SignalPlus Macro Research: Grayscale Legal Victory Drives Strong Crypto Market Rebound, GBTC NAV Discount Narrows

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The Grayscale Legal Victory Triggers a Strong Rebound in the Entire Cryptocurrency Market, reducing the GBTC Net Asset Value Discount from -25% to -18%.

Original title: "SignalPlus Macro Research Report (20230830)"

Original source: SignalPlus Chinese

Yesterday, the fixed income market was forced to face reality as US economic data encountered obstacles. JOLTS employment data and consumer confidence were both far below market expectations. In July, the number of job vacancies was 8.827 million, about 4 standard deviations lower than the expected 9.5 million, and even lower than the revised June data of 9.165 million. The decline in job vacancies was mainly concentrated in the professional services sector. In addition, the resignation rate decreased from 2.4% to 2.3%, the lowest level since January, and consistent with pre-pandemic levels. The largest decline in the resignation rate was in the accommodation and catering services industry, from 5.1% to 3.9%. Powell's preferred job vacancy-to-unemployment ratio decreased from 1.6 to 1.5, the lowest level since September 2021, but still far higher than the healthy level of 1.2 representing the job market. However, other data has intensified market expectations that Friday's non-farm payroll data will be weak.

The Zishang Consumer Confidence Index also weakened, falling to 106.1, below the expected 116 and down 8 points from the revised figure last month. Both the current situation index and the expected index are weak. In addition, the employment market differential index also fell from 32.4 to 26.2, the lowest level since April 2021, consistent with the weakness in JOLTS data.

Economic data suddenly softened, contradicting the 5.8% GDP growth predicted by the Atlanta Fed's GDPNow model. The interest rate market made some adjustments, with the 2-year yield dropping 16 basis points and the 2/10 yield curve steepening by 7 basis points. The market's expectation of a rate hike in November dropped from a high of 47% to 30%, and there was a significant amount of short covering in trading volume. The 7-year bond auction saw a significant squeeze, with a yield of 4.212%, 2 basis points lower than expected. The total bid amount was $95.9 billion, with a bid-to-cover ratio of 2.66, the highest level since January.

As the market struggles to cope with the rise in actual yields, the ratio of call and put options with 0 days to expiration (0DTE) hit a low for the year in August. The time to short has come, with major US stock indices rising 1.5-2% and the "most shorted" stocks doubling in value. In addition, day trading and short-term strategies remain mainstream, with 0DTE options trading volume accounting for 50% of total trading volume in the past month, reaching a historic high. It is expected that the market will continue to see greater intraday volatility during NFP, CPI, and the September FOMC, which is a sign of the current "data-dependent" narrative.

There have been some positive developments in the cryptocurrency industry. The appeals court has made a favorable ruling for Grayscale, stating that the SEC must reconsider Grayscale's Bitcoin spot ETF application. Circuit Judge Neomi Rao stated that "rejecting Grayscale's proposal was arbitrary and capricious, and the Commission failed to explain its differing treatment of similar products." Meanwhile, the SEC has approved a Bitcoin futures ETF. This lawsuit began in June of last year when the SEC rejected Grayscale's request to convert its Bitcoin fund into an ETF, citing concerns about market manipulation of spot BTC products.

This decisive victory triggered a strong rebound in the entire cryptocurrency market, with GBTC's net asset value discount narrowing from -25% to -18%, Coinbase rising 15%, and BTC/ETH rising 5% in the past 12 hours. Interestingly, the correlation between BTC and SPX and gold prices has quietly risen from 0 in July to near this year's high point. As mainstream interest returns after a year of silence, let's see if recent positive regulatory news can keep the correlation at its current level.