Spot ETFs Help Bitcoin Beat $100,000 Year-End Forecast 💰

🐺 Hi pack-mates,

This is Howling Markets, the newsletter that understands new market trends as Blackstone did at the beginning of 2023!

Today we will be covering:

• Education: What Are Private Equity Funds? 💸

• Private Equity Enjoys a $40 Bullion Price Surge 🚀

• Spot ETFs Help Bitcoin Beat $100,000 Year-End Forecast 💰

• Equity and Debt Markets Daily Update ⚖️

• And more!

Market Watch 👀

What Are Private Equity Funds?

When a company wants to raise funds, they are generally presented with three options: take out a loan, issue bonds or sell stocks.

The first two alternatives are often characterized by a relatively high interest rate and a series of “covenants”, which are rules set by the lender to minimize the risk of default.

On the other hand, when a company goes public and issues new shares, they lose almost all the flexibility due to the need to comply with all regulatory requirements, including requesting shareholder meetings to vote on most important issues.

Because of this, there is also a fourth, and slightly less popular, alternative: Private Equity (PE). Private Equity consists in acquiring equity of a private company, meaning businesses that are not publicly listed on stock exchanges.

Private Equity Funds are often organized as limited partnerships composed by High-Net-Worth Individuals (HNWIs) and accredited investors. However, as opposed to Venture Capital Groups, they do not invest in startups, but rather in established businesses at various growth stages.

Additionally, VC groups often acquire a minority stake whereas PE funds either acquire the entire business or an absolute majority as the partners usually become active managers of the company.

Private Equity Enjoys a $40 Billion Price Surge

Last year was characterized by a slow recovery from the 2022 market downfall. In this enviroment, many companies had to cut costs and increase layoffs just to stay afloat due to the high interest rates and a contracting banking sector.

Given the circumstances, Private Equity groups had to diversify away from their main buyout activities, which consisted in acquiring a majority stake in a public company and taking it private. Instead, they decided to devote their attention to the credit and insurance-based operations.

Due to the high risks and interest rates, these credit operations allowed PE funds to generate significant profits and to reel in billions of assets from investors attracted by this profitable diversification.

For example, in 2023 Blackstone received an inflow of $148 billion from new investors, bringing their total AUM to over $1 trillion.

As a consequence of PE’s exceptional 2023 performance, the value of the major Private Equity funds’ shares has increased on average by more than 40% since the beginning of last year. Among the best performers, Blackstone has distinguished itself by doubling the market average and gaining 80% without even considering its dividend payout!

Today’s Howling Question

And now, it is time for our howling question!

As you can see from the Bitcoin’s price chart above, its price has increased quite rapidly over the past week. Do you how much did Bitcoin gain between the 5^th and the 12^th of February?

a) +7.5%

b)  +12.5%

c)  +15%

d)  +17.5%

e) +20%

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

Spot ETFs Help Bitcoin Beat $100,000 Year-End Forecast

Bitcoin has been trading in an extremely volatile enviroment revolving around its spot ETFs. At the beginning of last year Bitcoin’s price was just below $17,000, but thanks to the announcement of its spot ETFs, the price surged to almost $44,000 by year-end.

A couple of newsletters ago we had talked about the trading strategy called “buy the rumors, sell the news”, which essentially consists in investing as soon as a proposal is made and selling once it is realized. The idea behind this strategy is that once the actual news is released, the forward looking markets will have already priced in the entire event.

Because of this, during the days after the spot ETFs’ launch, Bitcoin’s price plummeted by almost 15%. However, according to some analysts, many traders have overlooked one fundamental aspect of the new ETFs.

The reason behind Bitcoin’s price increase when the ETFs were announced is not the new trading instrument in itself, but rather the expected future purchase of Bitcoins made by these new funds, potentially driving up the price.

As a matter of fact, in just over a month since their lunch, these ETFs have purchased more than 192,000 Bitcoins, even surpassing the exceptional 190,000 Bitcoins held by MicroStrategy.

Analysts at CryptoQuant have estimated that by the end of the year the inflows could generate a $76 billion increase in the market capitalization of Bitcoin, pushing it over the half a trillion dollar mark.

Additionally, they have estimated that the worst-case scenario expects Bitcoin’s year-end price around $55,000 while the best-case scenario at $112,000.

So, according to CryptoQuant, the worst-case scenario would still signify a 10% increase from the current price level. Will you jump on this opportunity?

Equity and Debt Markets Update

And now, our daily markets update!

Despite a +0.5% push during the first hours of the trading session, the S&P 500 started to show some signs of weakness during Monday’s trading session. The price closed -0.1% leaving a long wick up and indicating downward momentum that could possible transfer over to the next trading session.

However, new US inflation data will be released on Tuesday, so the next trading day could really go either way depending on this new information.

Likewise, the US government bond yields were also characterized by a lack of volatility during Monday’s session, which has to be expected ahead of extremely important macroeconomic news. The US10Y concluded the session +0.1% with respect to Friday’s closing price.

Answer

The correct answer is d) 17.5%

More precisely, over this 8-day period, Bitcoin’s price has increased by +17.31%, completely gaining back everything it lost after the launch of the spot ETFs.

Howl-Worthy Memes 😂

🐺 See you next time!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Want to get your product or job listing for business-related readers? Please email us.