It’s been a mixed half-year for ETFs, with few surprises as to why. Dissonant financial conditions, spurred by an increasingly ambivalent policy outlook; against a macro backdrop surreally discontinuous with typical patterns; precipitated a dramatic reversal of equity ETF inflows (according to Natixis among others) whilst fixed income funds, particularly long duration, were supported. And true to 2023 flux, that scenario has begun to invert in recent weeks. Great uncertainty and inconclusiveness remain, but that snapshot married with BlackRock’s iShares Bitcoin ETF Trust filing (citing our regulated CME CF Bitcoin Reference Rate - New York Variant for NAV-calculation) offers additional colour to the resurgent spate of similar applications in its wake.
Re-filings, in fact, in most cases. Quite a few of those applicants were even further ahead of the curve than the dominant asset manager, recognising the need for objectively secured benchmarks. The ‘amended S1’ by CF Benchmarks client WisdomTree for WisdomTree Bitcoin Trust, retains the original name of CME CF Bitcoin Reference Rate – New York Variant, from the initial filing: ‘CF Bitcoin US Settlement Price’. (WisdomTree EU’s physical BTC ETP was launched in Europe in 2019, with the assurance of reliable, high-integrity iNAV calculation from its use of CME CF BRR). Valkyrie also re-joined the list of the most prudent would-be issuers. Shares of Valkyrie Bitcoin Fund, ticker, pending regulatory approval, ‘BRRR’, aim “to reflect the performance of the value of a bitcoin as represented by the CME CF Bitcoin Reference Rate - New York Variant”.
Indications of a slow-motion inflection point are further reinforced by ‘Crypto Winter’ contradictories emerging in capital markets and banking. EDX Markets is a new venue jointly owned by Citadel Securities, Fidelity Digital Assets and Charles Schwab, offering only four of the least contentious cryptoassets for trading, BTC, ETH, Litecoin and Bitcoin Cash. Elsewhere, Deutsche Bank applied to its country regulator, BaFin for a ‘digital asset license’, aiming to offer custody and, potentially, exposure, according to Bloomberg.
The broad sweep of events has been a positive reaction to that outbreak of apparent confidence among institutional issuers, albeit there are signs of rational uncertainty among crypto holders more broadly. The Bitcoin information site lookintobitcoin.com notes that both of the key cohorts it tracks – addresses with balances of at least one bitcoin and addresses with more than 10 – are running at or near record highs. Perhaps inevitably, this is reflected in the collapse of overall exchange flows, the largest decrease in 64 days among exchanges tracked by Chainalysis, whilst the platform’s data also suggests BTC held on exchanges, historically pointing to selling pressure, is moderately above 90-day trend, after a massive withdrawal coinciding with the SEC’s lawsuits against Coinbase and Binance. Meanwhile, tepid volumes and the tamest volatility since 2019 should also moderate interpretations of the rebound in sentiment that lifted CME CF BRTI, the most liquid, streaming institutional Bitcoin price, above $30k, for the first time since April. Albeit BTC did mark a somewhat signal new 2023 high of $31,407.95, looking at hourly intervals below. Still, it’s worth noting buyers have demurred pretty much at the longstanding major resistance that’s been in place for months.
The crypto market did not appear concerned with Jerome Powell's comments this week regarding the need for additional rate hikes. Instead, the news of prominent asset managers applying to list spot bitcoin funds has sparked renewed optimism among digital asset investors. Next week's economic releases will kick off with the latest preliminary data on durable goods, which are expected to moderate after aircraft-related orders boosted the figure back in April. Consumer Confidence is likely to stabilize following a previous report indicating a cooling in labor-market conditions. Fresh inflation data from Germany may show that pricing pressures will remain persistently high for Europe's largest economy. In the U.S., the University of Michigan's Consumer Sentiment survey will finalize its June reading, which has so far indicated improvements in longer-term inflation expectations.
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