Connecting the Dots
Episode 129 - Bull Market Just Getting Started
Welcome to the new subscribers that have joined us over the last week. The aim of this newsletter is to help you navigate the world of crypto. There’s an incredible amount of information out there so we try to distil it into the things you MUST know each week, covering both macro and crypto.
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Onto the newsletter. Here’s what you’re getting this week:
Macro Update: Our latest view on the macro and its impact on crypto markets.
Crypto Native News: Kraken secures MiCA license, Coinbase to launch US Perpetual-Style Futures, BitDigital moves from BTC to ETH, Bakkt to expand BTC corporate treasury, Robinhood adds micro futures.
Institutional Corner: Hong Kong issues an updated policy statement, Arizona passed a bill that would create a reserve fund for seized crypto assets, cryptocurrency to be added into US mortgage asset valuations.
Charts of the Week: Crypto VC raises may double 2024, Latam crypto market gaining steam.
Top Jobs in Crypto: Featuring Web3Space UK, Fuse Energy, Cumberland Labs, Blockchain.com, American Express and MoonPay.
Macro Update
This is where we connect the dots between macro and crypto.
Bull Market Just Getting Started
Equities ripped to new, all-time record highs this week as geopolitical de-escalation drained the risk-premium that has been weighing on markets, allowing for a risk re-pricing to catch up with the “goldilocks” macro backdrop we’ve been tracking for several weeks.
The S&P 500 and Nasdaq recorded gains of 3.4% and 4.25% respectively as the US involvement in the Israel/Iran war marked the beginning of the end, with both sides agreeing to a ceasefire just a couple of days after the US strikes on Iranian nuclear facilities. As we like to say, ALWAYS fade the geopolitics 💪
Adding to the euphoria, reports that China and the US have signed a new trade deal, alongside US government officials indicating more trade deals were close to the finish line, softened the other big concern of tariffs that has been hanging like a dark cloud over markets.
Uncertainties here still remain but markets have performed a V shape recovery from the extreme levels of fear recorded in April. Markets remain underpositioned risk however and we suspect as risk premium continues to leak out, pain remains higher as funds are forced to chase performance.
The tick higher in core PCE in May to 2.7% from 2.6% doing little to dent our sanguine view of the world, with a slowing not collapsing US economy alongside muted inflationary pressure which will allow the Fed to continue with the rate cutting cycle. Indeed, we’re increasingly hearing more dovish dissent from within the Fed, highlighting the shift in balance of risks towards growth and raising the spectre of a July cut. Whilst that looks unlikely, September looks nailed on and more importantly, is that the path of travel remains towards easier, lower rates, providing a persistent, supportive tailwind to risk.
The “leaking out” of risk premium we expect will take the shine off of gold which fell circa 3% this week and augurs well for the BTC/Gold cross, a good proxy for risk rotation, to continue its move higher having broken out from its downtrend in April.
Whilst we’re not bearish gold per-se as the currency debasement games continue apace, we think it's reasonable to see a re-pricing back to early April levels sub 3,000 on the fading risk premium and a consequent rotation into Bitcoin. The BTC/Gold cross we expect to hit new record highs in the next few weeks, which if Gold trades sub 3,000 would place BTC at around $125K which seems a reasonable target.
Breaking out - BTC/Gold set to climb to new record highs
Liquidity explosion…
Interesting comments as well from Trump this week as it potentially relates to liquidity. Frustrated at Powell’s lack of willingness to currently cut rates and help reduce the interest costs of the ever growing US debt pile, Trump said “we’ll probably extend short-term debt”
Remember, Yellen, when Treasury secretary, dramatically increased short-term treasury bill issuance, away from longer term, coupon issuance to more easily fund the deficit, given the greater structural demand for short term debt and teasing out cash from money market funds and the overnight RRP balances held at the Fed. This is a pseudo form of Quantitative Easing. Trump will fight a restrictive Fed by extending Yellen’s move towards short term debt, reducing the duration profile of the debt boosting market liquidity 🌊
More immediately and still feeding the positive liquidity impulse is the continued breakdown of the dollar, which fell this week to its lowest levels since Feb 2022. Given the more restrictive Fed and still resilient growth in the US, we remain of the view that this is being managed lower, rather than a more fundamentally driven, structural move out of the dollar.
