Welcome to BRC’s Breakdown.

“You think we needed rates cut?” is perhaps what the S&P and the two big cryptos scoffed at macro signals. Both the US equity index and the blue-chip crypto index shot up massively in what was a quiet week in the markets.

First, let’s see how the markets fared this week:

Here’s a preview of what we’ll cover:

• Macro: Equities Move Up While Commodities Struggle

• Crypto: Bitcoin Miners Have A Big Boost Coming

• AI: Gemini Is Here. No, Not The Crypto Exchange

• Week Ahead: New Year, New Hope For China?

Equities Move Up While Commodities Struggle

Global equity markets continued to move up led by growth & technology stocks (specifically semiconductors). The S&P 500 crossed the 5,000 POINTS market, a fresh record high. Among developed countries, Japan has been the big winner this year with the Nikkei up 10.26% for the year.

Bond yields moved up across countries as markets reduced the likelihood of US interest rates being cut in the next few months - following stronger-than-expected US economic data. In India, the Reserve Bank of India held interest rates unchanged.

The one weak spot amidst the discussion on a stronger global economy continues to be the Industrial metals segment. Copper, Nickel, Iron Ore, and Zinc are all down YTD. Surprisingly, gold is also down so far this year.

Crypto continued to perform strongly with US Bitcoin ETFs seeing sustained inflows. YTD, Bitcoin is up over 11%. This rally has happened with limited retail participation as evidenced by searches on Google for “Bitcoin” and “crypto” as well as volumes on retail crypto exchanges.

Bitcoin Mining Companies Have A Big Boost Coming

Bitcoin mining companies continue to move up as crypto prices improve in 2024. But this is only the beginning according to a report by Bernstein.

With the Bitcoin halving imminent the brokerage company expects Bitcoin mining companies’ stock prices to have bottomed. This is on the back of two events, one past one future. First, the approval of the spot Bitcoin ETF which mandates asset managers like Grayscale and Invesco among others to hold physical Bitcoin. Second, the imminent Bitcoin halving which is set to reduce the Bitcoin block rewards by half, from 6.25 BTC per block to 3.125 BTC per block.

The report by Bernstein said the halving, scheduled for April – May 2024 will sustain Bitcoin’s current momentum for the rest of 2024. Bitcoin is already up by 9% in 2024 and 65% in the past 6 months.

Bitcoin’s supply reduction won’t help all miners. Companies with high-cost mining equipment or overheads (like electricity) will see bottom lines shrink as block rewards (revenue) decline. The report said that the halving “looks to clear out high-cost miners, operating at unsustainable costs.”

Currently, BTC is trading at $48,000 or just short of Rs 40 lakhs a coin. This puts most miners in a good position given the current costs of mining. And post the halving, costs are expected to remain the same, with rewards declining. However, miners who can work through the economies of scale will come out better, while the others will be wiped out.

Gemini Is Here. No, Not The Crypto Exchange

Google just launched Gemini. Or rather renamed its earlier chat-based AI model, Bard to Gemini, eponymous with the crypto exchange founded by the Winklevoss twins.

"Gemini," aims to bridge the gap between iOS and Android apps. Gemini is a part of Google's effort to improve cross-platform compatibility and allow developers to easily create apps that work seamlessly on both operating systems. It consists of two components: Duet and Bard.

• Duet allows developers to write a single codebase for their apps that can run on both iOS and Android, simplifying the development process and potentially reducing costs.

• Bard is a tool that assists developers in optimizing their apps for different screen sizes and aspect ratios across various devices.

Google hopes that Gemini will encourage more developers to create apps for both iOS and Android platforms simultaneously, leading to a broader range of high-quality apps available to users on both operating systems.

Gemini's success could significantly impact the app development landscape, making it easier for developers to reach a wider audience and potentially boosting innovation in the mobile app industry. However, details about Gemini's release timeline and specific features are still limited, with Google yet to officially announce the project.

The Week Ahead

Interesting Reads

BlackRock’s Changing Attitude To Bitcoin

Rick Rieder, BlackRock's chief investment officer of global fixed income and head of global allocation, said his funds at the world's largest asset manager currently has a very small exposure to Bitcoin. But he said that could change along with public attitudes. Read it here.

Are Valuation Models Broken?

The S&P500 just made a new high last week, soaring past 5,000. But is the index overpriced? This article breaks down the index’s valuation using four valuation models.