2/1/24 Onramp Weekly Roundup: Fed Holds Steady & Banking Woes Re-Emerge

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And now, for the weekly roundup…

• Bitcoin rallies as GBTC outflows abate
• Treasury announces modest increase in coupon issuance
• Banking troubles re-emerge
• Fed holds rate steady, talks down probability of March cut

Bitcoin Rallies As GBTC Outflows Abate

Bitcoin rallied 14% to a high of $43,900 off its recent low of $38,500 over the past week as GBTC outflows have begun to slow dramatically.

After reaching peak daily outflows of over $600 million on January 22 amid?reports?that the FTX bankruptcy estate was liquidating $1 billion, GBTC had its smallest daily outflow since its first day of trading on January 29 of “just” $192 million.

The $192 million?out?of GBTC was outpaced by over $200 million?in?for both IBIT (BlackRock) and FBTC (Fidelity):

As the chart shows, the ETF complex as a whole has swung back to net inflows after seeing net outflows beyond the first few days post-launch.

Now that GBTC outflows seem to have abated I am watching to see if the new entrants can maintain a healthy rate of inflows, given that much of their inflows year-to-date have likely been from investors swapping over from GBTC.

At the current rate of $250 million of net inflows per day, the ETFs are taking in roughly 5,750 bitcoin per trading day against network issuance of 900 per day to miners.

Treasury Announces Modest Increase In Coupon Issuance

An action-packed Wednesday kicked off with the Treasury’s Quarterly Refunding Announcement before market open. In probably the most widely anticipated QRA in some time (that’s what ballooning fiscal deficits will do to you!), the Treasury indicated a small increase in coupon issuance, concentrated in the 2-5 year tenors:

Perhaps the more important reveal was the Treasury’s borrowing estimates for the April-June quarter; in particular, a -$245 billion implied net change in bill issuance:

This is important because:

1. Short-term T-bills compete with the?RRP?(reverse repo) for investment from money markets. All else equal, an increase in bill issuance equals a drain of the RRP. Thus, the net?reduction?in bills next quarter means the RRP won’t be drained as fast, as, all else equal, $245 billion in maturing bills should find it’s way back into the RRP.
2. In January, Dallas Fed President Lorie Logan was out suggesting the Fed should “slow asset runoff as reverse repo dwindles.” If the reverse repo dwindles more slowly due to a net reduction in bills, this could imply that the Fed can wait longer to begin tapering Quantitative Tightening.

A delay in the slowing of QT relative to market expectations would be a medium-term headwind for assets.

Banking Woes Re-Emerge As New York Community Bancorp Stumbles

New York Community Bancorp unexpectedly?reported?a net loss of $250 million and cut its dividend in response to $185 million in charge-offs stemming from two real-estate loans on Wednesday morning, January 31.

The news sent the stock tumbling 38% to the exact lows it reached last March during the regional bank panic, reigniting investor fears over the stability of the regional banking system. The KRE regional bank ETF traded down 6%.

NYCB?bought?the failed Signature Bank out of receivership from the FDIC last March. Their troubles come just as the Bank Term Funding Program is set to expire on March 11.

Bitcoin rallied and bond yields fell sharply in immediate reaction to the print, clouding the reaction to the Treasury’s QRA, as markets perhaps anticipated renewed troubles in the banking sector would lead to further liquidity measures from the Fed.

As a reminder, bitcoin rallied sharply in reaction to the creation of the BTFP last March.

Fed Holds Rates Steady

The first FOMC meeting of the new year came and went without significant changes in monetary policy.

Markets we’re not expecting any changes this meeting, but rather looking for clues as to whether or not the Fed would begin their rate cutting cycle at the March meeting, pricing in just shy of a 50% chance of a cut in March heading into Wednesday’s meeting.

Fed Chair Jerome Powell, however, threw some?cold water?on that belief.

“I don’t think it’s likely that the committee will reach a level of confidence (that inflation has come down enough) by the time of the March meeting”?Powell said during the Q&A portion of his press conference today.

Stocks were down and yields were flat in the wake of the decision, while bitcoin gave back the rally it had off the NYCB print.

Podcasts of the Week

The Last Trade E035:?The Bitcoin Heritage Blueprint with Matt McClintock

In this episode of The Last Trade, we spoke with Matt McClintock , the founder of Bespoke Group , to discuss the importance of legacy and estate planning within the context of bitcoin wealth. We explore the intricacies of properly securing one's wealth & propagating it across multiple generations to build a lasting legacy. We also introduce our new offering,?Onramp Heritage.

Final Settlement E002: Energy-Backed Money with Max Webster

In the second episode of Final Settlement, hosted by Brian Cubellis and Michael Tanguma , we're joined by Max Webster , founder of Hivemind Ventures. This episode dives deep into the technological underpinnings of bitcoin, exploring?the implications of energy-backed money, bitcoin's layers, Nostr, Lightning, rebuilding web architecture, & more.

Closing Note

Onramp provides bitcoin investment solutions built on top of multi-institution custody. To learn more about our products for individuals and institutions,?schedule a consultation?to chat with us about your situation and needs.

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Until next week,

Zack Morris