Weekly Market Update - Friday, July 7, 2023

Takeaways

• Bitcoin (BTC) continued to hold above $30k USD as spot bitcoin ETF applicants refiled applications to include more details on their surveillance sharing agreements.
• BlackRock CEO Larry Fink said Bitcoin is “digitizing gold” as his firm vies to be among the first to offer a spot bitcoin ETF in the U.S., marking a shift in tone from when he criticized Bitcoin as a vehicle for money laundering in 2017.
• Reports on Thursday and Friday painted a mixed picture of the U.S. job market. A hot ADP employment report released Thursday was followed by a cooler nonfarm payroll report on Friday morning.
• According to U.S. Federal Reserve June meeting minutes, there was more disagreement than expected among policymakers on whether to raise rates, with expectations for further hikes at their July meeting above 90%.
• Azuki Elementals NFT drop caused the Azuki floor price to crash as community members criticized strong resemblance to previous NFTs and artwork mistakes.

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Bitcoin (BTC) Remains Strong as ETF Hopefuls Update Applications

Bitcoin (BTC) held above the key psychological $30k USD support level throughout the Fourth of July week, but failed to initiate another leg higher. BTC rallied above $31.3k USD on Monday following the news that multiple asset managers had amended and resubmitted their applications for a spot bitcoin ETF. BlackRock, Fidelity and Valkyrie refiled their applications with more specific details about their surveillance-sharing agreements.

The refilings came after reports that the SEC communicated to the applicants that the asset managers needed to list the exchange and trading venues for the funds, which was the SEC’s main concern with previously rejected bitcoin spot ETF applications.

BTC prices shifted lower again on Tuesday during the Fourth of July holiday in the U.S., but saw a large spike in the early hours of Thursday, jumping from ~$30.5k USD to ~$31.4k USD.

Ether (ETH) attempted to gain back some ground on BTC this week, stopping just short of the $2k USD mark on Monday and moving above 0.064 on the ETHBTC pair. This was short-lived, though, as it dropped back to the 0.062 level as BTC and the increasing optimism of a spot BTC ETF approval remained in the spotlight. Despite regulatory headwinds from the SEC, there have also been some bright spots in other altcoins, such as Solana (SOL), which has rallied more than 45% since its June 10 low.

BlackRock CEO Fink Heaps Praise on Bitcoin, Shifting Tone

In a Wednesday interview, BlackRock CEO Larry Fink said that Bitcoin was “digitizing gold.” The comments came on the heels of BlackRock leading a pack of traditional financial institutions in filing to launch a spot bitcoin ETF.

Fink described Bitcoin as “an international asset” that can be used as a “hedge against the onerous problems of any one country, or the devaluation of your currency whatever country you’re in.” This represents a significant reversal from Fink’s comments in 2017 when he criticized Bitcoin as an “index of money laundering.”

Jobs and Payroll Reports Offer Mixed Picture of U.S. Job Market

Two reports this week provided a mixed picture of the U.S. job market. A hot ADP employment report released Thursday was followed by a cooler nonfarm payroll report on Friday morning.

On Thursday, the ADP National Employment report covering June non-farm payroll numbers showed 497K jobs were added vs. ~225K expected and 267K reported in May 2023. Wages increased 6.4% year-over-year.

While the ADP jobs report is not as closely followed by the media, the June report was particularly strong. This put markets on edge ahead of the Friday jobs report as yields spiked while stocks and crypto sold off. For example, the 2-year U.S. Treasury yield rose to ~5%, the highest level since March 2023.

The Friday jobs report met expectations with the unemployment rate at 3.6%, down 0.1% from May. Job creation came in below expectations at 209k for June, the slowest since December 2020. Stocks were largely even on Friday morning, as the market digested the news.

June Fed Minutes Suggest High Likelihood of Restarting Interest Rate Hikes

The U.S. Federal Reserve’s June meeting minutes were released on Wednesday, pushing stocks lower as commentary came in more hawkish than expected. The minutes showed division among policymakers on whether to pause rate hikes at the June meeting.

Despite opting for a pause in June, most members indicated that further interest rate hikes are likely as inflation remains elevated, the labor market remains tight, and economic activity continues to be stronger than anticipated. Market expectations for an additional rate hike in the July meeting now stand well above 90%.

Azuki NFT Prices Drop Amid Backlash Against Elementals Collection

One of the most popular NFT projects, Azuki, launched its Azuki Elementals collection last week. The new collection, however, appeared to closely resemble the originals and contained various artwork mistakes, with community members expressing their disappointment at the launch.

As a result, original Azuki NFTs saw a large decline in floor prices with the prices falling from a high above 17 ETH in June to below 6 ETH at one point this week. Some of the price decrease could be attributed to a wider sell-off across the NFT sector, with some of the largest collections in the space seeing significant drops such as Bored Ape and Mutant Ape collections hitting below 30 ETH and 5 ETH floor prices, respectively, floors not seen since the end of 2021.

-From the Gemini Trading Desk