ALL TIME HIGHS BUT STILL VOLATILE
Bitcoin set a new high record of $106,000 over the weekend, however, this morning the leading crypto has been volatile as investors await the Federal Reserve’s interest rate decision. Bitcoin has been trading between $104,000 and $106,000 after it reached a peak of $106,449 on Sunday. In addition, Ether also hit a high of $4,016 before dropping just below $4,000. This volatility comes before the Fed is expected to cut rates by 25 basis points after its meeting this week, leaving rates at 4.25%-4.50%. Low interest rates benefit markets and cryptocurrencies by increasing investor risk appetite. Nevertheless, it is important to remark that despite the tightening U.S. interest rate environment since March 2022, Bitcoin has surged 163%. Furthermore, the pro-crypto White House post-election has boosted the crypto boom, with Trump proposing a national Bitcoin reserve and supporting crypto projects, and since the new Securities and Exchange Commission (SEC) chair, Paul Atkins, is a crypto advocate, there is the possibility of more positive regulatory measures under the new administration.
RECORD-SETTING INFLOWS
Despite the recent fluctuations, it has been announced that the cryptocurrency market continues experiencing unprecedented growth as crypto investment products saw a surge last week, with net inflows of $3.2 billion and a total of $44.5 billion year-to-date, setting a new record. U.S. spot Bitcoin exchange-traded funds (ETFs) contributed $2.17 billion in net inflows, with a cumulative net inflow of $35.8 billion since their launch in January. In addition, Ethereum-based funds added $1 billion last week, reaching a total of $2.25 billion over 15 trading days. Additionally, Bitcoin mining difficulty rose to 109 trillion, indicating increased network activity and robust market engagement. Thus, although there has been some volatility, the overall trend suggests sustained interest and investment in the crypto market.
NEW INCLUSION
MicroStrategy, a company which is now widely recognized for its close association with the price of bitcoin, is scheduled to join the Nasdaq 100 index on December 23. This impending inclusion was announced on Friday after the stock market closed, and it is expected to lead to automatic purchases of MicroStrategy shares by popular ETFs like the Invesco QQQ Trust, providing additional benefits for the company. The anticipation of this move was high among investors during the index rebalancing, especially considering MicroStrategy’s significant surge this year. The company’s stock value has skyrocketed by 547%, outperforming the S&P 500’s increase of 26.9%. Following the announcement, MicroStrategy’s shares have already seen a rise of over 3%. This upcoming milestone in the company’s journey further solidifies its position in the market and underscores the growing influence of bitcoin-related firms in mainstream financial indexes.
WEAKER SPENDING LEADS DECLINE
Oil futures prices have declined as it was revealed that there was weaker-than-expected consumer spending in China. This caused Brent crude to fall 0.81% to $73.89 a barrel and U.S. West Texas Intermediate crude to drop 0.98% to $70.59. Chinese industrial output showed some growth in November, but retail sales were lower than forecasts, putting pressure on Beijing to boost stimulus measures. Amid this uncertainty, OPEC+ decided to delay production increases until April, while market participants awaited news on Chinese economic stimulus. Nevertheless, it is worth noting that despite the declines, oil prices were cushioned by the current concerns over potential supply disruptions from U.S. sanctions against Russia and Iran.
KEY EVENTS HAPPENING THIS WEEK
Monday: Empire State manufacturing survey, S&P flash U.S. services PMI and manufacturing PMI reports for December.
Tuesday: U.S. retail sales, retail sales minus autos, industrial production, and capacity utilization reports for November, and home builder confidence index report for December.
Wednesday: FOMC interest-rate decision, speech from Federal Reserve Chair Powell, and housing starts and building permits reports for November.
Thursday: GDP second revision for third quarter, existing home sales and U.S. leading economic indicators for November, Philadelphia Fed manufacturing survey for December, and initial jobless claims for the week ending on December 14.
Friday: Personal consumer expenditure (PCE) index and core PCE index reports for November, and final consumer sentiment report for December.
