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The crypto market experienced a strong rebound, buoyed by a recovery in tech stocks.
This follows a moderated CPI print that reassured investors of a contained inflation environment. November's CPI data showed shelter costs, a persistent driver of inflation metrics, increasing at a slower pace of +0.33%. This deceleration provides some relief but remains a notable component of the overall inflation narrative, particularly ahead of Inauguration Day and the potential implications of a Trump-led administration, including the risk of tariff policies.
We anticipate MicroStrategy (MSTR) will be included in the Nasdaq 100 (QQQ) today. The company's unique positioning as a to-be Bitcoin bank creates a diverse set of trading opportunities for a wide array of investors due to its highly volatile equity that trades at a premium to its Bitcoin holdings, and the downside protection of the convertible securities while providing some upside. A prolonged downturn in Bitcoin prices to roughly $20k could make the firm insolvent based on the current cost-basis of its bitcoin holdings, and a collapse in equity volatility remains a key risk.
Unlike prior cycles driven largely by leverage, this rally is spot driven. With Bitcoin nearing $100,000 and futures basis only at 15%, compared to last cycles peak at just below 50%, this cycle still has legs.
