Jan 26
Week 4, 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
Bitcoin's recent 20% decline is attributed to several factors: sales by Grayscale, fears surrounding the release of Mt. Gox Bitcoins, and the influence of the FTX bankruptcy.
Grayscale's Bitcoin Trust (GBTC) has been selling significant amounts of Bitcoin since the launch of spot Bitcoin exchange-traded funds (ETFs) in the U.S. These ETFs have lower fees compared to GBTC, prompting many investors to switch, which has led Grayscale to liquidate Bitcoin to meet redemption requests. Bloomberg Intelligence reported that GBTC experienced outflows totaling $3.96 billion since its conversion to an ETF.
Another factor is the FTX bankruptcy. FTX, a bankrupt crypto exchange, sold 22 million GBTC shares, worth nearly $1 billion, to pay creditors. This sale reduced FTX's GBTC ownership to zero.
Additionally, the potential release of Bitcoins from the defunct Mt. Gox exchange has added to market fears. Mt. Gox, which halted operations in 2014 following a hack, is set to start repaying creditors, some of whom will receive Bitcoin. This has raised concerns that these recipients might sell their Bitcoins, further depressing its price.
Despite these challenges, some market experts see the current situation as a typical correction in a bull market, noting that Bitcoin has previously experienced 20-30% corrections. They suggest this could be a good buying opportunity, anticipating a market rebound. Ran Neuner, founder of Crypto Banter, and Michaël van de Poppe, founder of MN Trading, both express optimism about Bitcoin's future, suggesting that the current dip could be an advantageous entry point for investors.
Top Gainers and Losers
As a top performer this week: Bittensor with over a 45.% gain. This is due to the recent changes in the Bittensor Ecosystem
The worst performing asset this week is Myro, Myro is a memecoin in the Solana Ecosystem
Global Market cap
The total market capitalization of the cryptocurrency ecosystem is down this week, from $1.7 trillion to $1.625 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 40.1 to 39.85, which is an 0.62% 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.
