BTC AUM is close to gold GLD: Technology stock funds outflow for the first time in 2 months

Author:LD Capital

Market Summary

In terms of U.S. stocks, although Tesla, Apple, and Google among the "Big Seven" stocks have performed poorly this year, other stocks such as Nvidia and Meta have performed strongly, and the overall market continues to hit new highs. However, chip stocks experienced a sharp correction on Friday, with NVDA experiencing its largest single-day decline in more than nine months - 5.6%. Considering that earlier in the session, NVIDIA's stock price rose by 5.1% and AMD's stock price rose by 7.5%, the market seemed There is a tendency to take profits.

Due to the current positive sentiment that AI dominates the entire market, chip stocks lead the entire risk asset market, and NVDA takes the lead, so we must pay close attention to the progress of this stock. . Of course, it is difficult to find fault with the company's current fundamentals. The valuation is high but not exaggerated. The main bearish views are as follows:

Supply is catching up with demand. Nvidia's chip delivery time shortened from as long as 11 months to three months, indicating an improvement in supply, which may affect its sales growth.

Facing more fierce competition. Because not only AMD is gradually making progress, but more importantly, NVIDIA's major customers, including cloud service providers and Tesla, are designing independent AI chips.

Technical callback. Driven by technology stocks, the Nasdaq and S&P Index rose hugely, and the market was fearful of highs. If the Federal Reserve makes unexpected moves, it may trigger a sharp decline in technology stocks.

Too much profit taking. Since the stock price has been rising unilaterally, some investors who have made huge profits may take profits after the upcoming GTC conference, causing the stock price to fall back.

< p style="text-align: left;">BTC and gold both hit record highs last week. During the recent rise in Bitcoin and gold prices, the explanatory power of the traditional framework is obviously insufficient. U.S. bond interest rates and the U.S. dollar exchange rate have only fallen slightly, and risk aversion has not increased significantly. sign. The logic of alternatives to the existing fiat currency system is dominating these alternative investment markets.

< p style="text-align: left;">The non-agricultural data on May 5 was mixed and not enough to change market expectations too much, but it was generally understood as a dovish signal, advancing the market's expected time for the Fed to cut interest rates. Interest rate market yields edged lower, while stocks rose before falling. Goldman Sachs believes that this pullback is a good buying opportunity given that employment data supports interest rate cuts. Slowing wage growth should be a positive sign for Tuesday's CPI data.

CryptocurrencyBTC ETF almost equals GLD

The recently listed spot Bitcoin ETF in the United States continued to accumulate Bitcoin last week - currently holding about 4% of 21 million Bitcoins worth $54.6 billion, almost tying the largest gold ETF GLD of US$56 billion AUM.

< p style="text-align: left;">According to a public document this week, BlackRock applied to the SEC to add spot Bitcoin to its AMU $18 billion Global Allocation Fund and AUM $36.7 billion Strategic Income Opportunities Fund. ETF exposure.

These news show that a new trend has just begun, that is, the allocation of passive asset management. These asset management plans will allocate BTC as an alternative asset into the portfolio. A considerable number of asset managers will adopt a fixed ratio allocation strategy, such as a fixed 1% AUM ratio. When adjusting positions every quarter, the holdings will be reduced if the ratio exceeds it. As for increasing holdings, these strategies often do not consider the absolute valuation of BTC, which will greatly increase the thickness of the BTC market.

According to our calculations, the total size of open-end funds that can potentially allocate BTC is 9.7 trillion US dollars. It is conservatively assumed that only 0.5% to 1% will be allocated to BTC. It may bring in capital inflows of US$48.5 billion to US$97 billion.

If we assume that the supply and demand of the existing BTC market are balanced, we do not consider the transfer of existing stocks, but only consider the global institutional management[New]Fund allocation part Looking at the BTC market, we conservatively assume that the capital flow corresponding to each newly produced BTC with a 0.5% new allocation may reach US$174,000 this year. Although this cannot be used as an accurate reference, we can indeed see the potential capital inflow. The space is huge.

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Founder of 10X Research Markus Thielen, the founder and CEO, issued a message on Saturday to warn of short-term risks. He believes that the Bitcoin/cryptocurrency market is currently overheated and potential downside risk consolidation should be carefully managed. US ETF flows are no longer the main driver of Bitcoin.

Macro events of the week

Global central banks are currently Wait-and-see attitude:

The European Central Bank and the Bank of Canada adopted a wait-and-see approach in March, emphasizing data dependence. The ECB forecasts downward revisions to both growth in 2024 and core inflation in 2025.

It is expected that by mid-2024, most major central banks will begin to cut interest rates, with global policy rates falling by an average of 1.4 percentage points.

