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Biggest GBTC discount ever — 5 things to watch in Bitcoin this week

Uncertainty across the board means an unusual end to a bull market Q4 for Bitcoin this year, but a price floor may be closer than many think.
Bitcoin (BTC) starts a new week with analysts looking for a bottom — but one which may…

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Uncertainty across the board means an unusual end to a bull market Q4 for Bitcoin this year, but a price floor may be closer than many think.

Bitcoin (BTC) starts a new week with analysts looking for a bottom — but one which may not mean a dip to $40,000 or lower.

After an unremarkable weekend, Bitcoin bulls now face a fresh week of bearish sentiment across the global economy as risk appetite stays tepid.

Amid the lack of a "Santa rally" for practically anyone, there seem to be few triggers to help BTC/USD return higher in time for the new year. At the same time, on-chain metrics remain strong, and miners are refusing to spend.

With Christmas almost here, Cointelegraph takes a look at what to look out for this week when it comes to assessing where Bitcoin may be headed.

$50,000 seems far away for Bitcoin bulls

Bitcoin failed to produce any significant moves over the weekend, but now, attention is turning to a potential volatile “bottoming” for the market.

At $46,000, BTC/USD remains firmly entrenched in a familiar range, with bulls failing to find the momentum for a fresh attack on the $50,000 mark.

Buying is occurring, particularly among smaller retail investors, but for seasoned market participants, lower levels are likely.

For popular trader Pentoshi, these could nonetheless avoid a retest of $40,000. In a tweet Sunday, he highlighted major exchange Bitfinex and its large-volume traders as a likely source of support.

“Finex makes the tops and bottom on $BTC. Believe this is a similar situation where they will just absorb selling at these key levels. See Sep post 40.7k bottom,” he wrote, referencing market events from the end of September.

“Now looking for 42-46k bottom imo.”
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Others were more optimistic, with fellow trader Galaxy calling for a “green week” led by altcoins.

With ten days left of the year, a surprise finish to 2021 is also not being universally ruled out when it comes to crypto markets.

In its latest market update, trading platform Decentrader brought up Bitcoin’s Advanced NVT indicator as a possible springboard to higher price levels.

Still bottoming, the historical cycle metric could yet produce a surprise for traders, having almost hit its lowest “overbought” level ever.

“Will we see the same this time with a bounce and rally into the Christmas break? Or will we see more year-end profit-taking?” the update summarized.

“Right now $BTC is at a key decision point level, so it would certainly be wise to manage one’s risk carefully until a clear trend emerges.”
Bitcoin Advanced NVT signal (light blue) chart. Source: LookIntoBitcoin.com

Miners keep hodling

One cohort of Bitcoin hodlers in no mood to sell at current prices is miners, whose outflows have reached their lowest in three months.

According to data from Glassnode, miner outflows have almost halved in just over a month, reiterating the turnaround in market dynamics since the all-time highs.

A similar dramatic fall came in September, with spot markets then bottoming two weeks later. This month’s action, therefore, has historical precedent.

Bitcoin miner outflows 1-hour chart (7-day moving average). Source: Glassnode/ Twitter

Further data shows that unspent supply is about to hit all-time highs, the culmination of a hodling trend from miners which began in 2020.

In other words, miners are in no hurry to spend their block subsidies once a new block is successfully mined.

Macro swaps 21-month bull run for volatility

Macro volatility is set to continue into 2022 in a trend which is unsettling investors, sources warn this week.

Just like Bitcoin, an unexpected bout of bearishness means that Q4 this year may end with a whimper and deny the market its classic “Santa rally.”

At fault are both the Coronavirus and U.S. political turmoil, the latter coming in the form of one senator rejecting President Joe Biden’s embattled $2 trillion spending package.

Stocks in Asia fell on the day, and ahead of the U.S. open, the mood was cautious.

“Investors should be prepared for Covid to continue to be a main factor in market performance heading into 2022,” Robert Schein, chief investment officer at Blanke Schein Wealth Management, told Bloomberg.

“After the bull run we’ve seen over the past 21 months, investors aren’t as used to prolonged periods of volatility.”

