Happy Tuesday, all, and welcome back to this week’s market newsletter. Please see below this week’s market data.

Market Overview

• Equities close in the red on a brutal week: Equities took a beating last week following Fed Chair Jerome Powell’s press conference where he indicated that the Federal Reserve would slow rate cuts in 2025. All the major indices closed in the red week-over-week; the Dow fell 2.3% to 42,840.26, the S&P 500 fell 2.2% to 5,930.85, the Nasdaq fell 2.2% to 19,572.60, and the Rusell 2000 fell 4.4% to 2,242.37. As of market close on December 17, the Dow had fallen for nine consecutive days, the longest streak since 1978. 
• Oil falls while natural gas rises:
  • Oil prices dropped last week, with a strengthening dollar and continued concerns about demand from China as a backdrop. Brent Crude fell 1.7% week-over-week to $72.59/barrel by the end of Friday.
  • Henry Hub also rose substantially last week for the second week in a row, surging 3.5% to $3.75/MMBtu. As expected, the onset of winter is pushing prices up, but the United States is also bottling less gas (U.S. producers drew 100.7 billion cubic feet per day in November, versus a record of 105.3 Bcf/day in December 2023) at a time when exports are ramping up (U.S. natural gas exports hit an 11 month high in November, as demand from Asia ramps up even as EU demand is 17% below the five-year average). 
• Federal Reserve slashes rates but signals for fewer cuts in 2025: The Federal Reserve cut its benchmark rate by 25 bips to a range of 4.25-4.50% last Wednesday, the third reduction this year and one which brings interest rates back to their December 2022 level. Following the cut, the central bank is updating its guidance, signalling that it plans to only cut rates twice in 2025 (versus a previously forecasted four cuts), twice in 2026, and once in 2027. “With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive…We can therefore be more cautious as we consider further adjustments to our policy rate,” Fed Chair Jerome Powell said in the post meeting press conference. Treasury yields rose falling the press conference.

• As Fed becomes less dovish, the dollar strengthens: We can hardly call the Federal Reserve’s plans to only cut rates twice next year hawkish, but the move is certainly less dovish than market participants expected. Perhaps accordingly, the dollar is strengthening, with the DXY rising 0.6% to 107.81 last week.
• Mortgage rates jump despite rate cut: Even though the Fed cut rates last week, mortgages haven’t responded in kind. With potentially fewer cuts than expected in the near future, Freddie Mac’s average 30-year mortgage rate jumped to 6.72% from 6.6% the week prior, ending a three week streak of declines.
• EIA estimates a record year for power consumption in 2024, predicts the same for 2025: The U.S. Energy Information Administration reckons that 2024 will be a record year for energy consumption in The States, and it expects more of the same in 2025. The EIA expects 2024’s power demand will clock in at 4,086 billion kilowatt-hours (kWh), and it’s forecasting 4,165 billion kWh for 2025, compared to 4,012 billion kWh in 2023 and 4,067 billion kWh in 2022. 
• VIX spikes to second highest level following Fed meeting: The VIX Volatility Index surged to 27.62 last Wednesday following the Federal Open Market Committee meeting, the second highest level of the year behind August 5’s print of 38.57.

The week ahead in data:

• The Conference Board Consumer Confidence report (Monday)
• U.S. Census Bureau Durable Goods report (Tuesday)
• U.S. Census Bureau Durable New Homes report  (Tuesday)
• Weekly unemployment claims from U.S. Department of Labor (Thursday)
• EIA petroleum report (Thursday)
• U.S. Census Bureau International Trade in Goods and Services report (Friday)

Bitcoin Market Update

• Bitcoin started last week on a high, cresting to a new zenith of $108,000. But it eventually backslid along with the broader market, falling below $100,000 to a December low of ~$92,000 on Friday before snapping back to $97,000. At the time of publication, bitcoin is trading at TKTK.$97,000
• Talk of a so-called Strategic Bitcoin Reserve (SBR) in the United States has begun to hit up in Bitcoin circles to a mix of applause and derision. President-elect Donald Trump said outright during his keynote at the Bitcoin 2024 Conference in Nashville that he would establish a SBR simply by refusing to sell the roughly 210,000 BTC the government holds as a result of seizures from the Silk Road and the like. Going further than this, Senator Cynthia Lummis (R-WY) proposed a bill for a purchasing program for the U.S. Treasury to accumulate up to one million BTC. Outside of the Legislature, there are a few paths the Executive could take to accumulate bitcoin under a reserve, as outlined by the Bitcoin Policy Institute. Whether or not the United States establishing a SBR is desirable is the subject of heated debate.

Interesting Reads and Videos

• John Carvalho, the CEO of Bitcoin services company Synonym, recently authored a Bitcoin Improvement Proposal (BIP) to formally name the smallest fractional unit of a whole bitcoin as a bitcoin in Bitcoin Core, Bitcoin’s primary software client. In other words, this would display “0.00000001 BTC” as “1 BTC” in wallet interfaces that adopted the change. This is unlikely to be adopted by Bitcoin Core (or any major wallets or exchanges), and even if it were adopted, it would do nothing to change Bitcoin’s unit economics or supply – only how we account for it. But nonetheless, it sparked interesting discussion, both for and against the proposal, about the semantics of microunits for Bitcoin, which are most popularly dubbed “satoshis” or “sats.” 
• Bitcoin Miner Phoenix Explores Nasdaq Listing with New CEO
• Bitcoin Traders No Longer Chasing Record Price Rally Like Before, Options Data Show

 Bitcoin Mining Market News and Trends

• Public miners add to bitcoin stacks: MARA and Hut 8 have plowed dollars raised through convertible notes into bitcoin, fattening their stacks. Last week, MARA announced that it had added 15,574 BTC (~$1.53 billion) to its balance sheet, while Hut 8 added 990 (~$100 million). As we covered last week, public miners – namely, MARA, Hut 8, and Riot – have been following in the steps of Microstrategy, issuing convertible notes with the stated intention of buying bitcoin.
• A new public miner emerges: A new publicly traded bitcoin miner snuck out of the woodwork recently after a quiet pivot to mining. Cango, a Chinese automotive financial services company, purchased 32 EH/s of on-rack S19 XPs from Bitmain in November, and it has another 18 EH/s under contract with another company owned by Bitmain’s former CFO. At 32 EH/s, Cango is now the third largest public miner by self-mining hashrate, and the addition of 18 EH/s (a deal expected to close by March 31, 2025) would put it on par with MARA, the largest public miner in the game. As it stands, Cango’s stock has surged 400% year-to-date, but it’s still trading at a much lower EV/Hashrate multiple compared to its peers. 

Thank you for reading, please feel free to reach out with any questions, and Happy Holidays and a Happy New Year!

Christian Lopez