Crypto News: Market Update January 2024
This month brought several challenges for crypto investors, resulting in significant fluctuations in market prices. Nevertheless, as is typical in any market, there are periods of both highs and challenges, and January was no exception. One of the notable events that affected the market was Grayscale’s selling behavior following the approval of Bitcoin ETFs. These actions had a measurable impact on market dynamics, leading to a series of price swings in the crypto landscape. Additionally, altcoins, which are traditionally known for their volatility, experienced increased downward pressure compared to Bitcoin. This situation caused Callisto Capital to face a 15% drawdown in its current positions due to the use of the Dollar-Cost Averaging (DCA) strategy. Read below to see what other developments occurred in the market and why Callisto Capital is currently employing the DCA strategy.
January 9: Bitcoin price fluctuates following false SEC announcement about ETF approval
The U.S. Securities and Exchange Commission (SEC) has not yet approved spot Bitcoin exchange-traded funds (ETFs), despite a false post on their social media platform X. The post claimed that the SEC had approved Bitcoin ETFs on all registered national securities exchanges. This message led to a rise in Bitcoin’s price. However, the SEC confirmed that their account had been hacked and that the post was incorrect. As a result, the price fell back to pre-announcement levels. The SEC is working with law enforcement to further investigate the incident. (Source: Reuters)
January 10: U.S. SEC approves first Bitcoin ETFs, marking a milestone for the crypto industry
The U.S. Securities and Exchange Commission (SEC) has approved the first U.S. exchange-traded funds (ETFs) tracking Bitcoin. This approval includes 11 ETFs from major firms such as BlackRock, Ark Investments/21Shares, and Fidelity, marking a significant milestone for the cryptocurrency and the broader crypto industry. These ETFs, which provide investors with exposure to Bitcoin without directly owning it, are seen as a positive step toward institutional recognition of Bitcoin. Analysts estimate that these ETFs could attract between $50 billion and $100 billion this year alone. Despite some concerns about risks, competition for market share is expected to be intense. (Source: Reuters)
January 11: CPI comes in higher than expected
In December, U.S. consumer prices rose more than expected, increasing by 0.3%, which brought the annual Consumer Price Index (CPI) to 3.4%, above the forecasted 3.2%. Rising housing costs were a major contributor to this increase. Despite this inflation, there is still a strong likelihood that the Federal Reserve will begin to cut interest rates in March. Policymakers express skepticism and emphasize the need to continue monitoring inflation trends. The economy remains resilient overall, with low unemployment and sustained consumer spending, but inflation has not yet reached the desired level. (Source: CNBC)
January 16: Bitcoin ETFs surpass all 500 ETFs from 2023 combined
The long-awaited launch of Bitcoin spot exchange-traded funds (ETFs) last week resulted in impressive volumes within just three trading days. On Martin Luther King Jr. Day, the 11 Bitcoin ETFs collectively reached nearly $10 billion in volume, three times higher than the combined total of all 500 ETFs launched in 2023. BlackRock’s iShares ETF emerged as the top performer, with a net inflow of nearly $498 million, followed by Fidelity with $422.3 million and Bitwise with $237.0 million. Despite the success of the ETFs, a significant increase in Bitcoin’s price has yet to materialize, with the price briefly rising to $49,000 post-launch and later settling in the current range between $42,000 and $43,000. (Source: Crypto Insiders)
January 17: Manhattan judge asks critical questions in Coinbase vs. SEC case: Classification of digital assets at stake
A federal judge in Manhattan questioned Coinbase and the U.S. Securities and Exchange Commission (SEC) about their differing views on the classification of digital assets as securities. Coinbase is asking the court to dismiss the SEC’s lawsuit, which alleges that the exchange is violating regulations. Judge Katherine Polk Failla heard arguments on Wednesday and posed questions regarding legal precedents and the characteristics of crypto tokens on Coinbase that the SEC considers to be investment contracts. The ruling is likely to impact the SEC’s jurisdiction over digital assets. This case is part of the broader legal actions the SEC has initiated against the crypto industry. (Source: Reuters)
January 26: Core PCE Index higher than expected
An important inflation gauge, the Personal Consumption Expenditures (PCE) price index, showed that price increases slowed down at the end of 2023. In December, the core PCE rose by 0.2% month-over-month and was up 2.9% year-over-year, excluding food and energy. Overall inflation, including volatile food and energy costs, also increased by 0.2% for the month and remained steady at 2.6% year-over-year. These figures suggest that, despite still elevated levels, inflation continues to decline, potentially allowing the Federal Reserve to lower interest rates later this year. Consumer spending rose by 0.7%, while personal income growth slightly decreased to 0.3%. The data, along with a report showing a 3.3% growth in Gross Domestic Product (GDP) for the fourth quarter, indicates a growing economy with inflation moving closer to the Fed’s 2% year-over-year target. (Source: CNBC)
January 31: The Federal Reserve keeps interest rates unchanged and indicates that it is not yet ready for cuts.
The Federal Reserve has indicated that it does not plan to lower interest rates but will cease increasing them. The Federal Open Market Committee (FOMC) stated that it is no longer willing to raise rates further until inflation is under control and on track to the 2% target. Although there are no plans to reduce rates, the FOMC is awaiting additional data to confirm that inflation trends are sustained. Fed Chair Jerome Powell deemed a rate cut in March unlikely. Markets initially reacted calmly but declined following Powell’s comments, with the Dow Jones Industrial Average losing over 300 points. The statement highlighted solid economic growth and balanced risks while leaving the possibility of further rate hikes open, considering inflation risks. (Source: CNBC)
Conclusion
Callisto Capital anticipated a shift in focus within the cryptocurrency market from Bitcoin to Altcoins this month. However, due to Grayscale’s selling activities, this shift has been delayed. As a result, the fund has reported a negative return of 15.5% for the month. Nevertheless, our analysis remains focused on the outlook that Altcoins will outperform Bitcoin in the near future. Using a Dollar-Cost Averaging (DCA) strategy, Callisto Capital has taken various positions within the Altcoin sector. It is important to note that with a DCA strategy, it is common for positions to experience a drawdown initially. This approach allows investors to lower their average purchase price in anticipation of a potential future increase.
