Groundhog Day - Valkyrie

Groundhog Day

Last week, the annual Groundhog Day tradition had Punxsutawney Phil call for six more weeks of winter. For many parts of the country, that could mean more unpredictable weather than desired. For investors, the end of “winter” falls right at the time of the next FOMC meeting, which could bring more volatility and uncertainty in the weeks ahead. The unemployment rate rose to 4% on Friday, up 0.1% last month, with the change non-farm payrolls rising a notable 467,000, up from 199,000 last month.

Markets trended higher Friday following the well received news, with equities finishing up about 1% for the week. The S&P 500 is still recovering from January’s dip into correction territory, now only down about 5.5% year to date. The 10 year treasury yield continued to grind higher, finishing the week above the 1.9% level for the first time since late December 2019. Year to date, 10 year yield is up about 40 basis points.

Monday’s mild trading activity could be a signal of more of the same ahead of Thursday’s inflation related Consumer Price Index report, currently surveyed to rise to 7.3%, up from 7% last month, with CPI excluding food and energy surveyed to rise as well to 5.9%, up from 5.5% last month. Just as Bill Murray’s Groundhog Day movie suggests, same trading based on the cycle of economic indicators that caused a move last month. Being that Punxsutawney Phil has been right only 40% of the time over the past 10 years, hopefully investors see better color and transparency in the next trying months of winter.

On-Chain Update

Bitcoin (BTC) and Ethereum (ETH) continue to show significant bullish strength from January price lows after finding support in the mid-2021 price zone. Low timeframe moving averages, a strong indicator of trend and sentiment, are likely to cross bullish for BTC and ETH this week. Based on the 2021 price range, near-term volumetric resistance and support for BTC sits at $47,400 and $37,000, respectively. BTC and ETH have also begun decoupling from traditional market indices since the beginning of the month, a potential indication for a resumption of risk-on sentiment within the crypto sphere. Crypto markets have also strongly diverged from Gold, which experienced very little price change throughout 2021.

Several congressional hearings on digital assets and stablecoins are scheduled over the next few weeks. Continued conversations with legislatures, as well as any clarity on pending and future regulation, should be seen as maturation of the emerging crypto asset class.

Valkyrie in the Press

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The Portfolio Management Team

Steven McClurg, CIO
Bill Cannon, Portfolio Manager
Wes Cowan, Portfolio Manager, Head of Defi
Josh Olszewicz, Head of Research
Sean Rooney, VP Research and Trading
Will McDonough, Vice Chairman, Investment Committee
Leah Wald, CEO, Investment Committee
Shannon Smith, Head of Investor Relations