The bull market is back and so is Bitcoin’s volatility
The bull market is back and so is Bitcoin’s volatility
Also a week of Bitcoin outflows and does anybody still care about the Fed’s rate cuts?
Welcome to the Friday edition of the Ecoinometrics newsletter.
Every week we bring you the three most important charts on the topics of macroeconomics, Bitcoin and digital assets.
Today we'll cover:
The bull market is back and so is Bitcoin’s volatility.
A week of Bitcoin outflows.
Does anybody still care about the Fed’s rate cuts?
Each topic comes with a small explanation and one big chart. So let’s dive in.
In case you missed it, here are the other topics we covered this week:
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The Bitcoin bull market is back and so is volatility
Since 2023 Bitcoin is up 285%. Since the start of this year Bitcoin is up 50%. And we have a new all-time high at $74k.
So Bitcoin didn't start to bounce back yesterday. It has been on an upward trajectory for more than a year.
That being said the real bull market only started with the launch of the ETFs.
Since then:
Volatility is back.
Because volatility is also a marker of bull markets.
For the whole time when BTC was recovering, starting from the bottom of the bear market, volatility was still trending down.
That's no longer the case.
But this is a feature of bull markets, not a bug. There is no reason to be afraid of volatility. Especially when that means more upside if you are willing to zoom out.
A week of Bitcoin outflows
Now the spike in volatility isn't coming out of nowhere. In the span of a couple of weeks Bitcoin made a new all-time high, dipped, recovered, dipped again. The usual rollercoaster.
Given that the main driver of the big trend is the sustained inflow from the Bitcoin ETFs it is a good time to wonder what they have been doing.
Spoiler alert, they are down this week.
But they are down in an interesting way:
The actual outflows are coming from Grayscale. As soon as the price action looked shaky those outflows strengthened again.
The rest of the ETFs just had smaller net inflows (not enough to compensate for GBTC).
So Grayscale remains the problematic element. There are still a lot of investors who have been into GBTC for a long time and who are ready to jump ship.
This will continue to be an issue until this legacy situation is purged.
Does anybody still care about the Fed’s rate cuts?
The Federal Reserve decided not to cut rates at the FOMC meeting this week.
Shocker…
I mean Jerome Powell has been clear on that for months. Bar any major surprise in the US economy (say inflation flaring up (which is not excluded) or like a recession (which is not excluded)) 2024 will be a year with a few rate cuts in the second half of the year.
Back in October the market was counting on like 8 rate cuts in 2024 when the Fed was saying 3.
At the beginning of this year the market was betting on 6 rate cuts in 2024 when the Fed was saying 3.
Now the market is pricing in 3~4 rate cuts… and the Fed is still saying 3.
So it looks like everyone agrees on everything at this point. If there is no surprise coming from the US economy there will be no surprise in the US monetary policy and the market won’t be surprised.
This is becoming a non-factor.
That’s it for today. I hope you enjoyed this. We’ll be back next week with more charts.
Cheers,
Nick
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