Market Commentary - March 22nd, 2024

Crypto Market

Good afternoon from CCML Trading. As we pen this update, Bitcoin and Ethereum stand tall at $63,000 and $3,300, respectively. With mid-April 2024 on the horizon, we're on the cusp of Bitcoin's next halving, a seismic shift that will halve the rewards for miners. This deliberate design to combat inflation by reducing the influx of new Bitcoin is a testament to Bitcoin's innovation. This halving, the network’s fourth, occurs with the mining of the 840,000th block. With this halving, miners will see their rewards halved from 6.25 BTC to 3.125 BTC, continuing until all 21 million bitcoins are mined, around 2140, cementing Bitcoin’s status as a uniquely disinflationary asset.

Turning our attention to Ethereum, the Dencun upgrade has taken a bold step forward, marking a significant leap in the quest to supercharge layer-2 network expansion by slicing data fees. Despite the groundbreaking rollout, Ethereum's price has held its ground, suggesting that the market might be in a watchful pause, anticipating a new equilibrium. This move is strategically aimed at confronting its infamous high fee conundrum and igniting a competitive blaze across layer-2 networks.

This past week, the spotlight was on the Solana meme coin frenzy, with dogwifhat (WIF) making significant moves, rallying about 40% before the momentum began to settle. This trend over the last couple of weeks, particularly centred around meme coins, has sparked curiosity among traders about its sustainability. With WIF climbing to become the 4th largest meme coin and propelling SOL past the $200 mark, it has notably outpaced BTC and ETH. Solana's trading volume has continued to highlight the retail excitement around meme coins, reminiscent of what we observed the past few weekends. At the forefront of the Solana meme coin fleet, egregious meme coin names have taken centre stage.  

GALA, the shining star of the gaming sector, had skyrocketed ~70% in a week, following news of its collaboration with Alienware and AWS for a hackathon at the 2024 GDC. This 24-hour coding marathon, leveraging Gala's tech, is set to spur innovative blockchain gaming projects.  


In our last commentary, we turned our attention to March highlighting several critical dates. Among them, the conclusion of the Bank Term Funding Program (BTFP), signalling a period for smaller U.S. banks to address their balance sheet challenges within the next year. The Regional Banking ETF (KRE) can stand as a useful measure and indicator of the health and resilience of these smaller institutions. Meanwhile, U.S. inflation has remained more persistent than expected, with the latest CPI figures coming in slightly above projections at 3.2%, against the anticipated 3.1%. This enduring inflation may make the Federal Reserve cautious about reducing interest rates. Nonetheless, following a decision to keep rates steady, Jerome Powell emphasized the Fed's aim for a gentle economic adjustment, suggesting a careful approach to rate changes. The Fed has also continued to signal the possibility of three rate cuts in 2024, with futures markets currently estimating a 75% chance of the first cut happening in June.

On the international stage, the Swiss National Bank took market observers by surprise by reducing its interest rate for the first time since 2015, from 1.75% to 1.5%. This is significant, especially considering the Swiss Franc's strength against the USD since late 2022, which has contributed to managing inflation within Switzerland. The rate cut announcement led to a 1.21% decrease in the Swiss Franc's value against the Dollar, underscoring how adjustments in monetary policy influence exchange rates.  

In Japan, the Central Bank has made notable changes that are expected to influence global FX and treasury markets. Moving away from its negative interest rate policy, rates now hover between 0% to 0.1%. Additionally, Japan has phased out its Yield Curve Control policy, aimed at suppressing interest rates. With these changes, the focus shifts to the FX market, especially with the JPY approaching the 150 USD/JPY level, a rate that Japan has actively sought to maintain in recent years.  

Equities, Fixed Income, FX and Commodities

A week in review the US stock market displayed robust growth, with the S&P climbing ~2.4% amidst anticipation around the FOMC release, which ultimately didn't sway rate cut forecasts. In the Equity market, the Reddit fans were buzzing as RDDTs IPO stole the spotlight. The social media giant shares increased by 48% upon making their NYSE debut. Though, some of those gains were given back, but remains above its $34/share IPO price.  

In the commodities corridor, oil futures saw a modest 3.85% increase over the last 2 weeks, fuelled by a combination of unexpected drops in US crude reserves and disruptions in Russian refineries. Meanwhile, the US Dollar index found its footing, clawing back to the 104 mark, yet it is facing a critical test against trend resistance that stretches back to late 2022. In the realm of precious metals, Silver and Gold have shined in recent weeks with Silver rallying 2.5% and Gold continuing to push new highs.

News We’ve been reading

Ethereum Foundation Gets SEC Scrutiny in Latest Crypto Crackdown – The recent investigation launched by the SEC brings up questions surrounding Ethereum's classification as a commodity or a security. While outcomes are to be determined, it creates uncertainty around an ETH ETF approval. - link - @BNNBloomberg

Swiss central bank cuts rates in surprise move, getting ahead of global peers – The Swiss National Bank became the first Central bank to cut interest rates. While inflation was not as bad in Switzerland as in the rest of the world, the move came as a surprise as they beat the ECB and The FED to cut. - link - @Reuters  

Fed holds rates steady and maintains three cuts coming sometime this year – The Federal Reserve maintained interest rates on Wednesday as well as it’s forecast to cut 3 times this year. - link - @CNBC

Coinbase Follows MicroStrategy's Playbook, Offers $1B in Convertible Notes – Coinbase recently announced a raise of $1 Billion in convertible debt notes, a play similar to what MicroStrategy has done to avoid shareholder dilution. - link - @Blockhead

Reddit prices IPO at $34 per share in first major social media offering since 2019 – At a valuation of $6.5 Billion, the company was able to raise $519 million in its Initial Public Offering. The public valuation was well below its peak of $10 Billion in 2021, but is a trend most tech startups have seen since interest rates increases began. - link - CNBC