Schein was referencing the comeback seen throughout global markets since March 2020, when a cross-market crash also took Bitcoin to lows of $3,600.

Amid all this, the U.S. dollar is returning to strength — a potential fresh headwind for BTC, which is traditionally inversely correlated with the greenback.

The U.S. dollar currency index (DXY), which measures dollar strength against a basket of major trading partner currencies, stood at 96.6 at the time of writing, having almost hit 97 late last week.

U.S. dollar currency index (DXY) 1-day candle chart. Source: TradingView

GBTC reaches biggest ever discount

Bitcoin under $50,000 should arguably look like a bargain to large-volume investors, but one industry yardstick tells a different story.

The Grayscale Bitcoin Trust (GBTC), the largest institutional BTC vehicle, currently trades with a discount of over 20%, data from on-chain analytics site Coinglass confirms.

GBTC price vs. holdings vs. GBTC premium chart. Source: Coinglass

GBTC, which next year plans to convert to a Bitcoin spot price exchange-traded fund (ETF), has seen major changes in market behavior in the second half of 2021.

As Cointelegraph reported, from spending the first portion of its life trading at a hefty premium, the investment fund now offers institutional buyers what is de facto “bargain basement” BTC.

At 22.95% as of Dec. 18, the discount has never been bigger — a curious phenomenon which points to what some argue is an even more curious lack of demand for GBTC shares.

Regulatory uncertainty surrounding spot-based ETFs remains a talking point for the U.S. As only futures-based products received the green light this year, the industry continues to rally around the issue, arguing for change in 2022.

Last week, major U.S. exchange Coinbase endorsed plans for GBTC’s conversion.

“GBTC shares can trade at premiums or discounts to its net-asset value (i.e., the value of the Bitcoin it holds). Such premiums and discounts can be dramatic: GBTC has traded over-the-counter at a premium to its net-asset value that has ranged as high as 142% and a discount to its net-asset value of 21%,” a dedicated letter to the the Securities and Exchange Commission reads.

“If Arca’s proposal is approved, GBTC will be able to use the ETP mechanics that 4 minimize the variations between its share trading prices and the net-asset value (‘NAV’) of its Bitcoin holdings, and as a result, U.S. retail investors will be able to gain access to the Bitcoin market through the familiar ETP structure and at trading prices that stay more closely aligned with spot Bitcoin trading prices.”

Spot-based already operate with huge success over the border in Canada, as well as in Europe and elsewhere.

Cold feet freeze over

Not much may have happened over the weekend when it comes to spot price action, but that is little consolation for nervous traders.

Related: Happy ‘bearday,’ Bitcoin: It’s been 3 years since BTC bottomed at $3.1K

According to the Crypto Fear & Greed Index, sentiment around crypto is as weak as ever.

Continuing its crisscrossing trend, the Index is back in the “extreme fear” zone as of Monday, having failed to crack even 30/100 throughout December.

For comparison, at the all-time highs of $69,000 on Nov. 9, Fear & Greed measured 84/100 — “extreme greed.”

As popular trader and analyst Rekt Capital often reiterates, however, such extreme fear “precedes financial opportunity.”

“This current BTC downtrending channel reminds me of the downtrending channel BTC formed in May,” he added Sunday, referencing the events after the China mining ban when BTC/USD reversed 50% and Fear & Greed bottomed multiple times at 10/100.

After that bottoming structure and consolidation, it took just a single month for the Index to return to the “extreme greed” zone.

Crypto Fear & Greed Index. Source: Alternative.me

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There Goes The Fed’s Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

There Goes The Fed’s Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

Two years ago, we first said that it’s only a matter…

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4 hours ago

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March 19, 2024

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There Goes The Fed's Inflation Target: Goldman Sees Terminal Rate 100bps Higher At 3.5%

Two years ago, we first said that it's only a matter of time before the Fed admits it is unable to rsolve the so-called "last mile" of inflation and that as a result, the old inflation target of 2% is no longer viable.

Then one year ago, we correctly said that while everyone was paying attention elsewhere, the inflation target had already been hiked to 2.8%... on the way to even more increases.