Europe may cut interest rates faster than the United States:

Based on historical circumstances, central banks in developed countries usually cut interest rates three times in a row before slowing down during the soft landing period. The pace of rate cuts tends to accelerate if inflation is below target and economic activity deteriorates or interest rates are well above neutral.

Employment and income growth:

U.S. employment in February The number of people increased by 275,000, significantly exceeding expectations of 200,000. While February's job gains look optimistic, the weak household survey and rising unemployment rate reveal some underlying instability in the job market. Wage growth was lower than expected, with average hourly earnings (AHE) rising 0.14% month-on-month, lower than the 0.2% expected. The unemployment rate rose 0.2 percentage points to 3.9%, higher than the forecast of 3.7%. These breakdowns may be a positive sign for controlling inflation, but they may also put some pressure on consumer spending.

Corporate profit margins are expected to remain high in 2024:

According to Goldman Sachs' latest forecast, non-financial corporate profits will fall from 17% of GDP in 2022 to an average of 16% in 2023, but will still be higher than the 13% in the fourth quarter of 2019. The economy-wide non-financial profit margin is expected to rise slightly to approximately 16.3% in 2024.

China’s macro policy objectives and stance:

Macroeconomic targets:At the National People's Congress, policymakers set a 2024 GDP growth target of 5%, in line with broad expectations.

Fiscal policy: China’s official fiscal deficit target is set at 3.0% of GDP (compared to 3.8% in 2023) , the market's first reaction was to be disappointed with this number, but then also realized that this official number may not fully reflect the government's actual financial support for the economy. Taking into account a wider range of fiscal activities and policy measures, including but not limited to bond issuance, spending on specific projects, government-guaranteed loans, etc., these may not be directly reflected in the standard fiscal deficit ratio. Goldman Sachs expects this implicit stimulus to be at least an additional 0.7%.

Monetary and Real Estate Policy: Although no major new measures were announced, China’s monetary and real estate policy stance remains supportive and has New expressions and new formulations have been introduced, such as handling hidden risks in a safe and orderly manner, improving basic systems related to commercial housing, and meeting diversified and improved housing needs.

Economic data: As a focus of the government’s economic strategy, China’s exports increased by 7.1% year-on-year from January to February, far from Higher than expected 1.9%; China's trade surplus hit a record high of $125 billion, and imports also increased by 3.5%. February's manufacturing purchasing managers' index (PMI) was also slightly better than expected.

Asia and emerging market economic data:

Asia 2 Month’s inflation data generally rose and exceeded expectations:

- South Korea’s CPI rose 30 basis points year-on-year to 3.1%;

-Taiwan CPI increased by 130 basis points year-on-year to 3.1%;

-Philippines CPI increased by 60 basis points year-on-year to 3.4%;

- Indonesia’s CPI increased by 20 basis points year-on-year to 2.8%;

- Tokyo, Japan’s CPI increased year-on-year 80 basis points to 2.6%;

- Thailand’s CPI increased by 30 basis points year-on-year to -0.8%.

Manufacturing PMI has mixed performance:

-China, India, Philippines and Australia PMI increased;

- PMI decreased in South Korea, Japan, Taiwan, Thailand and Indonesia;

- PMI in other regions was generally stable.

Funds and positions

Technology stocks have risen for two consecutive months The inflow was suspended;

Bitcoin and gold futures OI hit record highs, and ETH was slightly inferior;

">Growth and Momentum stocks are seriously overbought;

Chinese stock markets saw sharp inflows again after a week of brief outflows;

Nasdaq speculative longs fall to lowest since last fall;

Gold and Bitcoin prices fall as secondary market yields fall Both hit record highs, and positions in gold and Bitcoin futures increased significantly. Gold open interest has increased by US$20 billion to US$98 billion in the past two weeks, but the momentum of continuous outflows from gold ETFs has not changed. GLD holdings have outflowed 11.8 tons during the same period, showing that the buyers are not financial market investors but central banks and physical entities. gold buyer.

< p style="text-align: left;">CME Bitcoin contracts increased by US$1.7 billion to US$10.37 billion last week, and including cryptocurrency exchange contracts increased by about US$5 billion to US$32.36 billion, both of which continued to hit record highs .

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However, the number of positions denominated in BTC, including cryptocurrency exchange contracts, is only 460,000. There is still nearly 50% room for growth from the historical high of 678,000 in November 2022. There is also room for growth of nearly 50%. Showing that market capital and sentiment in the "traditional" currency circle have not yet returned to previous extreme levels:

Ethereum CME for ETH The currency-based position also hit a record high last week, showing that Wall Street funds are indeed interested in participating in the next physical ETF game. However, the range of new highs is much inferior to that of BTC.

