Bitcoin Enters Consolidation Mode, Spot Bitcoin ETF Trading Starts Strong, Ether Continues to Gain on Bitcoin, and Solana to Launch New Smartphone After Saga Success

Takeaways

• Bitcoin consolidates around $41k-$43k as ETF excitement settles: In the wake of the much anticipated approval of spot bitcoin ETFs last week, bitcoin (BTC) prices initially jumped to $49k before suddenly dropping to $42k as investors processed the news of approval and analyzed the data on the flows and volumes from the first day of trading. Since then, BTC prices have been muted, consolidating throughout the week, trading mostly in a tight range between $41k-$43k since last Friday.
• Spot bitcoin ETFs see more than $10 billion trading volume in first three days: Newly launched ETFs saw over $10 billion in trading volume in the first three days. Over the same period, net inflows came in around 21,000 BTC (just under $900 million), with Blackrock iShares Bitcoin Trust (IBIT) experiencing the largest inflows, reaching 16,362 BTC, and Grayscale’s Bitcoin Trust (GBTC) seeing outflows of about 25,000 BTC.
• Ether remains strong against bitcoin: Ether (ETH) continued to gain on BTC since the approval of the first US-based spot bitcoin ETFs last week. The initial jump higher appeared to stem from the waning buzz around bitcoin ETFs and a shift of focus toward a potential spot ether ETF approval later this year. This was fueled further by BlackRock CEO Larry Fink stating “I see value in having an Ethereum ETF … these are just stepping stones towards tokenization,” in an interview last Friday.
• Solana builds off Saga phone success with new smartphone: This week, Solana announced the “Chapter 2” smartphone, available for preorder starting at $450. The launch of the new phone is at least a year away, and details around the hardware and design of the product have yet to be released. Excitement is also building around Jupiter’s JUP token, set to launch on Solana at the end of the month.
• Stocks flat as global interest rate outlook remains uncertain: US stock indices were flat this week as market participants adjusted their expectations on how early we may see the Federal Reserve start to cut interest rates. Retail data released this week showed that December spending accelerated at its fastest pace since September, raising doubts over how early rate cuts may come. The market is now pricing in a ~52% chance we see a cut in March, down from 70% a week ago.

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Bitcoin in Consolidation Mode as Market Digests Spot ETF Approvals

In the wake of the much anticipated approval of spot bitcoin ETFs last week, bitcoin (BTC) prices initially jumped to $49k before suddenly dropping to $42k as investors processed the news of approval and analyzed the data on the flows and volumes from the first day of trading. Since then, BTC prices have been muted, consolidating throughout the week, trading mostly in a tight range between $41k-$43k since last Friday.

Initial Spot Bitcoin ETF Trading Data Shows Strength

The first three days of spot bitcoin ETF trading drew net inflows of around 21,000 BTC (just under $900 million). Blackrock iShares Bitcoin Trust (IBIT) has so far seen the largest inflows, reaching 16,362 BTC, while Grayscale’s Bitcoin Trust (GBTC) saw large outflows from the start, losing about 25,000 BTC.

These outflows were expected given the significantly higher management fee of 1.5% charged by GBTC and the large discount to net asset value (NAV) going away now that the fund has been converted to an ETF.

Bloomberg's Eric Balchunas highlighted the success of the newly launched ETFs as they saw over $10 billion in trading volume in the first three days, further noting that there were 500 ETF launches in 2023 and combined their total volume for Tuesday was only $450 million.

Ether Continues to Gain On Bitcoin

Ether (ETH) continued to gain on BTC since the approval of the first US-based spot bitcoin ETFs last week. The ETHBTC pair has pushed higher to touch 0.06, rebounding from a multi-year low of 0.0478. The pair has faced strong resistance at the 0.06 level, however, throughout the week and has failed to break higher.

The initial jump higher appeared to stem from the waning buzz around bitcoin ETFs and a shift of focus toward a potential spot ether ETF approval later this year. This was fueled further by BlackRock CEO Larry Fink stating “I see value in having an Ethereum ETF … these are just stepping stones towards tokenization,” in an interview last Friday.

Solana Announces New Smartphone as it Seeks to Build off Saga Success

Solana (SOL) saw its price rebound back above $100 on Wednesday after briefly touching below $90 last week. Solana Labs appears to be trying to cash in on the recent success of the Solana Saga phone sellout that was fuelled by a token airdrop to phone owners. This week, they announced the “Chapter 2” smartphone, available for preorder starting at $450. The launch of the new phone is at least a year away, and details around the hardware and design of the product have yet to be released.

Excitement is also building around Jupiter’s JUP token, set to launch on Solana at the end of the month. Jupiter is one of the largest liquidity aggregators on Solana. The token launch will be accompanied by a highly anticipated airdrop to eligible users that interacted with the platform before November 2, 2023.

Stocks Flat With Lack of Clarity Around Interest Rate Outlook

US stock indices were flat this week as market participants adjusted their expectations on how early we may see the Federal Reserve start to cut interest rates. Retail data released this week showed that December spending accelerated at its fastest pace since September, raising doubts over how early rate cuts may come. The market is now pricing in a ~52% chance we see a cut in March, down from 70% a week ago.

A similar trend is emerging in the Eurozone, with European Central Bank president Christine Lagard signaling on Wednesday that rate cuts could be coming this summer, adding: “but I have to be reserved.” This led to markets pulling back on the expectation of a rate cut as early as April and the worst day for the Stoxx Europe 600 since October, dropping ~1.2%.

The UK saw inflation unexpectedly rise to 4% this week, the first increase in 10 months, which resulted in the market lowering expectations on how many rate cuts the Bank of England can manage this year.

-From the Gemini Trading Desk