December 11, 2023

Markets Insights

Economic Calendar

Next FOMC meeting: Dec 13th 2023

  • Probability of a 0bps hike → 98%
  • Probability of a 25bps hike → 2%

The News Room

M&G Investments Leads $30 Million Raise for GFO-X

UK-regulated crypto derivatives platform, GFO-X, announced a $30 million Series B funding round led by M&G Investments, the asset management arm of a major pensions firm with $332 billion in assets. This funding will support GFO-X's upcoming launch, positioning it as a regulated trading venue for institutional customers seeking derivatives products. Founded in 2020, the platform recently partnered with the London Stock Exchange Group’s French clearinghouse unit, LCH, to clear Bitcoin index futures and options. M&G portfolio manager Jeremy Punnett highlighted the current limitations in the crypto derivatives trading market due to a lack of regulated venues and believes the UK has the potential to be a global hub for crypto asset technology and investment. This shift aligns with a broader trend of investors moving from unregulated to regulated trading venues.

Fidelity Engages in Talks with SEC Regarding Spot Bitcoin Fund and Submits ETF Workflow Presentation

Fidelity met with the SEC on December 7 to discuss its proposed spot Bitcoin ETF, presenting "Bitcoin ETF Workflows" which focused on "In-Kind" creation and redemption models. The presentation emphasized the efficiency of physical creations in arbitrage and hedge operations and the necessity of allowing physical creation and redemption for trading efficiency. This meeting is part of broader anticipation for the SEC's decision on spot ETFs, with discussions centering around the technical operations of these funds. Fidelity recently filed an amended S-1 form for its spot fund, incorporating both in-kind and cash options, though initial approvals may focus on cash creations. BlackRock also held a meeting with the SEC, presenting a "Revised In-Kind Model Design," addressing SEC concerns about balance sheet impacts and risks during redemption flows, highlighting the intricate regulatory considerations in the approval process for spot Bitcoin ETFs.

JPMorgan Updates Bitcoin Mining Stock Ratings and Price Targets Amid Crypto Market Dynamics

JPMorgan has updated its price targets and ratings for Bitcoin mining stocks, factoring in the recent rise in Bitcoin's price, changes in the network hashrate, and other company-specific developments. Following a 12% increase in Bitcoin price and a 2% rise in the network hashrate, JPMorgan adjusted its spot BTC price assumption to $44,000 and its network hashrate assumption to 485 EH/s. The bank downgraded CleanSpark (CLSK) to neutral due to its 130% stock gain over the past month, adjusting the price target to $8. Riot Platforms (RIOT) was upgraded to neutral with a new price target of $12. Iris Energy (IREN), JPMorgan's top pick in the sector, remains overweight with an increased price target of $9.50. Meanwhile, Marathon Digital (MARA) maintains an underweight rating but with a raised price target of $8.50. The bank's analysts, Reginald Smith and Charles Pearce, noted the significant year-over-year increase in the block reward opportunity, now valued at approximately $31 billion.

Trading Desk Insights

Since Sunday at 7pm EST, Bitcoin has experienced an 8% decline, falling from 43,800 to 40,300. During this period, approximately $3.4 billion worth of BTC, equivalent to around 85,000 BTC, was sold in the BTC futures market within a one-hour candle, marking the highest volume seen in recent months. This surge in trading activity has triggered a substantial number of liquidations, reaching nearly $1 billion, as long positions were forcibly closed.

In the past week, funding rates for major cryptocurrencies like BTC and ETH consistently hovered around the 0.15% threshold. This level indicates an excessively leveraged market, with anything above 0.10% suggesting an abundance of bullish leverage and an overcrowding of long positions. The repercussions of this over-leverage have become evident as traders who were heavily leveraged found themselves exiting the market due to the increasing costs associated with maintaining leverage, especially when market momentum slows down.

Looking at U.S. stock futures on Monday, there was minimal movement as investors awaited the final Federal Reserve meeting of 2023. They were eager for any signals regarding the central bank's intentions to commence interest rate reductions. Notably, the S&P 500 and the tech-heavy Nasdaq both concluded a six-week winning streak on Friday, with gains of 0.2% and 0.7%, respectively.

The upcoming week is set to be a pivotal one for various central banks as they make their last rate decisions of the year. This will put market expectations for rate cuts in early 2024 to the test. The Federal Reserve is anticipated to maintain the fed funds rate within the 5.25%-5.5% range. Chair Jerome Powell is also expected to reiterate his commitment to curbing inflation during his press conference on Wednesday. Investors are keen to glean insights into the timing of potential rate cuts next year, given the declining inflation from its decades-high levels. The futures market currently assigns a 45% probability of a 0.25% rate reduction by the Fed in March.

In terms of economic data, the November Consumer Price Index (CPI) is scheduled for release on Tuesday, followed by the Producer Price Index (PPI) on Wednesday. These releases will be closely monitored by market participants for their potential impact on future monetary policy decisions.

Technical Charts


This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

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