Dispatch #187: Prices Go Up, Again

In this patch of your weekly Dispatch:

• CPI Steals the Show 🛍️

• 1 Week Till the Halving ➗

• Japan’s MicroStrategy

The Big Idea

Inflation’s Dance with Bitcoin (or the Other Way Around)

The week started off with headlines about Bitcoin's surge to $72,000, but boy, did the U.S. CPI steal the show…

On Wednesday, the latest U.S. inflation print sent shockwaves through financial markets. The Consumer Price Index (CPI) for March rose more than anticipated, leaving Wall Street's expectations for a series of rate cuts in 2024 in the dust. The stubbornly high inflation was evidenced by the CPI rising 0.4% in March and 3.5% year-over-year. (If you need a key to read Dispatch’s cover visual, here it is: car insurance +22%, beef +7.6%, and hospital services +7.5% over the past year.)

Investors watch closely the Fed’s response to inflationary pressures and it seems they have quickly adjusted their expectations by pricing in just two or three rate cuts for 2024, according to the CME FedWatch Tool.

This uncertainty has led to market volatility, with traditional assets like stocks and gold experiencing fluctuations. Bitcoin dipped to $68,200 immediately after the CPI report only to rebound by 3% to over $71,000 on Thursday morning, reclaiming pre-inflation report levels.

These BTC moves are a testament to the complex interplay between macroeconomic factors and Bitcoin's price dynamics. While some may attribute the start-of-week rally to specific events or inflows, such as the purchase of $500M in Bitcoin by the Ethena stablecoin USDCe as collateral or MicroStrategy’s acquisition of 9,245 BTC, broader market dynamics and investor sentiment are at play. Also, beyond Bitcoin, ETH gained 2.5% to above $3,600, SOL was up 2% and XRP rose 1%. This resilience speaks volumes about the robustness of digital assets in the face of inflationary fears.

As market participants continue to see a bull case for Bitcoin, factors like the upcoming halving and adoption trends create a supportive environment for crypto markets. The halving, which looms as the next major catalyst for Bitcoin, restricts supply at a time when demand is rising from spot Bitcoin ETFs. This dynamic, coupled with booming nominal growth and adoption trends, reinforces the positive outlook for cryptocurrencies.

The whole thing might be unpredictable but one thing's for sure: with Bitcoin leading the charge, the adventure never ends!

The Latest In…

Pre-Halving Insights from the Options Market

One week to go until Bitcoin mining rewards are cut in half – from 6.25 BTC to 3.125 BTC – a.k.a the Bitcoin halving which is slated for April 20. As the date approaches (link to the live stream), investors watch the options market for clues, CoinDesk reports. Options data suggests expectations for pre-halving price weakness and a bullish bias afterward. Put options at $61,000 and $60,000 on Deribit indicate the highest open interest among options expiring before the halving. Put options allow selling at a predetermined price, indicating bearish sentiment among some traders.

Analysts stress that while the halving is significant, Bitcoin's long-term outlook relies more on macro factors (see today’s Big Idea). Despite short-term fluctuations, the options market anticipates a potential six-figure rally by December, reflecting optimism for Bitcoin's future.

The Latest In…

The SEC Recommends

NYC-based DeFi giant Uniswap is under regulatory scrutiny following a notice of intent for enforcement action from the SEC, leading to a 9.5% drop in its native token, UNI. In announcing the SEC’s plans to recommend legal action against Uniswap, CEO Hayden Adams signaled readiness to contest the allegations, emphasizing the protocol’s confidence in their compliance. Uniswap challenged the SEC's jurisdiction over crypto markets, citing Chairman Gary Gensler's past remarks, and got overwhelming support on Crypto Twitter. As Uniswap gears up for a legal tussle, the outcome of this battle could have significant implications for the broader cryptocurrency industry.

The Latest In…

Metaplanet: Asia's MicroStrategy Move

Metaplanet Inc, a Japanese budget hotel operator, made a splash by offering local investors a tax-efficient route to Bitcoin exposure. The company announced it has embraced Bitcoin as its core treasury asset, drawing parallels to Michael Saylor’s MicroStrategy move. With an initial JPY 1 billion commitment to Bitcoin and a partnership with Sora Ventures and Morgan Creek Capital's Mark Yusko, Metaplanet navigates Japan's low-interest-rate environment to position itself as a digital finance leader. The announcement catapulted Metaplanet's stock price by 89.47%.

The Week’s Most Interesting Data Story

BTC Spot > BTC Spot ETF

Since the launch of U.S. spot ETFs in January 2024, Bitcoin markets have also witnessed a surge in spot trade volume, reaching daily peaks of around $14.1B in mid-March. Notably, this volume rivals the height of the 2020-2021 bull market but has begun to ease, currently averaging $7B/day, according to Glassnode. Meanwhile, cumulative trading volume for U.S. spot Bitcoin ETFs surpassed $200B on April 10, less than three months after regulatory approval, and nearly doubled in the last month since total volume exceeded $100B on March 8.

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What the Community Is Discussing

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Nine months later…

What to Watch for Next Week:

• Obviously, the Halving

• Nexo’s next asset listing(s)

• Spot BTC ETFs: inflows or outflows?