Jan 18
Week 3, 2024 - Weekly Market Outlook
The weekly market outlook article provides a brief analysis of the past week's market performance and an outlook for the upcoming week.
Introduction
In this weekly market outlook, we examine the most recent updates in the cryptocurrency ecosystem. With an emphasis on Bitcoin and the macro environment, we analyze recent price action. We evaluate the global cryptocurency market cap, DeFi stablecoin flow and do a short review of the crypto market's biggest gainers and losers. Finally, we evaluate the performance of the Flagship Portfolio Vault.
Macro
The current economic landscape in the United States, presents a mixed picture with implications for risk assets. On one hand, the Federal Reserve Bank of New York's report highlights increasing financial stress among lower-income Americans. This group is beginning to feel the effects of the withdrawal of government support programs that were in place during the coronavirus pandemic. Early delinquencies on car and credit card loans have started to rise, particularly in lower-income households, surpassing pre-pandemic levels. Even higher-income Americans are facing challenges with mortgages, auto loans, and credit cards.
Conversely, the labor market appears resilient, with the number of Americans filing new claims for unemployment benefits falling to the lowest level in nearly one and a half years. This decline suggests robust job growth, painting an optimistic picture of the economy. Such strength in the labor market could influence the Federal Reserve's interest rate decisions, potentially delaying cuts. The data points to a tight labor market, with companies hesitant to lay off workers, a trend consistent with labor market conditions during and after the COVID-19 pandemic.
For risk assets, this presents a complex scenario. The financial strain on lower-income households could lead to increased volatility in markets related to consumer spending and credit, such as retail and banking sectors. Delinquencies in auto and credit card loans might affect the financial industry, potentially increasing credit risk and impacting investor sentiment. On the other hand, the strong labor market data suggests robust consumer spending power, which could support the performance of risk assets, particularly in consumer-driven sectors.
Bitcoin
After the initial eurphoria Bitcoin's price has dropped below 42k. This nearly 15% plunge happened just a week after the ETFs started trading, indicating a rapid shift in market sentiment.
Since their introduction, these ETFs have seen substantial inflows, signaling a bullish sentiment among investors. As of the close of business on Tuesday, net inflows into these newly approved ETFs, including major players like BlackRock's iShares Bitcoin Trust (IBIT) and Fidelity's Wise Origin Bitcoin Fund (FBTC), amounted to approximately 21,000 bitcoins, or $894 million. This indicates a strong investor appetite for Bitcoin in a more traditional investment vehicle.
However, this positive trend for Bitcoin ETFs contrasts sharply with the situation at Grayscale's Bitcoin Trust (GBTC). Previously a closed-end fund, GBTC converted to an ETF following the SEC's approval of other Bitcoin ETF products. Despite this transition, GBTC has experienced significant outflows, losing about 25,000 bitcoins. This can be attributed to a couple of key factors. First, GBTC's management fee, even after being reduced from 2% to 1.5%, remains higher than its new competitors. Additionally, the conversion to an ETF structure meant that GBTC no longer traded at a discount to its net asset value (NAV), making it less attractive to investors. These factors have collectively encouraged GBTC holders to sell, contributing to the notable outflows from the fund.
In the broader context of the ETF market, the launch of Bitcoin ETFs has been deemed a success, particularly when compared to the overall performance of ETFs launched in the previous year.
Top Gainers and Losers
As a top performer this week: Myro with over a 130.7% gain. This is a continuation of the Solana meme season we saw last week
The worst performing asset this week is Tectum, Tectum is a blockchain powering the superconductive digital financial environment of the future.
Global Market cap
The total market capitalization of the cryptocurrency ecosystem is down this week, rising from $1.8 trillion to $1.75 trillion in the past 7 days.
Stablecoin Flows
The total market capitalization of stablecoins has remains around its level at $130 billion. The Total Value Locked (TVL) of stablecoins in DeFi has risen to $108 billion for the last 7 days. This indicates that we are going to be seeing a Ethereum Beta season.
Flagship Portfolio Vault Performance
Over the past 7 days, the share price of the Portfolio Vault went from 40.35 to 39.85, which is an 1.24% decrease.
While the the Bitcoin ETF is now complete, the market has pivoted towards altcoins. While it isnt an altseason we are seeing certain altcoins outperform the market. As this is the case we have decided to maintain the same portfolio allocations and have not rebalanced it. As a result, our risk profile will continue to be classified as bullish.
If you’d like to access Flagship’s portfolio Vault, click here.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.
