this gets approved, the U.S. would have its first ESG-packaged listed bitcoin-linked fund.
This could be positive for the industry in two ways:
It puts the bitcoin story in front of ESG investors that still struggle to understand that bitcoin mining is a net plus for environmental efforts. After all, it supports the construction of renewable grids by acting as an industrial swing consumer that can co-locate anywhere, and it helps fossil fuel producers mitigate methane emissions. But, some investors might still like to have a carbon offset.
The second way this new type of fund could help the market is by introducing more variety to the bitcoin spot ETF range. We are likely to see more funds emerge that propose to include spot bitcoin in their mix rather than as the principal asset.
Contrast this with the last bout of ETF excitement back in 2021, when the options available were bitcoin futures funds… or bitcoin futures funds.
With such little difference between the available products, it’s understandable that flows were concentrated in the largest, BITO, which today accounts for almost 85% of all current bitcoin ETF assets under management.
This time, there’s likely to be a much wider variety, and investors like choice. What’s more, with a broader range of options for investors to choose from, and a broader range of investment strategies that include a bitcoin component, bitcoin is more likely to become less of a “novel” asset and more of an established portfolio diversifier.
In other words, the launch of spot bitcoin ETFs could end up helping to broaden the bitcoin investor base by even more than we originally thought. And with this, we could soon be witness to a big step forward in the maturation of crypto markets.
Read the full article here
