Macro Brief Q2 2023: The Institutions Are Coming
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Macro Brief Q2 2023: The Institutions Are Coming

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Created 9mo ago, last updated 9mo ago

A quarter full of ups and downs — from the SEC clampdowns to major institutional players stepping into the fray. Read on for a rundown of Bitcoin and macro updates.

Macro Brief Q2 2023: The Institutions Are Coming

Table of Contents

Ohh, it’s time.

Time for another crypto macro brief.
Cancel your dates (ha, good one!), call your loved ones (no, seriously) and barricade the door. You don't want to miss this. Everything you need to know about:
  • Are institutions max bidding Bitcoin, and when moon?
  • What are the chances of a Bitcoin Spot ETF being approved?
  • How bullish is the market?
  • The rundown on the macro.
  • Price predictooors feeding you hopium if the ETF gets the green light.

This one’s so hot off the press, you’ll need gloves to scroll it!

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Are Institutions (Finally) Max Bidding Crypto?

Just when it looked like the FUD was going to get the better of the bulls, crypto was thrown an unexpected lifeline.

Not all heroes wear capes. Some wear suits:

View post on Twitter
The BlackRock Bitcoin Spot ETF application is a big deal. But the real news was how it seemed to trigger an avalanche of institutional interest in the crypto industry. Let’s see, we have…
  • Deutsche Bank applying for a crypto custody license. Yes, the same Deutsche Bank that described Bitcoin as an asset based on “wishful thinking” in 2021.
  • EDX, a crypto exchange backed by Fidelity Investments, Charles Schwab and Citadel Securities, finally went live. Ok, they did not exactly hit refresh on the top cryptocurrencies since the exchange only offers Bitcoin, Ether, Litecoin, and Bitcoin Cash trading thus far. But it’s backed by some big fish. (Here is an extra explainer on EDX.)
  • Mastercard filed a trademark application to develop crypto software. Probably nothing.
  • Invesco, another institutional investment company, re-applied for a Bitcoin Spot ETF. Let’s see — they have only $1.4 trillion assets under management compared to BlackRock’s $10T but hey, any little counts.
  • Valkyrie filing for a spot ETF as well. Ticker name $BRRR. Legends.
  • Santander, Spain’s largest bank, showed interest in the Lightning Network. Again, probably nothing.
  • BlackRock, Fidelity and Vanguard with increased exposure in MSTR. Michael Saylor loves to hear it.
  • The GBTC share price surged after news of the spot application broke.
  • Oh, and crypto-native asset managers hopped on the spot ETF bandwagon because you might as well if BlackRock does.
And yes, all of that happened in the span of a few days (except for the MSTR piece). The Q1 macro brief closed with the following conclusion:

“Macro in 2023 will set the tone for crypto’s medium-term price development.”

That seems more true than ever. But let’s not get ahead of ourselves. Can the spot ETF really get the thumbs-up from *gasp* the SEC?

The Chance of a Bitcoin Spot ETF Being Approved

So far, Gary Gensler has been steadfast in his agency’s position on Bitcoin Spot ETFs. They are a no-no:

But why?

Is this even important and why could this be your last chance to make it?

Well, where there’s a narrative, there’s a way for crypto to print a big green dildo:
View post on Twitter
In other words, yes, it would be a big deal to get this approved. Bitcoin would get the “BlackRock stamp of approval” for other institutions and anyone of rank and file in tardfi, pardon, traditional finance to ape into Bitcoin. As George Kaloudis argues, it would also be a boon for liquidity but could come with some undesired side effects.
Because, as this thread explains, some of the fine print in the application will not be to the liking of Bitcoiners. Things like:
  • Not everyone is able to redeem their BTC, but only those handpicked by BlackRock.
  • The potential for a lot of rehypothecated BTC to be created (read: a lot of paper bitcoin).
  • BlackRock redeems the right to accept which hard fork it considers the “true chain” if such a thing happens. Cue the conspiracy theories of a “BlackRock Bitcoin chain.”
Read also: Trust vs ETF vs Bitcoin ETF ─ what is the difference?

But can BlackRock’s amazing streak of 575-1 ETF approvals overcome the winless Bitcoin Spot ETF streak?