Nonetheless, the dollar move is MASSIVELY bullish for risk. The dollar is the lubricant for global trade and finance and this sell off represents a huge easing of global financial conditions. As other countries try to slow their currency strength against the dollar, printing domestic currency to buy up dollars and expand FX reserves, it also facilitates a huge boost to global money supply.
Bigger gains ahead….
We consequently think this move in equities has a lot further to go, with the lagged impact of the weaker dollar allowing for a 10%+ move over the next quarter. Bitcoin as the higher beta of course will have substantially more upside.
Perhaps a little frustrating then that Bitcoin failed to reclaim new record highs this week. One reason perhaps is the month/quarter end impact. Bitcoin and broader crypto is the ultimate liquidity junkie and as we’ve written about frequently, liquidity gets drained into quarter end as banks “window dress” balance sheets and reduce riskier lending based activity, parking cash instead at the Fed RRP to reduce associated capital costs. This past week, the RRP rose $147bn which is a lot of cash being taken out of the markets.
Equities managed new record highs because of the underpositioning we’ve spoken about and forced chasing of performance into quarter end. Next week, once through quarter end, that cash and liquidity returns to the market and Bitcoin we believe will play “catch up” and establish new record highs.
With Trump’s crypto adviser saying “July will be a big month” from the policy, we agree also from the macro side. The walls of worry have been climbed. This is not a time to be sidelined.
Native News
Key news from the crypto native space this week.
Kraken announced on Wednesday that it has secured a regulatory license under the European Union's Markets in Crypto Assets (MiCA) framework. The authorisation, granted by the Central Bank of Ireland, enables Kraken to offer crypto services across 27 EU member states, as well as three EEA member states. Arjun Sethi, co-CEO of Kraken said in s statement "Securing a license from the Central Bank of Ireland… [is] a powerful signal of Kraken’s commitment to expanding the crypto ecosystem through responsible innovation. Being the first major global crypto platform to receive authorisation from the CBI affirms Kraken’s commitment to building for the long term. This license reflects that effort and places us in a strong position to expand our product offering, grow our institutional and retail client base, and deliver secure, accessible, and fully regulated crypto services to millions more people across the EU."
Coinbase Derivatives Exchange has announced that it will launch "US Perpetual-Style Futures" products in the U.S. market on 21 July 2025. Coinbase said in its announcement that the two contracts set to arrive on that date include the nano Bitcoin Perpetual-Style Futures at 0.01 BTC and nano Ether Perpetual-Style Futures at 0.10 ETH. These contracts have 5-year expirations with 24/7 trading hours, and will "closely" track spot markets on the firm's regulated platform. Head of Coinbase Derivatives Exchange Boris Ilyevsky said in the release "Today, some US-based traders access perpetual futures through offshore exchanges, an approach that introduces regulatory, custody, and counterparty risks. Our new US Perpetual-Style Futures contracts eliminate the need for offshore workarounds, offering traders a domestic, regulated alternative with the same utility: simplified contract expirations, capital efficient trading, long-term strategy execution, and risk management." Read the full release from Coinbase HERE.
Bit Digital has raised $150 million in a public offering to accelerate its pivot away from Bitcoin mining and toward Ethereum staking and treasury operations. The company priced 75 million shares at $2 each, with an additional 11.25 million shares available to underwriters via a 30-day option. Proceeds from the offering will be used to acquire Ethereum, marking one of the largest public ETH treasury commitments to date. The raise formalizes Bit Digital’s strategic exit from Bitcoin mining, a business the company now plans to sell or wind down. As of March 31, Bit Digital held approximately 24,434 ETH and 418 BTC, with plans to fully convert its Bitcoin holdings into Ethereum over time.