And while the Fed still pretends it can one day lower inflation to 2% even as it prepares to cut rates as soon as June, moments ago Goldman published a note from its economics team which had to balls to finally call a spade a spade, and concluded that - as party of the Fed's next big debate, i.e., rethinking the Neutral rate - both the neutral and terminal rate, a polite euphemism for the inflation target, are much higher than conventional wisdom believes, and that as a result Goldman is "penciling in a terminal rate of 3.25-3.5% this cycle, 100bp above the peak reached last cycle."

There is more in the full Goldman note, but below we excerpt the key fragments:

We argued last cycle that the long-run neutral rate was not as low as widely thought, perhaps closer to 3-3.5% in nominal terms than to 2-2.5%. We have also argued this cycle that the short-run neutral rate could be higher still because the fiscal deficit is much larger than usual—in fact, estimates of the elasticity of the neutral rate to the deficit suggest that the wider deficit might boost the short-term neutral rate by 1-1.5%. Fed economists have also offered another reason why the short-term neutral rate might be elevated, namely that broad financial conditions have not tightened commensurately with the rise in the funds rate, limiting transmission to the economy.

Over the coming year, Fed officials are likely to debate whether the neutral rate is still as low as they assumed last cycle and as the dot plot implies....

...Translation: raising the neutral rate estimate is also the first step to admitting that the traditional 2% inflation target is higher than previously expected. And once the Fed officially crosses that particular Rubicon, all bets are off.

... Their thinking is likely to be influenced by distant forward market rates, which have risen 1-2pp since the pre-pandemic years to about 4%; by model-based estimates of neutral, whose earlier real-time values have been revised up by roughly 0.5pp on average to about 3.5% nominal and whose latest values are little changed; and by their perception of how well the economy is performing at the current level of the funds rate.

The bank's conclusion:

We expect Fed officials to raise their estimates of neutral over time both by raising their long-run neutral rate dots somewhat and by concluding that short-run neutral is currently higher than long-run neutral. While we are fairly confident that Fed officials will not be comfortable leaving the funds rate above 5% indefinitely once inflation approaches 2% and that they will not go all the way back to 2.5% purely in the name of normalization, we are quite uncertain about where in between they will ultimately land.

Because the economy is not sensitive enough to small changes in the funds rate to make it glaringly obvious when neutral has been reached, the terminal or equilibrium rate where the FOMC decides to leave the funds rate is partly a matter of the true neutral rate and partly a matter of the perceived neutral rate. For now, we are penciling in a terminal rate of 3.25-3.5% this cycle, 100bps above the peak reached last cycle. This reflects both our view that neutral is higher than Fed officials think and our expectation that their thinking will evolve.

Not that this should come as a surprise: as a reminder, with the US now $35.5 trillion in debt and rising by $1 trillion every 100 days, we are fast approaching the Minsky Moment, which means the US has just a handful of options left: losing the reserve currency status, QEing the deficit and every new dollar in debt, or - the only viable alternative - inflating it all away. The only question we had before is when do "serious" economists make the same admission.

They now have.

And while we have discussed the staggering consequences of raising the inflation target by just 1% from 2% to 3% on everything from markets, to economic growth (instead of doubling every 35 years at 2% inflation target, prices would double every 23 years at 3%), and social cohesion, we will soon rerun the analysis again as the implications are profound. For now all you need to know is that with the US about to implicitly hit the overdrive of dollar devaluation, anything that is non-fiat will be much more preferable over fiat alternatives.

Much more in the full Goldman note available to pro subs in the usual place.

Tyler Durden Tue, 03/19/2024 - 15:45

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Household Net Interest Income Falls As Rates Spike

A Bloomberg article from this morning offered an excellent array of charts detailing the shifts in interest payment flows amid rising rates. The historical…

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4 hours ago

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March 19, 2024

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A Bloomberg article from this morning offered an excellent array of charts detailing the shifts in interest payment flows amid rising rates. The historical anomaly was both surprising and contradicted our priors.

