Santa rally underway? Is BTC ready for its next move?

Global stock markets seem to be headed for an end-of-year 'Santa rally' as traders and investors return to their desks after the Christmas break, gearing up for the final push into 2024. The ongoing optimism surrounding the prospect of central banks initiating interest rate reductions in 2024, with multiple cuts expected next year, continues to propel shares higher after the US stock market experienced gains in light trading, bringing the S&P 500 index to its highest intraday level in nearly two years. This positions the S&P 500 just below 1% of its closing all-time high of 4,796.56 recorded in January 2022 with this rally reflecting investors' growing confidence in the ability of US policymakers to engineer a 'soft landing,' effectively curbing inflation without precipitating a recession with this sentiment gaining further traction after the recent US PCE index data revealed a deceleration in inflation last month. However, it is important to note that the situation in the UK is significantly more troubling after recently released data continues to indicate inflationary and economic issues in the economy as the Bank of England may have run out of moves.

ETF approval potential continues to move crypto markets

Institutional investors are directing capital investments into Bitcoin as the deadline for the U.S. Securities and Exchange Commission (SEC) to approve a spot BTC exchange-traded fund approaches. This trend is evident in MacroMicro's Bitcoin Futures Smart Money Index, a data tracking website based in Taiwan, which monitors the spread between large investors' long and short positions on the Chicago Mercantile Exchange. Derived from the CFTC's weekly Commitment of Traders report, the smart money index has witnessed a notable increase this quarter, driven by the narrative surrounding the potential spot ETF approval and growing expectations of a Federal Reserve rate cut in 2024. The SEC has reportedly set January 10 as the deadline for approving or rejecting an ETF directly investing in Bitcoin and while anticipations of substantial inflows into the asset class are high upon the potential ETF launch, it remains possible that the actual demand for the BTC Spot ETF may initially fall short of market expectations, possibly leading to a 'sell the news' scenario in January. In addition, the general economic uncertainty seen recently may lead many to be more cautious as the main theme for the beginning of 2024 will likely continue to be the ETF approval and interest rate decision by major central banks which could significantly impact market performance.