Bitcoin Regains Momentum After Early Dip, Fed Projects 3 Rate Cuts in 2024, Dow Hits All-Time Highs, and New Accounting Rules Could Facilitate More Corporate Ownership of Bitcoin and Crypto

Takeaways

• Bitcoin starts the week with a dip but recovers after FOMC meeting: Following eight successive weeks of gains, bitcoin (BTC) faced a volatile start to this week. Opening the week around $43.8k, the price suddenly dropped as low as ~$40.3k as a cascade of over $300 million in liquidations drove the market lower. The Fed’s decision to hold rates steady and its foreshadowing of three rate cuts in 2024 helped buoy BTC on Wednesday, with prices consolidating around the $43k level.
• Bitcoin ETF issuers continue to meet with SEC to discuss fund structures: Bitcoin ETF issuers continued to hold meetings with the SEC this week as we near the possible approval of the first US-based spot bitcoin ETFs in early January. Despite several issuers, including Blackrock, proposing the use of an “in-kind” model, it is looking more likely that the initial approvals will be for a “cash creation and redemption” model.
• Dow hits all-time highs as US equities get a boost from Fed and inflation data: Stocks and bonds rallied following the FOMC meeting on Wednesday, as the Federal Reserve held rates steady and signaled several interest rate cuts next year. The Dow reached its highest ever recorded level on Wednesday, closing above 37,000 for the first time. The S&P 500 also saw its price jump, reaching its highest level since January 2022. Inflation data earlier in the week had helped push prices higher in the build up to the Fed meeting.
• New accounting rules allow for fair value reporting of crypto holdings: The Financial Accounting Standards Board (FASB) announced a new set of rules that will require companies to account for crypto at fair value, with the rules set to be effective from December 2024. As part of the rules, companies will report the value of crypto they hold on their balance sheets at market prices, rather than only being able to report gains when assets are sold, which is the current practice.
• Altcoins have a strong week as IMX surges 40%: A number of altcoins have seen outsized gains this week as confidence grows across the crypto markets. For example, Immutable X (IMX) posted a 40% gain after a positive 2024 prediction from VanEck.

Sign up for a Gemini account

The secure way to buy, sell, store and convert crypto. Millions use Gemini to diversify their portfolios.

Get started

Bitcoin Has Volatile Start to Week, With Rebound After Fed Holds Rates Steady

Following eight successive weeks of gains, bitcoin (BTC) faced a volatile start to this week. Opening the week around $43.8k, the price suddenly dropped as markets opened in Asia, with BTC falling as low as ~$40.3k as a cascade of over $300 million in liquidations drove the market lower. The price quickly snapped back to $42k before entering a steady decline throughout Monday morning as investors took some profits off the table from the prolonged BTC rally we have seen over the past two months.

The conclusion of the final federal open market committee (FOMC) meeting of the year helped buoy BTC on Wednesday, alongside other risk assets, with the leading crypto consolidating around the $43k level. The Federal Reserve kept interest rates steady and projected multiple rate cuts in 2024.

Aspiring Bitcoin ETF Issuers Discuss In-Kind vs. Cash Creation Models With SEC

Issuers continued to hold meetings with the Securities and Exchange Commission (SEC) this week as we near the possible approval of the first spot bitcoin ETFs in early January. Despite several issuers, including Blackrock, proposing the use of an “in-kind” model, it is looking more likely that the initial approvals will be for a “cash creation and redemption” model.

Senior ETF analyst for Bloomberg Eric Balchumas tweeted on Wednesday: “pretty big clue that SEC is dug in on only letting cash create ETFs out in the first run (which is what we hearing back channel as well),” in reaction to the updated S-1 from Invesco that stated they are committing to cash redemption initially. The market is now waiting on an update from Blackrock to see if they can persuade the SEC to allow an “in-kind” model.

Dow Break All-Time High as US Equities Rise

Stocks and bonds rallied following the FOMC meeting on Wednesday, as the Federal Reserve held rates steady and signaled several interest rate cuts next year. The Dow Jones Industrial Average closed ~1.4% higher on the day and reached its highest ever recorded level, closing above 37,000 for the first time. The S&P 500 also saw its price jump, adding ~1.37% and reaching its highest level since January 2022.

While the Fed held interest rates steady in the 5.25%-5.50% range, as was widely expected, three three interest rate cuts in 2024 were forecast. The announcement added one more projected rate cut than what was indicated in September, sending a wave of optimism through the market. The Fed acknowledged that the pressures of inflation have eased and lowered their 2024 inflation forecast to 2.4% (2.6% previously).

Inflation data earlier in the week helped push prices higher in the build up to the FOMC meeting, with the Producer Price Index (PPI) remaining unchanged in November, while Tuesday's Consumer Price Index (CPI) came in at 3.1%. The bond market reacted to the news positively too, with the 10-year treasury yield dropping below 4% for the first time since August.

Corporations Can Report Crypto at Fair Value Under New Accounting Rules

On Wednesday, The Financial Accounting Standards Board (FASB) announced a new set of rules that will require companies to account for crypto at fair value, with the rules set to be effective from December 2024.

As part of the rules, companies will report the value of crypto they hold on their balance sheets at market prices. The existing practice is to book an impairment charge on their books if the price of an asset moved below its purchase price, even if the tokens were not sold. Corporations are also unable to record any benefit if the value of crypto holdings increased, unless those assets were sold.

The new guidelines, which allow firms to report unrealised gains on their books without having to sell crypto, could lead to more businesses adding BTC or other crypto assets to their balance sheets as they can now hold for the long term and report any increase in value on their books.

Altcoins Rally, With IMX Up +50% Following VanEck Prediction

A number of altcoins have seen outsized gains this week as confidence grows across the crypto markets. Last week, VanEck released a blog of its 15 crypto predictions for 2024. Among them was that blockchain gaming could see a surge next year and will finally demonstrate its long awaited potential. As part of this, they named “IMX is most likely to become a top 25 coin by market cap with the release of Illuvium, Guild of Guardians and other high-budget games in 2024”. This may have contributed to a rally in Immutable X (IMX), which has posted a 50% gain since the release of the blog.

-From the Gemini Trading Desk