ETF Express: Week Ending 12 January 2024
- Ethereum (EETH) was the top performer last week off the back of Bitcoin’s historic ETF debut. Given Bitcoin’s success, investors are now confident that the SEC will also grant approval to Ethereum ETFs in their decision due May 2024.1
- Uranium ETFs (ATOM, URNM) were also a theme among the top performers of the week as spot Uranium prices rose above US$100 per pound for the first time since 2007.2 Kazatomprom, the world’s largest uranium producer by volume, warned of a possible supply shortage due to low stockpiles of sulphuric acid which is critical to the extraction of uranium.
- Crypto companies (CRYP) were the worst performers of the week as traders took profits on their successful bet that the SEC would approve US’s first ever spot Bitcoin ETFs. Bitcoin rallied as high as US$49,000 within 24 hours of the approval, before falling to US$42,000 over the weekend.3
- There were $226.5 million in reported inflows for the week and $226.9 million in outflows, marking a slight week of net outflows for the Australian ETF industry.
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US Bitcoin ETFs have Launched. Is Ethereum Next?
The US Securities and Exchange Commission (SEC) approved the first US-listed spot Bitcoin ETFs last Wednesday, in a historic move for both cryptocurrencies and ETFs.4 11 spot Bitcoin ETFs immediately entered the market and more than US$4.6 billion of units changed hands on their first day of trading – marking one of the biggest launch days in ETF history.5 Now, attention is turning to whether Ethereum will be the next cryptocurrency available via an ETF.
Spot Ethereum ETFs (which will track Ether – the underlying token of the Ethereum blockchain) are currently up for review with the SEC, but a decision is not due until May 2024.6 Industry heavyweights BlackRock, VanEck, and Invesco, are among those that have put in applications for their own versions of the fund.7 However, an Ether ETF approval is not guaranteed. In SEC Chair Gary Gensler’s statement to the media, he makes clear the SEC’s “action is cabined to ETPs holding one non-security commodity, bitcoin” and that the approval does not “signal anything about the Commission’s views as to the status of other crypto assets”.8 Nevertheless, investors seem confident Ethereum ETFs will eventually make it onto the US market – Ether prices rallied almost 10% on the confirmation of Bitcoin’s ETF approval.9
- Gold rallied last week as US and UK forces launched airstrikes on Houthi militants based in Yemen. The Houthi have since threatened to respond with attacks of their own, risking further escalation of the Middle East.11
- The US producer price index (PPI) unexpectedly fell by 0.1% in December, a sign inflation may be subsiding. Gold prices bounced on the news as traders priced-in a slight increase in the likelihood of a Fed cut in March.12
- The overall likelihood of a Fed rate cut in March has fallen more than 10% since late December 2023. According to CME’s Fedwatch tool, markets had priced-in a 90% chance of rate cuts occurring in March on December 27th, 2023. Traders now think there’s a 79% chance for that same rate cut to still happen.13
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- Shipping operators Hafnia, Torm and Stena Bulk have stopped all traffic toward the Red Sea after the US and UK Airforce commenced airstrikes on Houthi militants in Yemen. The three companies are some of the world’s largest gasoline and petroleum tanker operators in the world.14
- Global consumption for petrol and crude oil hit a record high last year and is expected to further increase until 2025. The world used more than 101.1 million barrels per day (bpd) in 2023, which beats the previous record of 101 million bpd set in 2019.15 Looking forward, analysts expect the world to consume roughly 102.5 million bpd in 2024, and close to 104 million bpd in 2025.
- The OPEC operated with more than 4.3 million bpd in spare capacity in 2023, up from 2.5 million bpd in 2022.16 This excess production capacity means there should be more than enough supply to cope with incoming demand growth and any supply interruptions.
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- Uranium spot prices broke above US$100 per pound for the first time since 2007 after Kazatomprom, the world’s largest producer of uranium, warned there may be a shortfall in supply over the next two years due to a shortage in sulphuric acid, which is essential for extracting uranium from ore.17
- The UK and US are investing up to £300 million and US$500 million respectively to support domestic production of high assay low enriched uranium (HALEU) fuel that is essential for the operation of small-modular reactors (SMRs).18,19 HALEU fuel is currently only produced in Russia and both nations are looking to detach their uranium supply chain from the widely sanctioned nation.
- Year-to-date, all five of the top performing companies on the ASX All Ordinaries benchmark are uranium related stocks.20
- Morgan Stanley forecasts physical uranium prices to average US$85 per pound across 2024 and notes the current rally may be over-extended. The investment bank’s bull case currently sits at US$119 per pound for 2024.21
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Forecasts are not guaranteed, and undue reliance should not be placed on them. This information is based on views held by Global X or referenced sources as at 16th January 2024.