Post FED rally and another strong week for ETF flows

Last week the FED cut rates by 50bps, kicking off the easing cycle with confidence. The market took the move as good news, causing risk assets to rally and gold to make new all-time highs. US equities are also trading higher while BTC popped above 64k this morning. ETH posted impressive gains of c. 15% over the last week, allowing the BTCETH cross to post an impressive reversal. Overall, we have teetered away from recession fears, back to expecting a goldilocks scenario or soft landing as global central banks normalize policy. Elsewhere, the BoJ and BOE both kept interest rates unchanged.

Macro developments helped ETF flows kept up the positive momentum, with BTC ETFs logging just shy of $400mio of inflows last week. ETH ETFs unable to buck the trend of outflows as Greyscale’s higher fee incumber fund continues to see redemptions. Bitcoin ETF Flow (US$m) – Farside Investors / Ethereum ETF Flow (US$m) – Farside Investors 

The SEC has approved the listing and trading of options on BlackRock’s IBIT (iShares Bitcoin Trust), giving institutional investors and traders an alternative methos to hedge BTC exposure. SEC Approves Options Trading for BlackRock's Bitcoin ETF on Nasdaq - Blockonomi 

Polymarket election forecast shows Harris (51%) moving slightly ahead of Trump (47%) this week although odds are still incredibly close. Betting markets are pricing a 76% chance that Harris wins the popular vote.  Polymarket - 2024 Presidential Election Predictions 

BlackRock on BTC as a unique diversifier in investor portfolios 

Last week, BlackRock published an insight report titled “Bitcoin: A Unique Diversifier” which makes the case for why Bitcoin is a compelling addition to a diversified investment portfolio.   

The paper outlined the main drivers of bitcoin, illustrating how they differ from traditional asset classes and how this allows bitcoin to remain largely uncorrelated to traditional portfolio holdings. Below is my favorite passage from the paper which neatly summarizes why the low correlation with traditional investments makes sense and why bitcoin cannot easily be fit into the traditional risk-on/risk-off asset framework. 

The paper also illustrates traditional asset vs BTC performance over the course of various geopolitical risk events as well as historical correlations with the S&P. Find the full report here: Exploring Bitcoin as a unique diversifier | BlackRock 

Notable Crypto News 

Non-dollar stablecoins will rise over next few years, Visa’s Head of Crypto says | The Block 

SEC Approves Options Trading for BlackRock's Bitcoin ETF on Nasdaq - Blockonomi 

Crypto community seeks more clarity from Harris, sentiment under Trump win would be stronger: Bernstein | The Block 

Crypto and stocks share strongest positive correlation in years after Fed rate cut: Bloomberg | The Block 

Germany Shuts Down 47 Crypto Exchanges 'Used For Criminal Purposes' | IBTimes 

The Macro Week Ahead

In the week ahead, Fed Chair Powell and several other central bankers will deliver remarks this week after last week’s interest rate cut. We will be watching the RBA decision tomorrow and Friday’s US PCE data release.  

Financial Advice Disclaimer: Nothing in this article constitutes professional or financial advice, performance data or any recommendation that any specific cryptocurrency, portfolio, index, investment product, transaction or investment strategy is suitable for any specific person. You assume the sole responsibility of evaluating the merits and risks associated with all financial decisions and should seek the advice of a registered financial advisor when in doubt.