CryptoAt the time of writing, Bitcoin is trading at $30,000 USD and Ethereum is at $1,850 USD. The talk of the market over the last 2 weeks has been all about the BlackRock Bitcoin Spot ETF Filing and the wave of other ETF applications that quickly followed. Sentiment in the market seems to have turned positive, and for good reason. A Spot Bitcoin ETF would provide a way for true institutional investors to gain access to Bitcoin. Risk mandates and regulatory uncertainty have prevented them thus far.The ETF comes at a time when the Bitcoin held on exchanges continues to fall and is at its lowest levels since 2017. To think about how an ETF would impact the market, we should be thinking about Supply and Demand. On the supply side, there is approximately, 1.86m Bitcoin held on exchanges (Coinglass data), which amounts to about $55.8 billion of BTC at current prices. In terms of Demand, if BlackRock and Fidelity end up with a conservative 0.10% of their combined $14 Trillion AUM in an approved ETF, that's $14 Billion. This means that these entities alone would try to accumulate 25% of the floating supply. It's not likely that they'll be able to accumulate such a large position at these levels if they needed to do it quickly. We also need to consider the other applications that have been filed by Grayscale (pending lawsuit), Wisdom Tree, Valkyrie, Bitwise, Galaxy, and Ark Invest. Consider all applications and you can start to see how there is a severe supply shock looming. The applications can be approved as early as August, but as late as spring 2024, right before the next halving. To quote Anthony Pompliano, "The Bitcoin Accumulation Race has begun".Bitcoin spot ETF conversation aside, let's discuss the Bitcoin cycle on its own to see what comes next if the ETFs are denied by Mr Gensler and the SEC. The 2013 and 2016 cycles took 14 months and 12 months respectively from peak to trough. We are now about 19 months past the November 2021 peak of $69,000 and 6 months past the December lows. Although history doesn't guarantee future returns, the risk/reward tradeoff at current prices should be appealing to investors.Investors should also consider that the next halving is only 9 months out, another historically positive catalyst for prices. Following the halving in 2016, Bitcoin went from $660 to $2,500 one year later, and in 2020 we went from $8,700 to $59,000. Although returns are difficult to predict, the next halving will likely have a positive impact on future prices. The question to be answered is what happens leading up to the event. In both previous cycles, the year leading up to the halving saw a lot of consolidation, volatility was suppressed and investors lost patience. This is similar to what we are seeing now, having gone through a 13 week period where it felt like we would be in the $25,000 to $30,000 range forever. But when you look back at the previous cycles, those who sat on the sidelines during the run up wished that they bought when price action was boring. This cycle will be no different as many investors are waiting to buy again near the December lows. When that mindset finally flips, and those investors lose patience, FOMO kicks in and before you know it we'll be back near previous all time highs. But to each their own, at the end of the day, Bitcoin isn't going anywhere and the halvings will continue to happen every 4 years.MacroA few weeks back, we mentioned the Reverse Repo Market and the correlation to the Treasury General Account (TGA). At the time, there was about $2.14 trillion parked at the Fed and the TGA was running on fumes. The TGA now holds $437 Billion and the Reverse Repo market has come down to $1.94 trillion. So far, the correlation between the two seems to be functioning as it should, but liquidity is clearly moving towards government bonds. But as the Fed continues to maintain its hawkish tone, investors should continue to monitor those balances to look for any signs of easing. The signal would be that the Reverse Repo market balances come down to near 0 and overnight lending rates begin to spike, similar to what happened towards the end of 2019. The external variables that impact the Fed's monetary policy decisions are unemployment and real estate. For now things seem to be OK, but Jerome Powell's recent comments at the ECB Forum on Central Banking hinted that there could be early signs of cooling, especially in residential rent.Other macroeconomic events shaping the investment landscape are coming from China, which cut its Loan Prime Rates by 10 basis points. This comes as no surprise as China's COVID reopening has been moving at a slower pace than western countries. China has also made moves recently in the crypto space with HSBC now offering Bitcoin and Ethereum ETFs in Hong Kong. This moves comes shortly after the region opened crypto trading back up to retail investors at the beginning of the month.Equities, Fixed Income, FX and CommoditiesEquitiesThe S&P and Nasdaq have have stalled out at the $4,400 and $15,000 area after making year to date highs the last time we wrote. The DJIA continues to fight the $34,000 level. Stocks remain mixed, with optimism still surrounding tech and AI focused stocks. Distressed regional bank stocks have found support in recent weeks but aren't out of the woods yet as the special BTFP program continues to nudge higher sitting around $101 Billion.Fixed Income, FX & CommoditiesShort term treasury yields have been relatively stable in recent weeks while longer term bills have seen a slight uptick, a sign that longer term bond investors are demanding higher yields to lend to the government to cover inflation.In FX, the Loonie has been been showing signs of strength against its US counterpart and is up 2.6% on the month. The Yen has continued its fall against the USD, perhaps a sign that investors are becoming weary of the loose monetary policy in Japan. In Commodities, Gold and Oil continue to flirt with the $1,900 and $74 marks respectively.News we've been readingHow Many Bitcoin are For Sale? - "As a gold rush of institutional-grade ETF applications are filed in the US, we have seen early signs of a revival of US-led demand."- link - @GlassnodeNorth Carolina House Advances Bill to Study Virtual Currency Including Bitcoin - The ultimate goal is to determine the most suitable custodian, guardian and administrator for virtual currency assets held by the state, its agencies, political subdivisions, or other instrumentalities."- link - @BitcoinMagazineUK Crypto, Stablecoin Rules Receive Royal Assent, Passing Into Law - The UK has moved forward with providing more power to regulators over cryptocurrency - link - @CoindeskUnderstanding the Bitcoin Halving - A helpful article for those looking to understand the Bitcoin Halving - link - @FidelityDigitalAssetsBitcoin ‘overreacting' as SEC returns ETF filings, BTC price dives 6% - Bitcoin tumbled on the WSJ headline with claims that the SEC returned the Spot ETF applications saying they were "inadequate" - link -@CointelegraphThe fine printClickherefor the fine print.