< p style="text-align: left;">Looking at investor types, the net short positions and net long positions held by hedge funds and asset managers respectively hit record highs last week:

According to Goldman Sachs PB statistical caliber, the U.S. stock market experienced net buying for the second consecutive week, with long buying exceeding short selling, with a ratio of approximately 1.6 to 1. The top net buying sectors were communications services, industrials, utilities and real estate. The largest net selling sectors were energy, health care, consumer discretionary and materials. Communications Services last week saw its largest notional net buying in more than five months +1.2 standard deviations.

< p style="text-align: left;">Momentum stock continues to perform strongly, and everyone has been worried that the rally in stocks with strong momentum will run out, but the market still shows signs of artificial intelligence, improving corporate profits, receding concerns about recession, and repeated cryptocurrency Confidence in long-term themes such as innovation. The momentum factor calculated by Goldman Sachs has risen by more than 20% this year, setting the best performance for the same period in history. Judging from the Relative Strength Index (RSI), Momentum US stocks have entered the severely overbought zone, higher than the 99% historical quantile level.

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From the perspective of long and short positions, hedge funds are extremely fond of momentum factors and growth stocks, and the level of crowded trading has reached a record high:

Large-scale growth stock positions enter 2009 Historical 96th percentile:

According to the EPFR statistical caliber, funds have flowed into currency funds, investment-grade debt funds and stock funds significantly, with record inflows into cryptocurrency funds and outflows from technology stocks and energy. stock funds.

< p style="text-align: left;">Tech funds see record outflows of $4.4 billion, ending two months of inflows

After a brief week of outflows, Chinese stocks continued to see significant inflows last week US$3.8 billion

Subjective investor positions remain basically unchanged, while systematic investor positions decrease slightly:

CTA fund positions remained flat last week , located at the 90th percentile of history

Nasdaq futures net longs fell for third straight week, to levels last fall:

Mainly composed of Due to short selling by hedge funds, the current short level is close to the highest level in the past three years:

The impact of the election

In the past three presidential elections, of course this coincided with the halving cycle, so During the 2012, 2016, and 2020 U.S. elections, Bitcoin’s average return in those years was 192%, with Bitcoin rising by more than 100% in each year. So based on 192%, we started the year at $40,000 and by the end of the year Bitcoin could reach $125,000.

Trump is currently leading the polls. If he wins, possible monetary and economic policies include:

There is no large-scale tax reform like the last time

Emphasize "protectionism", increase tariffs, and expand trade wars (bad for the stock market)

< p style="text-align: left;">Relaxing regulations in the financial and environmental fields (good for the stock market)

After Trump is elected, he may ask the Federal Reserve Apply pressure to maintain lower interest rates (good for the stock market)

The Fed hopes to prevent an economic recession by keeping a low political profile before the election (good for the stock market)

< p style="text-align: left;">Pay more attention to suppressing inflation (good for the bond market) than maintaining employment

In history, Biden and Trump The best-performing assets during the election period did not include BTC. BTC rose by 400% during the Biden period and 1,900% during the Trump period. Interestingly, the returns of crude oil, the U.S. dollar, South American stock markets, Asian stock markets, and bonds were The two presidents were almost complete opposites during their administration:

Market Sentiment

Investor survey sentiment climbed to an 11-week high, entering the top tenth of history.

Institutional Perspective

[GS : The volume of repurchases is expected to increase significantly this year and next year]

The current scale of corporate repurchases far exceeds the scale of corporate newly issued stock financing. A Goldman Sachs report predicts that the scale of stock repurchases implemented by U.S. listed companies will reach $925 billion in 2024, a year-on-year increase of 13%. Looking forward to 2025, Goldman Sachs expects the scale of repurchases to further increase to US$1.075 trillion, a year-on-year increase of 16%. Buybacks remain one of the most important supporting forces for U.S. stocks.

[JPM: bit Is the allocation ratio of coins higher than that of gold? 】

JPMorgan Chase mentioned in a report last week that only 7% of the US$3.3 trillion invested in gold Or $230 billion is held in ETF format. If the Bitcoin ETF can reach 230 billion, the market value of Bitcoin may increase from US$1.3 trillion to US$3.3 trillion.

But considering that Bitcoin is 3.7 times more volatile than gold, Bitcoin should account for a lower proportion of the investment portfolio. Simply use 3.3 trillion US dollars / 3.7 = 0.9 trillion US dollars, which corresponds to a Bitcoin price of 45,000 US dollars. So the current price of more than 60,000 means that the implicit allocation to Bitcoin in everyone's investment portfolio has exceeded that of gold.

Still using the so-called "vol ratio" (volatility ratio), divide the gold ETF's market value of $230 billion by the volatility ratio of 3.7 = $62 billion. The author believes that this is an asset management goal that Bitcoin ETF can achieve conservatively. It’s already 52 billion.

Original link: https://www.bitpush.news/articles/6364978