On this short holiday week, we provide a quick update on market action as well as wish our readers a Happy Thanksgiving.

Bitcoin closed 7.5% lower at $59,541 in the week ending on Sunday, but more recently, closed $56,280 on Monday. While bitcoin traded near and around $60,000 for much of the last month, the asset reached a closing high of $67,734 on November 9.

With no significant bitcoin-related news the culprit of this most recent pullback, market action seems likely to do with traditional trading and profit taking ahead of a low volume holiday weekend.

We point out that bitcoin’s high coincides with a rapid move higher in interest rates, as further inflation data has created calls for a faster pace of tapering as well as a quicker tightening schedule in 2022.

As a result, bond markets have experienced recent volatility. The 10yr treasury yield has moved higher from 1.42% on November 9 to 1.62% as of Monday’s close, and the curve has bear flattened in the same period. Momentum-related ETFs, such as Arkk Innovation, is now down 13.3% from its highs in November to Monday’s close. This rebalancing has likely stemmed partially to bitcoin, as its highs also coincide with these macro moves.

In other news, Jerome Powell was just renominated for Fed Chair, which provides consistency and transparency to the Fed’s process of normalization. While Lael Brainard could have been more dovish, Powell is certainly willing to provide accommodation when needed. This will support one of many bull-cases for bitcoin in the years beyond.

The infrastructure bill was also signed into law, including uncertain reporting language for a portion of crypto entities. A bipartisan team of senators have already put forth a bill to narrow such rules and provide greater clarity. We thank senators such as Cynthia Lummis (R-WY), Ron Wyden (D-Ore), and Pat Toomey (R-PA) for the work that they’ve done in supporting a runway for growth.

With bitcoin off ~17% from its close on November 9, an attractive buying opportunity is available for long-term investors. Bitcoin adoption continues to grow at a rapid pace, with estimates of over 200 million people using bitcoin and other digital assets.

The prospects into the end of the year and beyond remain incredibly bullish.

As always, please reach out with any questions or comments.

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Stay Tuned,

Joseph Orsini, CFA
Director of Research

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DISCLOSURES

Investment advisory and management services are provided by Eaglebrook Advisors, Inc., a registered investment advisor. Information presented is for educational purposes only. Past performance is no indication of future results. Please see our Form ADV Disclosures and Privacy Policy in our website.

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