Digital asset platform Bakkt Holdings has notified the U.S. SEC of its plans to sell up to $1 billion in securities to provide fresh capital for a possible expansion of its corporate treasury to include Bitcoin. Bakkt's S-3 filing on Thursday creates a $1 billion pool of potential securities, including common stock, preferred stock, debt securities, warrants, and bundled stock units, which could be tapped whenever market conditions become favourable. Bakkt intends to "explore" these "financing alternatives" for "acquiring Bitcoin or other digital assets," a summary of the filing's prospectus reads. See the full filing from Bakkt HERE.
In an announcement on Friday, Robinhood added micro XRP and Solana futures, marking the latest expansion of its crypto product suite. The firm also rolled out a micro version of its existing Bitcoin Friday futures offering. Micro futures are smaller-sized futures contracts that allow traders to speculate on or hedge against price movements of assets like stock indices, commodities, or currencies with lower capital requirements and reduced risk compared to standard futures.
Institutional Corner
Top stories from the big institutions
On Thursday, the Hong Kong government issued the Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, reinforcing its commitment to establishing Hong Kong as a global hub for innovation in the digital asset (DA) field. The new policy statement builds upon the foundational measures outlined in the initial policy statement released in October 2022. The press release says that “The Policy Statement 2.0 sets out a vision for a trusted and innovative DA ecosystem that prioritises risk management and investor protection, while delivering concrete benefits to the real economy and financial markets. The latest statement introduces the "LEAP" framework, which focuses on legal and regulatory streamlining, expanding the suite of tokenised products, advancing use cases and cross-sectoral collaboration and people and partnership development. Read the full release HERE.
Arizona's House of Representatives has passed a bill that would create a reserve fund for seized crypto assets. The House passed the bill, dubbed HB 2324, in a 34-22 vote on Tuesday, advancing it to Governor Hobbs. It passed the Senate last week in a 16-14 vote, after previously failing a House final read in May. HB 2324 aims to grant the State Treasurer the authority to create the Bitcoin and Digital Assets Reserve Fund, which would oversee crypto assets obtained through criminal forfeiture. The measure would enable the state to invest, reinvest, and divest funds in crypto assets or exchange-traded funds containing digital assets. If signed into law, HB 2324 would mark Arizona's second piece of legislation establishing a crypto reserve. Last month, the state enacted HB 2749, which focuses on unclaimed crypto assets presumed abandoned, while HB 2324 addresses crypto assets obtained through forfeiture. Read full details on the bill HERE.
United States FHFA Director Bill Pulte announced via X that he has ordered Fannie Mae and Freddie Mac to begin incorporating cryptocurrency into mortgage asset evaluations, stating that the move aligns with President Donald Trump’s vision of making the United States the “crypto capital” of the world. See the post HERE.
Charts of the Week
Because charts are just as important as macro.
PitchBook, the investment research firm, estimated the crypto industry will raise $18 billion in 2025. That would double the $9.6 billion raised in 2024 — an amount the industry has already surpassed this year, according to DefiLlama.
LATAM’s crypto market keeps gaining steam in 2025. Brazil leads with strong institutional flows and regulation. Argentina and Colombia are growing fast.
Top Jobs in Crypto
Well, we all want to work in Crypto don’t we. Here’s a bit of help on your job search!
Crypto Go-to-market lead at FuseEnergy
Bitcoin Asset Venture - Chief Executive Officer at Cumberland Labs
UK Market Lead at Blockchain.com
Senior Manager-Digital Product Management at American Express
Transaction Monitoring Analyst at MoonPay
DISCLAIMER: The content in this newsletter is not financial advice. This newsletter is strictly educational and is not investment advice or a recommendation to buy or sell any assets or to make any financial decisions. Crypto markets are volatile, please be careful and do your own research.
Great summary! Thanks a lot