Bitcoin June 2024 Update

Market Commentary: 

In June, markets rose as inflation declined but still remained above the Federal Reserve’s 2% target rate. The latest Consumer Price Index (CPI) slowed for the second straight month in a row, showing overall prices increasing 3.3% YoY compared to the reported 3.4% in April. Lower gasoline prices helped drag down the overall index as the energy index fell 2% in May, while gasoline fell 3.6%. Moreover, core inflation (which strips out food and energy prices) rose 3.4% YoY compared to 3.6% in April. However, as highlighted in last month’s update, the housing sector continued as the focal point. It was the largest factor in the core CPI’s monthly increase as rent prices rose 0.4%, marking the fourth straight month of rental increases. However, the Producer Prices Index (PPI) surprised to the downside falling to 2.2% in May - its biggest decline since October 2023.
 

While the US economy seemingly remains sturdy, data showed retail sales were 0.1% in May (0.2% expected). This conveys that consumer spending is coming off its high point, which the Fed would like to see if it wants to decrease interest rates later this year. Furthermore, the Personal Consumption Expenditures Index, the Fed’s preferred inflation gauge, is expected to be flat for the month of May.  Jerome Powell stated that the committee would need to see more “good data” before cutting rates. The odds of a rate cut have now increased to an estimated ~61% chance in September (up from ~50% last month). The S&P 500 hit an all-time high of 5,482, up 4% from the end of May; similarly, the NASDAQ rose 5%, continuing its upward trend for 2024. While gold did not hit a new all-time high, it ranged between $2,270 and $2,305. However, the aforementioned macro factors, while positive for stock prices, did not help BTC as its price declined 11% from $68k to $60.7k. 

Despite relatively few liquidation cascades, BTC price has remained under pressure for months. This price pressure has been happening in line with the liquidity tightening from the FED - a combination of treasury account management, balance sheet operations, and a drawdown of the Reverse Repo facility. What’s more, is that the basis trade (buy spot, sell futures) has become less profitable possibly leading to outflows seen from the spot ETFs. The German government has also reportedly began selling the 50K BTC seized earlier this year. Another big seller over the past month has been struggling BTC miners. It’s been estimated that 5% of the current hash rate is struggling to make a profit on their operations. Lastly, Mt. Gox, once the world's largest crypto exchange, is set to begin distributing approximately $9 billion worth of BTC to its creditors (former customers). The process is scheduled to start in July 2024, with a final deadline for repayments set for October 31, 2024. It should be noted that only about 65,000 bitcoins out of the 140,000 will be delivered to individual creditors. The remaining tokens will be sent to large claims funds and a separate bankruptcy. While there is concern over potentially even more sell pressure from this distribution, there are some mitigating factors. Many of the individual creditors are tech-savvy early followers and well-known bitcoiners, there are also tax implications if sold immediately and many early investors have already sold their claims in the secondary claims market. The impact of this massive redistribution on the market remains uncertain, and investors may be repositioning to see how it will play out in the coming months.

A new law in Oklahoma will exempt the mining of digital assets from the state's property tax code starting November 1, 2024. This exemption also applies to the sale of machinery and equipment used for commercial mining of digital assets in specific facilities, with detailed definitions included in the law. The exemption is set to expire on December 31, 2029, and builds on prior Bitcoin-friendly laws passed by the state. 
Bitcoin, while still relatively small in the grand scheme of investor importance, is being mentioned more by CEOs in the US. Below we show the growth and relative importance of key topics discussed by CEOs in Q1 2024. 

Bitcoin, while still relatively small in the grand scheme of investor importance, is being mentioned more by CEOs in the US. Below we show the growth and relative importance of key topics discussed by CEOs in Q1 2024.