Bitcoin Spot ETFs Finally Launched! 🚀

🐺 Hi pack-mates,

This is Howling Markets, the friendliest guide dog helping you through the treacherous financial markets!

Today we will be covering:

• Education: What Is a Mutual Fund? 💰

• US Faces Higher Than Expected Inflation 📈

• Investors Are Changing Their 2024 Rate Cuts Forecasts 📉

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

What is a Mutual Fund?

A mutual fund is a company that pools resources to pursue a diversified investment strategy. In slightly more detail, these companies sell their shares to fund the purchase of securities in different markets including stocks, bond and other financial instruments.

When talking about the mutual funds, it is essential to distinguish between two different structures that they can adopt:

• Closed-End Funds: these mutual funds have a fixed number of shares that were issued when the fund was created and that will only be repurchased by the institution at a fixed expiration date. However, the shareholders are still able to buy and sell the shares on secondary markets where the price is determined by supply and demand.

• Open-End Funds: these mutual funds do not have a fixed number of shares, so anytime there is an increase in demand, the fund will issue more. Likewise, when an investor wants to sell, it will be the fund itself to buy them back. So, as opposed to closed-end funds, this type can raise additional funds when needed.

However, it is important to know something very particular about open-end funds: the price of the shares is not determined by the market and all transactions during the same trading day will occur at the same price.

This is because each day after market closure, open-end funds calculate their Net Asset Value (NAV) by subtracting their liabilities from their assets and dividing the result for the number of shares outstanding.

The NAV is the price at which the transactions occur, but because it is calculated only after the market closes, it means that all the orders are executed at an unknown price, which will only be discovered after the trading session ends!

US Faces Higher Than Expected Inflation!

Aside from the great news that you are about to read regarding the approval and launch of the Bitcoin ETFs, the US got hit pretty hard by some macroeconomic readings.

On Thursday, the CPI reading for December came in a little hotter than what economists expected. The general consensus had priced in an increase from 3.1% in November to 3.2%, but in reality, inflation shot up to 3.4%, surpassing all forecasts.

This inflation reading contributed to the wave of pessimism, started with the release of the Feds Minutes, that believes the March meeting will be too soon to perform the first rate cut.

As a matter of fact, Vincent Reinhart, a former Fed member, commented on the numbers saying: “You’re not supposed to react to one data point. But in this case, the Fed is looking for a signal to start. And, with this CPI report, the starting gun didn’t go off. […] After this, the Fed can’t use their meeting at the end of January to hint that they want to act in March. It’s going to take another round.”

Right after the numbers were released, the stock market plummeted by -1.0% before recovering throughout the day and touching the all-time high.

Today’s Howling Question

And now, it is time for our howling question!

How do you think the Grayscale Bitcoin Trust (Ticker: GBTC) performed during its debut as a spot ETF?

a) -1%

b)  +0.5%

c)  +1.0%

d)  +1.5%

e)  +2.5%

Try to answer the question by yourself, and then check the correct answer after the last interesting news!

Bitcoin Spot ETFs Finally Launched!

After months in the works, 11 Bitcoin ETFs have been approved by the SEC on Wednesday and have been finally launched on Thursday.

As expected, these ETFs are receiving a lot of attention, crossing $2 billion in trading volume before even the first trading day comes to a close!

The most traded Bitcoin ETF, up to this point, is Grayscale’s (Ticker: GBTC) accounting for almost 50% of the trading volume. However, it must be mentioned that this ETF has somewhat of an unfair advantage as it was created by converting the world’s largest Bitcoin investment fund, originally founded in 2013.

Trailing closely behind, accounting for more than 25% of the trading volume is Blackrock’s iShares Bitcoin Trust (Ticker: IBIT).

Right after the official launch, Bitcoin surged to $49,000 before coming down and closing by -0.69%, as we forecasted in yesterday’s newsletter.

Equity and Debt Markets Update ⚖️

And now, our daily markets update!

Today was a particularly strange day for the market, which started off very badly, but in the last couple of trading hours it managed to recover pretty well.

The SPX opened with a small gap up, but as soon as it touched the all-time high, the inflation data came out and in a matter of a few hours after the opening, the price fell down around 1%. However, it managed to recover during the last section of the day, and it closed -0.07%.

It will be extremely interesting to check out what the price will do tomorrow. There is a long wick down hinting at buying pressure, however we still have the RSI divergence, and we are right under the all-time high which can often be a significant resistance level.

On the other hand, the 10 year US government bond yield managed to drop right under the support level that had been respecting for the past week and in an interesting turn of events, it is showing bond buying pressure even when the Fed is hinting at higher interest rates for longer.

On Thursday, US10Y fell by -1.54% with respect to the previous day.

Answer

The correct answer is b) +0.5%.

As expected, the launch of Bitcoin’s spot ETFs has been characterized by enormous amounts of volatility. Grayscale’s ETF opened around +4.5% higher than the previous day, and then it continued to rally much higher for the first trading hours.

However, after touching $43.50, it fell back down significantly, closing the day just +0.48%.

Howl-Worthy Memes 😂

🐺 See you next time!

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