Will Ether (ETH) ETFs drive prices higher?

Thoughts of the Day

When Bitcoin Exchange Traded Funds (ETFs) were approved by the US authorities on 10 Jan this year, the price of BTC did not immediately rally upwards as the approval was already widely expected by the market before it happened. As such, there was the usual “buy the rumour, sell the fact” reaction. BTC prices struggled and fell more than 17% in the 2 weeks that followed and finally recouped the losses after a month. In the following month, it rallied more than 50% to make new highs. 

However, as investors became more familiar with the new investment option, money started flowing in. As of last Friday, a total of US$13.69 billion has been invested in the BTC ETFs. The price of ETH will likely follow this path as money from mainstream investors gets invested in the new ETFs. 

It could be volatile in the shorter term as those who bought ahead of the approvals take profit, but as new money flows in, the price of ETH will grind higher in the weeks ahead.
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Source: https://www.sciencedaily.com/releases/2024/05/240524171429.htm

Sure, we may be fascinated by ChatGPT and how it can respond to us like a real human. However, there are many applications of AI still in the works and soon we will hear more of these. AI is more than just chatbots and pushing you ads to buy more things.

Day Ahead

Canadian PPI (+ 0.6% MoM expected vs +0.8% prev, -0.5% YoY)
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What Happened Yesterday

Market Movements as of New York Close 27 May 24
  • The US stock and bond markets were closed for Memorial Day.
  • The crypto market rose slightly higher on a light trading day.
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Headlines & Market Impact

China sets up third fund with $47.5 bln to boost semiconductor sector

Notable Snippet: China has set up its third planned state-backed investment fund to boost its semiconductor industry, with a registered capital of 344 billion yuan ($47.5 billion), according to a filing with a government-run companies registry.

The hundreds of billions of yuan invested in the sector puts into perspective President Xi Jinping’s drive to achieve self-sufficiency for China in semiconductors.

That commitment has taken on renewed urgency after the U.S. imposed a series of export control measures over the last couple of years, citing fears Beijing could use advanced chips to boost its military capabilities.

The third phase of the China Integrated Circuit Industry Investment Fund was officially established on May 24 and registered under the Beijing Municipal Administration for Market Regulation, according to the National Enterprise Credit Information Publicity System, a government-run credit information agency.

The third phase will be the largest of the three funds launched by the China Integrated Circuit Industry Investment Fund, known as the “Big Fund.”

One of the major areas the third phase of the fund will focus on is equipment for chip manufacturing, Reuters reported in September. Also, the Big Fund is considering hiring at least two institutions to invest the capital from the third phase.

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The time is ripe to cut interest rates next week, European Central Bank’s Rehn says

Notable Snippet: Two key European Central Bank figures on Monday threw their weight behind the prospect of an interest rate cut next week, indicating that it is practically a done deal.

In a speech on Monday, Olli Rehn, ECB governing council member and head of Finland’s central bank, stressed that inflation in the euro area was falling in a “sustained way.”

“Thanks to this disinflationary process, inflation is converging to our 2% target in a sustained way, and the time is thus ripe in June to ease the monetary policy stance and start cutting rates,” Rehn said in a speech published on the website of the Finnish central bank.

“This obviously assumes that the disinflationary trend will continue and there will be no further setbacks in the geopolitical situation and energy prices.”

Meanwhile, the ECB’s Chief Economist Philip Lane said in an interview with the Financial Times, “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.”

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Gold, silver and copper rally has just taken a breather — new highs are not that far off, experts say

Notable Snippet: Gold prices have been rallying to record highs, with spot gold notching a new top of $2,449.89 per ounce on Monday. Silver too hit multi-year highs earlier last week, as did industrial metal copper.

While all three are off their perch currently, they are still trading hovering near record highs, with analysts expecting prices to strengthen over the next 12 months.

“While geopolitical risks continued to bolster haven demand, an impressive rise in China’s gold demand in Q1 2024 has largely fueled the price rally,” ANZ’s strategists wrote. 

China is currently the leading consumer demand for bullion, after the country overtook India in 2023 to become the world’s largest buyer of gold jewellery.

Chinese consumers have also been at the forefront of gold purchases, buying 603 tons of gold jewellery last year, a 10% jump from 2022, data from the World Gold Council showed. The WGC expects Chinese jewellery demand to stay at elevated rates this year, or even higher compared to 2023.

“Robust gains for industrial metals and the precious metals complex are underpinning financial and physical inflows and bullish sentiment,” Citi strategists said in a note earlier this month, adding that it’s a “bullish world for metals.”

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord