Crypto News: Market Update December 2023
Callisto Capital achieved a return of 0.12% in December. During this month, several notable developments occurred in the financial markets. Bitcoin reached a new peak, major financial players like JP Morgan were revealed to be engaging in significant maneuvers, Société Générale became the first major bank to launch its own euro stablecoin, and the Federal Reserve made a historic announcement regarding future interest rate policies. This market update provides an overview of crucial events that impacted the economy, cryptocurrencies, and financial markets.
December 4: Bitcoin Reaches New Peak in December 2023
Bitcoin has surged significantly, reaching a 19-month high of $41,809, driven by optimism surrounding the approval of a Bitcoin exchange-traded fund (ETF) and expectations of interest rate cuts by the U.S. Federal Reserve. This is the first time Bitcoin has surpassed $40,000 since April 2022. The cryptocurrency’s annual return has now exceeded 150%. Analysts suggest that the next significant price levels might be $48,000 and $52,000. Market confidence increased after the SEC (U.S. Securities and Exchange Commission) met with representatives from Grayscale, BlackRock, and Nasdaq, boosting expectations for the approval of a Bitcoin ETF. While an ETF approval could further drive up the price, it’s important to note that even with approval, substantial price increases are not guaranteed. Federal Reserve Chairman Jerome Powell indicated that it’s too early to discuss interest rate cuts, but his remarks led to expectations that the Fed is likely done with rate hikes for now. (Source: CNBC)
December 6: Société Générale Launches Own Euro Stablecoin on Bitstamp
French bank Société Générale has announced the launch of its own stablecoin, called EUR CoinVertible, on the cryptocurrency exchange Bitstamp. This makes Société Générale the first major bank to offer digital tokens. The stablecoin, pegged to the euro, aims to provide efficient settlement in terms of cost and speed. The bank is following the emerging trend of stablecoins that track the value of national currencies. Société Générale emphasizes that their stablecoin complies with the MiCA regulations that will come into effect in the European Union next year, distinguishing it from other stablecoins on the market. (Source: Bitcoin Magazine)
On December 6, a notable consensus emerged among bankers and politicians regarding Bitcoin. They asserted that “Bitcoin is only useful for criminals; if I were the government, I would shut it down.”
On December 6, Jamie Dimon, CEO of JPMorgan Chase, expressed strong criticism of cryptocurrencies during a hearing on Capitol Hill, suggesting that they should be banned. Dimon asserted that the only legitimate use of crypto is for criminal activities, such as drug trafficking and money laundering, and stated, “If I were the government, I would shut it down.” This statement marks another instance of Dimon’s vocal opposition to crypto. During the same hearing, there was notable agreement between Dimon and Senator Elizabeth Warren, who is typically critical of the banking sector. Both Dimon and Warren, along with other banking leaders, supported the imposition of anti-money laundering regulations on crypto businesses. Warren emphasized the importance of such regulations for national security. (Source: CNBC)
December 8: Nonfarm Payrolls came in higher than expected
In November, U.S. job growth accelerated, and the unemployment rate fell to 3.7%, indicating ongoing resilience in the labor market. The Labor Department’s report also revealed an increase in the participation rate to 62.8% and a rise in average hourly wages by 0.4%, bringing the year-over-year increase to 4.0%. These positive figures cast doubt on financial market expectations for an interest rate cut early next year. While the labor market is cooling, wage growth and employment remain strong, particularly in sectors such as healthcare, government, and manufacturing. Despite some declines in retail and transportation, a recession is not currently anticipated. Economists still believe that the Federal Reserve might ease monetary policy in the second half of 2024, while consumer inflation expectations have decreased, fueling hopes for further economic recovery. (Source: Reuters)
12 December: CPI data came in higher than expected
On December 12th, CPI data showed a higher-than-expected result. In November, U.S. inflation slowed to 3.1% year-over-year, with the Consumer Price Index (CPI) increasing by 0.1% month-over-month. Excluding volatile food and energy prices, the core CPI rose by 0.3% month-over-month and 4% year-over-year, in line with expectations. The decline in energy prices, particularly gasoline, contributed to moderating inflation. Although these figures remain above the Federal Reserve’s 2% target, they indicate ongoing progress. Investors are awaiting signals from the Fed during the current two-day policy meeting, where no change in interest rates is anticipated, but future policy guidance is expected to impact the markets. (Source: CNBC)
December 13: Major Step Forward: FASB Publishes First Accounting Standard for Crypto Assets
On December 13, 2023, the Financial Accounting Standards Board (FASB) released its first accounting and reporting standard for crypto assets. The rules, which will be effective for fiscal years beginning after December 15, 2024, require that crypto assets meeting six criteria be measured at fair value, with changes in fair value recognized in net income. Companies must also provide detailed disclosures about their crypto assets, including holdings, contractual restrictions, and changes during the reporting period. This step is positively received by the crypto sector, though it is seen as just a first step, coming nine months after the FASB proposed the standard in response to lobbying from the crypto market. The rules target tokens representing approximately 75% of market capitalization. (Source: Reuters)
December 13: Federal Reserve Announces End of Rate Hikes and Hints at Possible Cuts in 2024
The Federal Reserve maintained its interest rates and indicated that its historic tightening cycle is likely coming to an end. Chair Jerome Powell noted that the expectation for further rate hikes is no longer the baseline, and discussions about potential rate cuts are underway. A clear shift in outlook is evident, with 17 out of 19 Fed policymakers forecasting lower rates by the end of 2024. Powell emphasized that the Fed is now at a point where “both mandates are important,” considering the risk of overly slowing the economy. The Fed appears to be aiming for a “soft landing,” with inflation projected to return to the 2% target in a slowing economy by 2024. Following the announcement, U.S. stocks rose, the dollar declined, and interest rates fell. The market interprets this as the beginning of a potential easing cycle by the Fed. (Source: Reuters)
December 13: Dow Jones Industrial Average Hits All-Time High
U.S. markets surged following the Federal Reserve’s decision to keep interest rates steady and announce three potential rate cuts for 2024. The Dow Jones Industrial Average reached a record high, closing at 37,090.24, up by 1.4%. The S&P 500 and Nasdaq both increased by 1.4% as well. The Fed’s commitment to a “soft landing” and a planned reduction of 75 basis points in interest rates for 2024 was well-received, bringing the Dow’s year-to-date gain to 11.9%. The CNN Business Fear & Greed Index shifted from “fear” to “greed” territory. Additionally, government bond yields fell, and oil prices rose. (Source: CNN)
December 13: DWS, Flow Traders, and Galaxy Form Company to Issue Euro Stablecoin.
DWS, Galaxy Digital, and Flow Traders have teamed up to form AllUnity, a company aiming to launch a euro-backed stablecoin, EUR CoinVertible, within the next 12 to 18 months. The stablecoin will be physically backed by euros and euro-denominated liquid assets, such as German government bonds. The initiative seeks to drive the token economy and accelerate the adoption of digital assets. AllUnity aspires to become a leading regulated provider of euro stablecoins. The launch is contingent on approvals from BaFin and competition authorities. Alexander Höptner, the former CEO of BitMEX, will serve as the CEO of AllUnity. (Source: Bloomberg)
December 21: GDP Data Falls Short of Expectations
In the third quarter of 2023, the U.S. economy experienced faster growth than initially reported, with the Gross Domestic Product (GDP) increasing at an annualized rate of 4.9%, down from the initially reported 5.2%. This revision was primarily due to downward adjustments in consumer spending and inventory investments. Consumer spending, a key driver of the U.S. economy, was revised to 3.1%, below the earlier estimate of 3.6%. Inflation, measured by the Personal Consumption Expenditures (PCE) price index, was less pronounced than previously reported. These developments present a nuanced picture of the U.S. economy, indicating some moderation in key contributors to GDP growth.(Source: Reuters)
December 22: Core PCE Index Falls Below Expectations
In November, U.S. inflation fell for the first time in over 3.5 years, bringing the annual increase below 3%. This development has bolstered expectations of an interest rate cut by the Federal Reserve in March and has improved consumer confidence. The economy remains resilient, supported by a strong labor market. President Biden highlighted efforts to address supply chain issues, and higher wages are supporting consumer spending. The U.S. economy appears to be gaining momentum, with GDP growth estimates for the fourth quarter ranging between 1.1% and 2.8%. (Source: Reuters)
December 29: BlackRock Appoints JP Morgan Securities and Jane Street Capital as Authorized Partners for Their Spot Bitcoin ETF
Fidelity, WisdomTree, BlackRock, and Valkyrie have selected Jane Street Capital and JP Morgan Securities as “authorized participants” for their proposed Bitcoin ETFs. This decision is seen as a significant step, particularly for BlackRock, which appears to be the first to meet the SEC’s requirements. In their filings, Invesco announced it will not charge any fees for the first six months, while Fidelity presents the lowest fee at 0.39%. These developments reflect growing expectations around the approval of spot Bitcoin ETFs, with the SEC expected to make decisions on major Bitcoin spot ETF applications by January 10. (Source: Bloomberg).
Remarkably, Jamie Dimon, CEO of JP Morgan, Criticized Bitcoin Earlier This Month but Now JP Morgan Becomes Authorized Partner for BlackRock’s Bitcoin ETF On December 6, Jamie Dimon, CEO of JP Morgan, stated during a meeting on Capitol Hill that Bitcoin was primarily used by criminals and that if he were in government, he would shut down Bitcoin. However, by the end of the month, it has been revealed that JP Morgan will be an authorized participant for BlackRock’s Bitcoin ETF. This shift highlights a striking contrast between Dimon’s previous criticism and JP Morgan’s new role in the cryptocurrency space.
Conclusion
On the financial markets, several notable developments occurred. Bitcoin reached a new high of over $44,000, driven by optimism regarding the approval of a Bitcoin ETF. Société Générale launched its own euro stablecoin, EUR CoinVertible, while JPMorgan CEO Jamie Dimon voiced criticism of cryptocurrencies. The Federal Reserve announced the end of interest rate hikes and hinted at possible cuts in 2024, leading to positive market reactions. The Dow Jones Industrial Average reached a record high, and steps were taken towards regulation with the publication of accounting standards for crypto assets. Notably, JP Morgan Securities was chosen as an authorized partner for BlackRock’s Bitcoin ETF, despite Dimon’s earlier criticism of Bitcoin. These events illustrate the market dynamics in December and the shifting attitudes towards cryptocurrencies and regulation.
