The past week in financial markets was intriguing, especially for the bond market. The Treasury forecast a $1 trillion in debt issuance for the third quarter of 2023. Government deficits are expected to be financed primarily through long-duration securities, which poses questions about the private sector’s capacity to absorb more Treasury notes. These dynamics, coupled with the recent U.S. credit rating downgrade by Fitch, have intensified pressures in the bond market.
This has pushed long-duration bond yields to their highest levels since November and has steepened the yield curve. This surge in bond yields has weighed on equities, with the S&P 500 breaking its 47-day streak of no 1% down days. The tension in the equity market is also reflected in the rise of the Volatility Index (VIX), which has broken out of a multi-month low range.
In the bitcoin market, the trend of consolidation around the $30,000 level continues. Bitcoin’s 10-day realized volatility is nearing record lows and has even fallen below the realized volatility of both equities and gold. The muted volatility is somewhat surprising given this week’s news from Semafor, which reported that U.S. Department of Justice officials are contemplating fraud charges against Binance, the world’s largest crypto exchange. Simultaneously, bitcoin giant MicroStrategy, led by infamous bitcoin bull Michael Saylor, announced via a new SEC filing that they may raise as much as $750 million via share sales for general corporate purposes, including additional bitcoin purchases.
Lastly, turning our attention to the ongoing spot bitcoin ETF discussion, Bloomberg Intelligence analysts James Seyffart and Eric Balchunas have increased their estimates for the approval and launch of a spot Bitcoin ETF in the U.S. this year to a 65% probability, up from their previous estimate of 50%. This optimism stems from various developments, including SEC Chairman Gary Gensler’s recent comments downplaying his role in the agency and the SEC’s apparent approval of Coinbase’s bitcoin trading platform. The ongoing case between the SEC and Grayscale could also serve as a catalyst, should Grayscale prevail. Our view for 2023 remains: The status quo for the bitcoin market will be further consolidation and muted levels of volatility, leading into a 2024 year with plenty of bullish catalysts on the horizon.
Hello, is this still being updated monthly? Thanks.
Great summary 👍🙏