A Historically Momentous Week, Increasing ETH Exposure
Imminent 19b-4 Approval Seems Likely
Up until yesterday, we were quite bearish about the prospects of a spot ETH ETF approval. Our off-the-record conversations with those close to the situation confirmed this sentiment. ETF experts James Seyffart and Eric Balchunas, who accurately predicted the Bitcoin ETF call, also assigned a very low probability of approval. The market agreed as well, with the ETHE discount widening from 8% to over 20% in the past couple of months, indicating a lack of conviction over ETH ETF approval.
Thus, we are inclined to think that this is indeed a late development from the SEC, potentially part of a wider shift in regulatory attitudes from the current administration. The Biden White House and the Warren-led Senate have been notably antagonistic towards crypto, with the latter even campaigning on an anti-crypto platform.
What changed? A couple of weeks ago, at an event at the Trump estate in Florida, Presidential Candidate Trump was asked about his attitudes toward crypto. He replied that he was open to it and wanted to see crypto businesses stay in the US.
We think that this, combined with tight polls across major swing states and the bipartisan overturning of the notably anti-consumer SAB 121 last week, has led to a forced change in to...Reports you may have missed
LESSONS FROM OPEC We have witnessed a significant market panic partially related to formerly locked BTC hitting the order books. The major sources of supply include:Mt. Gox – 141,686 BTCUS Government – 8,100 BTCGerman Government – 50,000 BTC At current prices, this would equate to over $12 billion in supply. This threat, combined with an inhospitable macro backdrop (rising DXY, higher rate expectations, hawkish Fed), has brought BTC down to...
LDO Risk/Reward Looks Good Here, Immediate-term Macro Picture Still Uncertain (Core Strategy Rebalance)
FLOWS AND SENTIMENT STILL SUBDUED Last week, we received a better-than-expected CPI print, but the DXY continued to move higher due to global weakness and a hawkish Fed. We discussed the risks appearing in the metrics we use to gauge sentiment and flows. The overall lack of follow-through in the crypto market was evident. Volumes, net ETP flows, the Coinbase discount, stablecoin market cap trend, and search interest for key...
OVERALL, IT WAS A GOOD CPI/FOMC DAY As any market observer knows by now, CPI came in remarkably cool yesterday. May CPI data was soft across the board, with headline inflation at 0.0% M/M vs. 0.1% expected and core inflation at 0.2% M/M vs. 0.3% expected. The unexpected data fueled a violent rally across all risk assets as rates fell, and the futures market started to price in additional cuts,...
STX Remains Compelling Beta Exposure, Miners to Outperform in Lower Rate Environment
RATE EXPECTATIONS MOVING LOWER Last week, we discussed how rate expectations were a barrier to crypto moving higher and that we anticipate continued non-recessionary but soft economic data will help spur flows. Fast forward to this week, and we have seen a cool manufacturing PMI, a soft JOLTS report, and a services PMI in which the price component was below market expectations. The remaining important data for this week includes...
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