SignalPlus Macro Research Report (20240115): BTC Spot ETF Data Performs Well, US Likely to Significantly Cut Interest Rates in 2024

The U.S. PPI released last Friday softened, endorsing the Federal Reserve's dovish shift and increasing the likelihood of further rate cuts in the future. The downward revision of the previous value, along with the decline in core PPI (which fell to a year-on-year growth of 1.8%), led to a 10 basis point drop in the 10-year yield during the day. The 2/10 spread steepened back to "only" -20 basis points, and the 2/30 curve inverted for the first time since last October. Short-term yields also benefited from geopolitical tensions, as the U.S. and U.K. jointly conducted airstrikes against Houthi rebels, causing oil prices to rise by 4% at one point. The federal funds rate reflects a rate cut of 165 basis points in 2024, a new record for this year.

U.S. stock and bond markets will be closed today for Martin Luther King Jr. Day, and market focus may shift to the situation in emerging markets following the results of Taiwan's presidential election, as well as a series of Chinese economic data this week, including credit, industrial production, and retail sales data. The market will also pay attention to the PBOC's MLF pricing, especially after the overall financing and loan data in China softened.

In the stock market, the focus will be on the earnings season, with SPX companies that will report fourth-quarter results accounting for over 50% of the total market capitalization during the weeks of the 22nd and 29th. From a technical perspective, after recent movements, the market has shown some early signs of weakness. However, we are approaching the historical high of SPX at 4818, and if this level is broken, the upward trend may continue.

In the cryptocurrency space, Bloomberg ETF analyst Eric Balchunas pointed out that the new ETF attracted over $1.4 billion in new funds during its first two trading days after approval. However, this was partially offset by $579 million in outflows from GBTC. Compared to leading products like SPY and QQQ, cryptocurrency ETFs have shown impressive trading volume and transaction numbers, especially considering the severe criticism this asset class has faced from the mainstream public over the past 18 months.

Although the market seems to attribute the drop in BTC price to $42,000 to outflows from GBTC, this is inconsistent with the data. The price fluctuations are more likely a result of profit-taking after bullish sentiment peaked. The previous launch of BTC futures and futures ETFs also led to a weakening of BTC prices. Will we experience the same fate this time?

On the other hand, Larry Fink, CEO of Blackrock, who has largely downplayed cryptocurrencies over the past 3-5 years, has recently sung praises for Bitcoin in his latest television interviews and statements, which is somewhat eerie. His 180-degree turnaround comments include:

• Discussing the latest spot ETF on CNBC's Squawk Box: "ETFs are a way for investors to access this young and high-risk asset class, but the value that blockchain technology can provide far exceeds Bitcoin. These ETFs are just a prelude to broader asset tokenization."
• He stated, "ETFs are the first step in the technological revolution of financial markets," and "the second step will be the tokenization of all financial assets."
• "I believe that when the world feels fear, when people are afraid of geopolitical risks and personal risks, the price of this asset class will rise," adding, "this is no different from what gold has represented for thousands of years; it is an asset class that can provide protection."
• "It is a ledger, but it is a ledger that transcends governments and crosses borders."
• The launch of the Bitcoin ETF is an example of how we are legitimizing this asset class.

It is truly impressive how quickly people's views can change when it involves their own interests, and I hope the influx of funds can continue.