Animal Spirits to Persist Through New Year
Let it Flow
As we approach the holiday weekend and the final week of the year, which is typically marked by lower liquidity due to many stepping away from their desks, one might expect to see a dialing back of risk and a slowdown in trading volumes. However, contrary to these expectations, most data suggest animal spirits seem poised for a rally through the New Year.
CME futures data, the go-to platform for institutional capital seeking exposure to BTC and ETH, has shown a resurgence. We're now seeing BTC-denominated open interest returning to an all-time high after a notable decline two weeks ago.
This trend likely mirrors a sentiment shared by many investors, one that resonates with our perspective — there's no strong incentive to reduce one’s exposure prior to the much-awaited ETF decision, anticipated to arrive January 8-10th.
On a separate note, ETH’s underperformance is clearly reflected in the current level of CME open interest. We think this relative underperformance will likely continue, at least until the Bitcoin ETF approval. Post-approval, the market is likely to rapidly adjust its expectations for an ETH ETF in Q2 or Q3, potentially attracting significant flows.
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