“Bitcoin” Corporate Earnings continue this week with PayPal and Square. How Biden’s $4-Trillion plan could impact bitcoin. Bitcoin Micro-Futures start trading today on the CME.
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The Bitcoin Economic Calendar:
Week of Monday May 3rd to Sunday May 9th.
Market Commentary:
Savings Accounts Rate Announcement: We are proud to announce we are holding our rates of 6.10% APY on the first 2 BTC (with balances >2 BTC earning 2.25%), and 12.50% APY on USDC as of May 1, 2021.
Market Commentary:
Bitcoin: Bitcoin had a strong week, closing Sunday evening at $56,622, up +15.25% for the period. The focus around bitcoin markets today will be on the launch of the highly anticipated bitcoin micro-futures on the CME. This will make CME bitcoin futures much easier to trade for professional traders and institutions. The size of the micro-future contract will be of approximately 0.5 BTC - which is about 10x smaller than the current contract at 5 BTC (~$30k contracts vs. $300k contracts).
Other relevant headlines from last week include Nexon, a South-Korean-Japanese video game publisher, which announced on Tuesday that it had purchased USD $100 Million worth of bitcoin for its balance sheet.
On Wednesday the SEC postponed the ruling on the VanEck Bitcoin ETF proposal, extending the time to make a decision to mid June. All previous Bitcoin ETF applications have been denied by the SEC. However, this is the first decision that will be issued with Gary Gensler, who has taught blockchain courses at MIT, as part of the SEC.
JP Morgan also announced last Monday that it was preparing to offer a bitcoin fund to its wealthy investors as early as this summer. For context, JP Morgan is the largest bank in North America and in 2017 JP Morgan Asset and Wealth Management held $2.8 Trillion in client assets.
Tesla announced last week that it had trimmed its bitcoin position by 10%, receiving proceeds of $272 Million. Tesla continues to hold approximately $2.44 Billion in BTC. During the call, the Tesla CFO stated that the company will “continue to invest in bitcoin”.
We’ll cover what we’re seeing in the bitcoin futures and options markets for this week in our What’s Ahead section later today.
S&P 500: The S&P 500 closed the week at a fresh all-time high of 4,189 +0.32%. The Dow Jones closed the week down -0.50% at 33,874 and the Nasdaq was also down -0.58% at 13,860.
Last Friday evening, president Biden gave his first 100-day speech, which provided some details around his proposed $4 Trillion package, which would be in addition to the recently deployed $1.9 Billion. This morning we’ll see how U.S. markets react.
The Russel 2000 did not close the week above the key 2,293 level, which Fundstrat investment strategist Tom Lee is watching as confirmation of another leg higher for markets in general. Looking at the chart, it does look like it is coiling up for a decisive directional move.
There are a slew of earnings, Fed speakers, and economic data on tap for this week - we’ll cover that in our What’s Ahead section.
Gold: Gold had a down week closing -0.47% at $1,768/oz. The U.S. Dollar index closed the week with a monster rally, ending up +0.73%. The yield on the 10-year U.S. Treasury Note also rose +4.08% to 1.63% during the week.
There has been strong demand for gold out of China throughout 2021. However, gold prices are struggling to rally even on the back of positive news.
How could Biden’s speech impact gold prices this week? On one hand, more spending does generate inflation fears. However, it also creates deflationary pressures worldwide and provides incentives to invest in more industrial/productive assets.
DeFi: It was a big week for the DeFi index, reaching a fresh all-time high of 14,706 +27.35%. Ethereum also had a stellar week, reaching a new all-time high of $2,951, up 27%.
Last Friday, the European Investment Bank, the lending arm of the European Union, announced that it had used Ethereum technology to issue a bond of €100 Million (USD $121 million) in two-year digital notes for the first time.
While it does not have a direct effect on the value of Ether, the asset, this event legitimizes the Ethereum blockchain. Indirectly, it also feeds into the “Ethereum as an institutional-grade asset” narrative.
Difficulty Commentary: We had a significant difficulty adjustment kick in on Saturday, bringing difficulty down -12.68% at 20.68 TH. This has helped speed up block times and may help unclog the network further as the week rolls on.
The mempool is back at March levels, with next block confirmation costs north of 60 sats/vbyte at the time of writing this Sunday.
Importantly, Saturday’s difficulty adjustment kicks off the first phase of activation for Bitcoin’s Taproot upgrade. This is Bitcoin’s biggest upgrade in years which (among many things) will make Bitcoin multi-signature transactions cheaper, more private and easier to deploy. We’ll be diving deeper into Taproot in the coming weeks.
What's ahead for the week:
First, the time-sensitive stuff:
“Bitcoin Corporate Earnings” continues this week with PayPal reporting on Wednesday and Square reporting on Thursday. Both of these earnings calls could be meaningful for bitcoin. There is also the potential for wildcard bitcoin allocation announcements like the one we saw from Nexon - ActivisionBlizzard and Akamai Technologies both report this Tuesday as well.
A slew of Fed speakers are scheduled throughout the week with Jay Powell starting today, and one or more speaking each day until Friday.
On Thursday and Friday important U.S. economic indicators are being released, including Initial Jobless Claims and Employment data.
Now - what could impact bitcoin in the coming weeks and months? First, more U.S. stimulus will have an indirect impact on bitcoin and crypto markets.
Data from Harris shows that 1 in 10 Americans have used stimulus checks to invest in crypto. While Biden’s upcoming plan may not include direct checks, it could indirectly benefit crypto markets in a similar way.
Biden also announced that he intends to pay for his plan, in a large way, by taxing the wealthy. While nothing has yet been announced for higher taxes at a corporate level, this could have an impact on asset prices. It will also incentivize more borrowing against those assets to optimize capital gains treatment. This helps putting some of the excess cash in the system to use.
The combined market capitalization of the major stablecoins in crypto has increased substantially since April 19th. Increased stablecoin supply tends to be a tailwind for crypto markets in general.
Looking at the bitcoin Futures market, we see that all exchanges are showing a healthy contango. Most exchanges are pricing bitcoin at around $60k for July.
Looking at the options markets, we see that the May contracts are pricing a probability of bitcoin being above $60k of 41%.
Lastly, regardless of what Charlie Munger and Warren Buffett said about bitcoin over the weekend, the fact is they had to address it.
At their annual meeting.
At the request of their investors.
Let that sink in.
The fact of the matter is that they don’t understand bitcoin. However, many people will now research bitcoin as a result of their comments (oh, and Bill Maher’s) - and reach their own conclusions.
Big week coming up, as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account @hodlwithLedn
Canadian Central Banking Updates:
Current Target Interest Rate: 0.00 - 0.25%
Current Overnight Money Market Rate: 0.23%
Source: https://www.bankofcanada.ca/rates/
U.S. Central Banking Updates:
Current Fed Interest Target Rate: 0.00 - 0.25%
Current Effective Federal Funds Rate: 0.09%
Source: https://apps.newyorkfed.org/markets/autorates/fed%20funds
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This article is intended for general information and discussion purposes only, it is not an offer or solicitation of any kind, and is not to be relied upon as constituting legal, financial, investment, tax or other professional advice. A professional advisor should be consulted regarding your specific situation. The information contained in this publication has been obtained from sources that we believe to be reliable, however we do not represent or warrant that such information is accurate or complete. Past performance and forecasts are not a reliable indicator of future performance.