January 4, 2024

Markets Insights

Economic Calendar

Next FOMC meeting: Jan 31st 2024

  • Probability of a 25bps ease → 7%
  • Probability of a 0bps hike → 93%

The News Room

Goldman Sachs in Talks to Join Bitcoin ETF Space as Authorized Participant for BlackRock and Grayscale

Wall Street bank, Goldman Sachs, is reportedly in discussions to become an authorized participant (AP) for the proposed Bitcoin ETFs by BlackRock and Grayscale. This role is crucial in the ETF industry, involving the creation and redemption of ETF shares to keep them aligned with underlying assets. Goldman Sachs' potential involvement follows announcements that JPMorgan Chase, Jane Street, and Cantor Fitzgerald will act as APs for various Bitcoin ETF applicants. This marks a significant shift as major U.S. banks, traditionally hesitant to engage with cryptocurrencies, are now participating in the Bitcoin ETF landscape. This change is attributed to the adoption of a cash-based mechanism for handling Bitcoin backing, a strategy believed essential for SEC approval. Both BlackRock and Grayscale are significant players in this domain, with Grayscale aiming to convert its $26 billion Grayscale Bitcoin Trust into a more accessible ETF. Previously, Grayscale had designated Jane Street and Virtu Financial as potential APs for this transition. Goldman Sachs, BlackRock, and Grayscale have yet to officially comment on these developments.

Franklin Templeton Introduces Bitcoin Depositary Receipts for Institutional Investors

Receipts Depositary Corporation, backed by Franklin Templeton, is launching a Bitcoin-based security product, BTC Depositary Receipts (DRs), targeting qualified institutional buyers and exempt from SEC registration under the U.S. Securities Act of 1933. These BTC DRs, similar in structure to American Depositary Receipts, provide a secure and regulated way for sophisticated entities like banks and investment firms to access digital assets. Broadridge Corporate Issuer Solutions will act as the SEC-registered transfer agent, with Anchorage Digital providing custody in a bankruptcy-remote setup, ensuring the DRs are fully backed by Bitcoin and not subject to lending or re-hypothecation. This initiative comes as the crypto industry, including Franklin Templeton, eagerly anticipates the SEC's potential approval of spot Bitcoin ETFs, with Franklin Templeton also submitting an application for its own Franklin Bitcoin ETF to be listed on the Cboe BZX Exchange.

Visa Pilots Web3 Customer Loyalty Platform

Visa is introducing a Web3 loyalty service designed to offer immersive and gamified customer experiences, such as digital collectibles and augmented reality treasure hunts. The Visa Web3 Loyalty Engagement Solution, developed in collaboration with SmartMedia Technologies, allows brands to create digital wallets for customers to store reward points and unique experiences. This initiative addresses the growing consumer desire for brand engagement beyond traditional purchases, as highlighted in customer experience and loyalty management firm Bond's “The Loyalty Report”. Kathleen Pierce-Gilmore, Visa's SVP and global head of issuing solutions, emphasizes that this solution will revolutionize loyalty programs by rewarding customer engagement and offering diverse perks. Visa's move into Web3-based loyalty programs builds on its existing involvement in the crypto space, including a crypto advisory unit and partnerships for card programs and USDC transactions, positioning it at the forefront of leveraging Web3 for innovative customer loyalty solutions.

Trading Desk Insights

Bitcoin has experienced a notable uptick of nearly 3% since 7am ET, driven by growing optimism surrounding the anticipated approval of the BTC spot ETF. Market participants are evidently seizing the opportunity to buy on the dip, while open interest has surged by 8%, amounting to a substantial $900 million. The prevailing funding rates are maintaining a near-neutral stance, implying the potential for volatility to swing in either direction.

The CME's dominance in BTC open interest has reached an impressive 32%, marking a new high, while Binance's share has plummeted to 25%, the lowest it's been since January 2022. This shift suggests an uptick in institutional engagement within the cryptocurrency market.

Although opinions among seasoned analysts are divided regarding the market repercussions of an impending BTC spot ETF approval, expected by January 15, there is a prevailing consensus, both within the financial community and the crypto sphere, that the SEC will likely grant a favorable decision.

Goldman Sachs, a prominent Wall Street investment institution, is currently in negotiations to assume a pivotal role as an "authorized participant" for BlackRock and Grayscale's bitcoin ETFs. This move follows the recent announcement that JPMorgan Chase, Jane Street, and Cantor Fitzgerald had also stepped into similar roles as authorized participants.

In the realm of equity futures, Thursday witnessed a mixed performance as Wall Street grappled with efforts to regain traction after a challenging session. The ADP jobs report delivered a pleasant surprise, revealing stronger-than-anticipated job growth in December. Consequently, the 10-year treasury yield made an upward push, nearing the 4% mark.

Mega-cap technology stocks, exemplified by companies like Apple, are starting the year with underwhelming performance. This underperformance can be attributed to stretched valuations and lingering uncertainty surrounding the Federal Reserve's impending rate cuts, which has sowed concerns among investors about the market's excessive optimism.

The release of minutes from the Federal Reserve's December meeting on Wednesday indicated a sense of uncertainty regarding the future trajectory of interest rates. Even though policymakers acknowledge the likelihood of rate cuts, history shows that the Fed typically resorts to such measures only when a recession looms on the horizon. Consequently, forward-looking markets often interpret rate cuts as a harbinger of economic challenges, prompting a flight to safety, typically represented by the U.S. dollar. It remains to be seen whether this historical pattern will repeat itself in the coming months.

Technical Charts


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