On 8 December 2023, David Duong, the Head of Institutional Research at Coinbase, in collaboration with David Han, a distinguished Institutional Research Analyst, issued their most recent weekly commentary about the cryptocurrency market. The provided commentary on LinkedIn has been succinctly summarized by Duong, offering valuable insights about the prevailing trends and prospective trajectory of the cryptocurrency market.
Considerations Regarding the Bitcoin Rally
In the words of David Duong, it has been observed that the recent surge in Bitcoin has resulted in approximately US$256 million worth of short Bitcoin liquidations since the beginning of December. The individual ascribes the 2.5 standard deviation shift in Bitcoin, observed over 40 days, to moderate United States rate expectations.
This is underscored by a notable decline of nearly 30 basis points in the 10-year Treasury yield, resulting in a value of 4.1%. Duong highlights that the remarkable upswing observed in Bitcoin did not correspondingly manifest in the S&P 500 or the Nasdaq, indicating the presence of distinct elements that explicitly influence the cryptocurrency market.
A Comparison of the Equity Market
Duong observed that there has been a lateral movement in equities such as the S&P 500 and Nasdaq. This could be attributed to the forecasts made by various sell-side banks regarding a forthcoming pullback, which has been influenced by the previous gains experienced in November. The observed phenomenon presents a notable distinction from the Bitcoin rally, suggesting divergent market dynamics.
Track the Developments of Bitcoin Exchange-Traded Funds
The subject of analysis pertains to spot bitcoin exchange-traded funds (ETFs), wherein Duong delves into the recently revised S-1 filings submitted by prominent financial entities, namely BlackRock and Bitwise. The author observes the meticulous modifications made, encompassing matters related to custody arrangements and establishing an Intraday Indicative Value (IIV). These adjustments signify preparedness for deployment and a notable degree of scrutiny from the Securities and Exchange Commission (SEC).
The Intraday Indicative Value (IIV) represents a contemporary assessment of the net asset value of an Exchange-Traded Fund (ETF), which is computed and refreshed at frequent intervals during the trading day. The derivation process involves:
Top 5 Cryptocurrencies Today:
| Name | Price | 24H (%) |
|---|---|---|
Bitcoin
(BTC)
| $29,078.00
| -3.19% |
Ethereum
(ETH)
| $1,948.11
| -4.71% |
Tether
(USDT)
| $1.00
| -0.03% |
BNB
(BNB)
| $295.60
| -1.51% |
Cardano
(ADA)
| $0.51
| -10.30% |
>> Invest In Cryptocurrencies Now!
- The assessment of the prevailing prices of the exchange-traded fund’s underlying assets.
- Subtracting any liabilities.
- Ultimately, the resultant value is divided by the total outstanding shares.
Implementing this measure is essential for exchange-traded funds (ETFs) that track highly volatile markets, such as cryptocurrencies. It furnishes investors with a consistently refreshed assessment of the fund’s value.
The Intraday Indicative Value (IIV) is a valuable tool for assessing whether an Exchange-Traded Fund (ETF) currently trades at a premium or discount relative to its underlying value. By providing transparency and facilitating informed trading decisions, the IIV empowers investors to make well-informed choices in the market.
Demand for Cryptocurrency by Institutions
The increasing institutional interest in cryptocurrencies is underscored by the observed surge in the CME futures basis for bitcoin and ether, as highlighted by Duong. It is suggested that institutions without direct access to BTC or ETH spot markets have been incurring additional costs to obtain cryptocurrency exposure. However, this situation has become more balanced as the front month on both assets has stabilized.
The Behavior of Bitcoin Holders Over the Long Term
It is worth noting that Duong has observed a notable rise in the proportion of individuals who have held Bitcoin for an extended period, reaching a significant 86% during the initial days of December. According to Duong, the observed trend indicates that the recent price increase has yet to incentivize long-term holders to capitalize on their investments, thereby diverging from patterns observed in prior market cycles.
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