Markets Tumble Amid Global Tensions

Plus Kashkari's Comments Fuel Rate Cut Speculation

Author

Nathaniel Whittemore
April 05, 2024

The Breakdown First Five - Friday, April 5, 2024

Welcome back to The Breakdown First Five — the 5 most interesting and/or important stories in bitcoin, crypto, and markets to start your day.

Markets Tumble Amid Global Tensions

5. Wirehouse Warm Up to Bitcoin

Morgan Stanley and UBS are reportedly gearing up to offer Bitcoin ETFs. So far the large wirehouse platforms have technically allowed access to the Bitcoin ETFs to some high net worth clients on an unsolicited basis, but this shift would allow RIAs to actively sell the idea of adding a little Bitcoin. When the products launched, it was believed it would take three months to pass compliance. That would take us up to the week after next. 

4. Hedge Funds Record Short BTC

Hedge fund positioning on the CME is record short Bitcoin, reaching over $5B in notional value. The extreme desire to short Bitcoin is likely driven by a lucrative carry trade, going short the futures and long spot in the form of Bitcoin ETFs, capturing the premium. Although Bitcoin has dropped from all time highs, the three month average futures premium is still above 10%, making the basis trade one of the most attractive low risk trades available.

3. Exchange Bitcoin Reserves Hits Multi-Year Low

Bitcoin held on centralized exchanges has dropped to a low point, the lowest in available data going back to early 2021. According to CryptoQuant data more than 90,000 BTC has been withdrawn over the past month. A run on Kucoin was likely a major contributor, but the trend is still down. There’s now less than 1,700,000 Bitcoin remaining on exchanges.

2. Kashkari Crash

Minneapolis Fed President Neel Kashkari was blamed for yesterday's market sell off. It likely wasn’t all his fault, but the comments were still worth noting. Standing out among half a dozen Fed speakers for the day, Kashkari suggested we might not see rate cuts at all this year if inflation remains sticky. This thought has been on everyone’s mind, but Kashkari is the first to say it out loud. He’s an hawkish outlier on the FOMC, but the warning seems important.

1. Markets Rattle 

All three major stock indices saw a 1% daily fall for the first time in months as traders went risk off. It’s little wonder as conflict in the middle east hits another point of escalation. The current rally in risk assets is entering its sixth month and starting to look very stretched. With Bitcoin now widely available to US traders, will it capture a share of the bid for safe haven assets?