January 8, 2024

Markets Insights

Economic Calendar

Next FOMC meeting: Jan 31st 2024

Probability of a 25bps ease → 5%

Probability of a 0bps hike → 95%

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The News Room

Spot Bitcoin ETF Fee Wars Heat Up as Firms Vie for Approval and Market Share

Spot Bitcoin ETF applicants are aggressively competing on fee structures in anticipation of SEC approval, with several players such as BlackRock, Fidelity, and VanEck revealing or revising their proposed fees. Bitwise leads with no fees for six months or until $1 billion in assets, then a fee of 0.24%. Ark/21Shares follows closely, also offering no fees initially and then 0.25%, a significant drop from their initially suggested 0.8%. BlackRock proposes 0.2% for the first year or until $5 billion in assets, increasing to 0.3% thereafter. VanEck maintains a fixed fee of 0.25%. Fidelity's fee is set at 0.39%, and Invesco/Galaxy offers zero fees for the first six months or until $5 billion in assets, later charging 0.59%. Valkyrie and Hashdex are on the higher end with fees of 0.8% and 0.9%, respectively. Grayscale, aiming to convert its Bitcoin trust into an ETF, has reduced its fee from 2% to 1.5%. This competitive fee environment aims to capture market share quickly upon launch, reflecting the high market potential projected for these ETFs, with the SEC's decision on approval being the final determinant.

Mercari Japan to Introduce Bitcoin Payment Option through Subsidiary Mercoin

Mercari, a prominent Japanese digital flea market platform, is set to introduce Bitcoin as a payment option by June this year. This initiative, as reported by Nikkei, will be facilitated by Mercari's Tokyo-based blockchain subsidiary, Mercoin. Despite product prices being displayed in Japanese yen, the integration will allow users to pay using Bitcoin. Mercoin is poised to act as an intermediary, converting Bitcoin payments to yen for sellers, with transaction fees expected to be similar to those for fiat currency sales. This development follows Mercari's establishment of its own Bitcoin exchange in March 2023, enabling Bitcoin purchases through the app using various funds, including bank balances and sale proceeds. In its latest financial report, Mercari showcased a significant year-on-year profit increase, highlighting the platform's growth and potential impact of integrating cryptocurrency payments.

Digital Currency Group Clears $1 Billion Debt to Subsidiary Genesis Amid Bankruptcy Proceedings

Digital Currency Group (DCG) has fully repaid all short-term loans to Genesis, its subsidiary and institutional crypto broker, marking a significant financial milestone. DCG's CEO Barry Silbert confirmed the repayment of over $1 billion in debts, including nearly $700 million to Genesis. This move comes after DCG assumed approximately $1 billion of Genesis's debt following the latter's financial challenges stemming from the collapse of FTX. Genesis, which filed for Chapter 11 bankruptcy protection in January 2023, is reported to owe about $3.6 billion to its top 50 creditors.

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Trading Desk Insights

Bitcoin has been quite choppy lately, maintaining a bullish trajectory despite a surge in liquidations, which spiked by over 225% to $233 million within a 24-hour period. Simultaneously, the trading volume soared by over 100% to $50 billion.

This morning's updated S-1 filings grabbed significant attention, propelling BTC's price above $45,000. The momentum persisted, with Ethereum rallying toward $2,275. Notably, ETHBTC declined to 0.05, aligning with earlier yearly lows and establishing itself as short-term support. Volatility indicators surged over the weekend for both BTC ATM IV and ETH ATM IV.

The refiling of S-1s initiated a fee war among key players. BlackRock announced a starting fee of 0.20% for the initial 12 months, settling at 0.30% after the fund reaches $5 billion. Invesco and Galaxy are waiving fees for the first six months until their fund hits $5 billion, thereafter implementing a 0.59% fee. ARK, 21Shares, VanEck, and Cathie Wood's investment firm all disclosed a 0.25% fee, while Valkyrie set its fee at 0.8%. Grayscale's updated S-3 filing revealed a reduction of its fee from 2% to 1.5%.

The grayscale GBTC discount rate narrowed to 5.59%, while the ETH trust discount rate stands at 9.96%.

In the equities market, futures showed marginal movement on Monday following a down week that marked Wall Street's first losing streak in ten weeks. This decline was led by underperformance in mega-cap tech stocks like Apple, alongside a rise in Treasury yields. Nasdaq experienced its most significant weekly drop since September, with a 3.25% fall.

Amidst a hot December jobs report and recent Fed meeting minutes indicating uncertainty about rate cuts, traders are now adjusting their expectations. The odds of a rate cut in March have shifted from 75% to 60%. This week's focus turns to the central bank for clarity, with the release of December's CPI scheduled for Thursday and the producer price index due on Friday. This data will provide greater insight into the anticipated path of rate adjustments.

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Technical Charts

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Disclaimer

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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.

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