10 Key Points:

  1. Historical Anomaly: This is the first time in the last fifty years that a Federal Reserve rate hike cycle has led to a significant drop in household net interest income.
  2. Interest Expense Increase: Since the Fed began raising rates in March 2022, Americans’ annual interest expenses on debts like mortgages and credit cards have surged by nearly $420 billion.
  3. Interest Income Lag: The increase in interest income during the same period was only about $280 billion, resulting in a net decline in household interest income, a departure from past trends.
  4. Consumer Debt Influence: The recent rate hikes impacted household finances more because of a higher proportion of consumer credit, which adjusts more quickly to rate changes, increasing interest costs.
  5. Banks and Savers: Banks have been slow to pass on higher interest rates to depositors, and the prolonged period of low rates before 2022 may have discouraged savers from actively seeking better returns.
  6. Shift in Wealth: There’s been a shift from interest-bearing assets to stocks, with dividends surpassing interest payments as a source of unearned income during the pandemic.
  7. Distributional Discrepancy: Higher interest rates benefit wealthier individuals who own interest-earning assets, whereas lower-income earners face the brunt of increased debt servicing costs, exacerbating economic inequality.
  8. Job Market Impact: Typically, Fed rate hikes affect households through the job market, as businesses cut costs, potentially leading to layoffs or wage suppression, though this hasn’t occurred yet in the current cycle.
  9. Economic Impact: The distribution of interest income and debt servicing means that rate increases transfer money from those more likely to spend (and thus stimulate the economy) to those less likely to increase consumption, potentially dampening economic activity.
  10. No Immediate Relief: Expectations for the Fed to reduce rates have diminished, indicating that high-interest expenses for households may persist.

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One more airline cracks down on lounge crowding in a way you won’t like

Qantas Airways is increasing the price of accessing its network of lounges by as much as 17%.

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4 hours ago

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March 19, 2024

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Over the last two years, multiple airlines have dealt with crowding in their lounges. While they are designed as a luxury experience for a small subset of travelers, high numbers of people taking a trip post-pandemic as well as the different ways they are able to gain access through status or certain credit cards made it difficult for some airlines to keep up with keeping foods stocked, common areas clean and having enough staff to serve bar drinks at the rate that customers expect them.

In the fall of 2023, Delta Air Lines  (DAL)  caught serious traveler outcry after announcing that it was cracking down on crowding by raising how much one needs to spend for lounge access and limiting the number of times one can enter those lounges.

Related: Competitors pushed Delta to backtrack on its lounge and loyalty program changes

Some airlines saw the outcry with Delta as their chance to reassure customers that they would not raise their fees while others waited for the storm to pass to quietly implement their own increases.

A photograph captures a Qantas Airways lounge in Sydney, Australia.

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This is how much more you'll have to pay for Qantas lounge access

Australia's flagship carrier Qantas Airways  (QUBSF)  is the latest airline to announce that it would raise the cost accessing the 24 lounges across the country as well as the 600 international lounges available at airports across the world through partner airlines.

More Travel:

Unlike other airlines which grant access primarily after reaching frequent flyer status, Qantas also sells it through a membership — starting from April 18, 2024, prices will rise from $600 Australian dollars ($392 USD)  to $699 AUD ($456 USD) for one year, $1,100 ($718 USD) to $1,299 ($848 USD) for two years and $2,000 AUD ($1,304) to lock in the rate for four years.

Those signing up for lounge access for the first time also currently pay a joining fee of $99 AUD ($65 USD) that will rise to $129 AUD ($85 USD).

The airline also allows customers to purchase their membership with Qantas Points they collect through frequent travel; the membership fees are also being raised by the equivalent amount in points in what adds up to as much as 17% — from 308,000 to 399,900 to lock in access for four years.

Airline says hikes will 'cover cost increases passed on from suppliers'

"This is the first time the Qantas Club membership fees have increased in seven years and will help cover cost increases passed on from a range of suppliers over that time," a Qantas spokesperson confirmed to Simple Flying. "This follows a reduction in the membership fees for several years during the pandemic."

The spokesperson said the gains from the increases will go both towards making up for inflation-related costs and keeping existing lounges looking modern by updating features like furniture and décor.

While the price increases also do not apply for those who earned lounge access through frequent flyer status or change what it takes to earn that status, Qantas is also introducing even steeper increases for those renewing a membership or adding additional features such as spouse and partner memberships.

In some cases, the cost of these features will nearly double from what members are paying now.

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