The asset management firm seems to be confident it can with this one weird trick (the SEC hates it!) to get your Bitcoin Spot ETF application approv,ed ─ a surveillance sharing agreement between NASDAQ and an approved exchange.
You see, the SEC has been slapping down applications for fear of “price manipulation.” And since it does not consider any significant exchange legit (except for, you know, Prometheum), the answer to all applications so far has been…no.

Can it get done this time then?

Opinions on Crypto Twitter differ.

Noelle Acheson, former Head of Research at CoinDesk, thinks it’s more of a political message to the Democratic Party, which BlackRock’s CEO Larry Fink is affiliated with, to go easy on the whole “banning crypto” trip:
View post on Twitter
Justin Slaughter, Policy Director at Paradigm, disagrees. His take is that BlackRock have the influence and the timing to get it approved, as the Grayscale vs SEC lawsuit may end with a defeat for the SEC (and open the door for a “crypto-native” spot ETF to be first):
View post on Twitter

Nic Carter agreed. He suggested the SEC may in fact have given BlackRock a silent nod of approval to get first in line:

View post on Twitter
The entire narrative shows: institutions are more bullish than they let on. Some form of crypto seems inevitable, so might as well try to take the degens’ plaything away.
Now surely, this was really bullish for Bitcoin, wasn’t it?

How the Market Reacted

Not much of a cliffhanger here. Yes, Bitcoin teleported back to over $30K on the tsunami of (hopefully) good news.

Even a look under the hood suggests this is good for our favorite orange coin.

The rally is being driven by spot buying instead of a short squeeze:
View post on Twitter
And who’s been violently slamming the “long” button on exchanges? Turns out, it’s been the Americans:
View post on Twitter
Another good sign: stablecoin inflow is finally turning positive and has recorded its first two-week uptick since February:
View post on Twitter

So it’s all good again? Bull market here we come?

Oh you know what’s coming now. The m-m-m-macro summary.

The Macro Situation in Q2 2023

So. The Fed recently changed course and stopped hiking rates. Enter the new “macro main character” ─ the hawkish pause.

What is this, you ask?

Well, when the Fed tries to pause rate hikes but doesn’t want everyone diving in head-first into JPEG and frog coin trading, they cloak their decision with a lot of spooky talk about how that’s only a temporary breather:

View post on Twitter

To the Fed’s credit, it has been doing exactly what it has been telegraphing it would do. So no reason to doubt a rate hike coming in July, right?

The markets don’t see it that way though.

With inflation coming down (for now), some commentators on Twitter wonder whether the bear market in equities is actually a thing of the past:
View post on Twitter

In case you are not following equities, they have been printing for the last few weeks, which is not the kind of decoupling crypto investors wanted to see. Time for crypto to catch up now?

Overall, the theme is that it’s a game of chicken between the Fed and the market. And at the moment, it seems the Fed is winning:
View post on Twitter

So that would be a bearish catalyst for the crypto market. How about the long term though?

Can a Bitcoin Spot ETF Teleport Us to All-Time-Highs?

Here’s the deal. Leading up to the halving next year, you should not expect any magic from the crypto markets due to volatility, volume and realized value at multi-year lows. Glassnode read the on-chain tea leaves, and the market is likely in an accumulation phase, marked by boredom and investor disinterest.
As Bitcoin Magazine points out, 2018 also saw a rally and more sideways crab. The market can stay boring longer than you can stay disciplined.
With that being said, let’s listen to some Crypto Twitter hopium on where an ETF approval could take prices in the really long run.

How about a cycle of institutional money buying our bags, followed by government:

View post on Twitter

In any case, Bitcoin is likely going to enter the political mainstream really soon:

View post on Twitter
Here’s another dose of hopium by Adam Cochran, who suggests even a sprinkle of institution-controlled Boomer pension money could cause a 15X for crypto prices:
View post on Twitter

If it does happen though ─ the final approval would be in eight months ─ Crypto Twitter isn’t expecting prices to teleport immediately. There still seems to be some bear market PTSD at play:

View post on Twitter
Whatever the outcome, crypto isn’t going away any time soon. The show must go on!
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