SignalPlus Macro Research Report (20230830): Grayscale wins the lawsuit and the encryption market rebounds strongly

Fixed income markets were forced to face reality yesterday as U.S. economic data hit a snag, with JOLTS employment data and consumer confidence both well below market expectations, the number of job vacancies in July was 8.827 million, a gap of about 4 standard deviations from 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; , the resignation rate fell from 2.4% to 2.3%, the lowest level since January and in line with pre-pandemic levels, with the lodging and food service industry seeing the biggest drop, from 5.1% to 3.9%; The unemployment-to-population ratio fell to 1.5 from 1.6, the lowest level since September 2021, but remains well above the 1.2 level that represents a healthier labor market, though other data have fueled expectations for weaker non-farm payrolls on Friday .

Conference Board consumer confidence index also weakens, came to 106.1, lower than the expected 116, down 8 points from last months revised figure, of which the current situation index and the expectations index were both weaker. It was the lowest level since April 2019, coinciding with the weakness in the JOLTS data.

Economic data suddenly softened and contradicted the 5.8% GDP growth forecast by the Atlanta Feds GDPNow model.The interest rate market corrected a bit, with 2yr yields down 16bps and the 2/10s yield curve bull-steeping 7bps, the probability of a rate hike in November fell from a high of 47% to 30%, the market saw a lot of short-covering volume, and there was a sharp squeeze in the 7-year bond auction, which yielded 4.212% , 2 basis points lower than expected, the total bid amount was US$95.9 billion, and the bid multiple was as high as 2.66 times, the highest level since January.

As markets grapple with rising real yields,The 0-day expiration (0 DTE) call-to-put ratio hit this year’s low in August, the time for a short squeeze is ripe, with the major U.S. stock indexes up 1.5-2%, while the most shorted stocks doubled; in addition, day trading and short-term strategies are still the mainstream,0 DTE options trading volume accounted for 50% of the total trading volume in the past month, hit a record high, and the market is expected to continue to see greater intraday volatility during the NFP, CPI, and September FOMC, a hallmark of the current data dependent narrative.

There has been some positive news on the cryptocurrency front, with an appeals court ruling in Grayscales favor, ruling thatSEC Must Reconsider Grayscales Bitcoin Spot ETF Application, Circit Judge Neomi Rao said,"The rejection of Grayscales proposal was arbitrary and capricious, and the Commission failed to explain its different treatment of similar products"At the same time, the SEC has approved the Bitcoin futures ETF; this lawsuit began in June last year, when the SEC rejected Grayscales request to convert its Bitcoin fund into an ETF on the grounds that spot BTC products have hidden concerns about market manipulation.

This decisive victory sparked a strong rally across the cryptocurrency market, with GBTC NAV narrowing from -25% to -18%, Coinbase up 15%, BTC/ETH up 5% in the last 12 hours, interestingly,BTC’s correlation with SPX and gold has quietly climbed back from 0 in July to near this year’s highs, with mainstream interest returning after a year-long hiatus, to see if recent positive regulatory news can keep correlations at current levels.

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