While we hope you enjoyed downtime during the holiday season and a lazy warm January, markets were buzzing with news and excitement. Crypto markets experienced multiple significant waves as massive players entered the market. We bring you another packed Rake Review to fill you in on the important and interesting developments.

Inflation numbers out of Australia showed official inflation (CPI) at a relatively low 4.1% down from over 5% last quarter. The quarterly increase was the smallest in almost 2 years. 

Why is this important? Well, everyone is closely following inflation numbers to see if the RBA will be likely to end its record breaking tightening policy and start lowering interest rates. Home owners (Variable Mortgage holders) are hurting from the quick rise in rates over the last year especially and this is starting to bite in the real economy.

If the loosening begins, we may see very bullish conditions for asset prices. Property could rise for the first time since rates started to bite and equities are already on a bullish path. However, Bitcoin and the wider crypto market could be the biggest winners. There are many reasons for this view. Firstly, Bitcoin's higher volatility pays dividends in a bullish and low interest rate environment (not literally). Secondly, Bitcoin could be a winner because this will coincide with the bullish part of the Bitcoin cycle. Bitcoin is already on a winning path with the halving approaching and the US Spot ETF's approved. Adding in to the mix improved homeowner cashflow and we could see a Bull Run for the ages!

In terms of Market Cycles, we are heading to the juicy part of the cycle where the biggest profits are made. If history is a guide, Bitcoin is heading towards the Hope & Optimism stage this year and possibly complete Thrill and Euphoria in 2025. Now History is just a guide and this time could be different but the exact same conditions exist. A whole new wave of Buying (Demand) is here with ETF's buying in bulk against the backdrop of Bitcoins fixed supply. There will only be 21 Million!

On the first day of trading Bitcoin ETF's saw $4.6 Billion in inflows with Blackrock doing over $1Billion alone.  The below graph shows the ETF inflows by fund. As the ETF's swallow more and more Bitcoin it will become evident that there is not enough to go around and the price will reflect that monumental demand shift.

Everyone has probably heard about the disaster that was FTX in 2022. The exchange went down in metaphorical flames and took with it the whole market leading to sub $17,000 Bitcoin and the absolute panic of November 22. 

It was all caused by FTX's subsidiary trading company Alameda Research losing Billions on the biggest trade of the last Bull market cycle. The GBTC premium trade brought down some huge names that are no longer here. We won't go into it too deeply here but its really the central issue that brought the last bull run to a premature halt. We thought that SBF (Sam Bankman-Fried's) Trial would be the last we heard of that sorry saga however that hope was a tad premature. The great news of the ETF approvals was dampened by the fact that the FTX bankruptcy estate is now finally able to get rid of its GBTC shares and in turn the sale of BTC which pushed the market lower for the biggest DIP we've seen for months.

After a stellar run for Bitcoin and the Alts, Bitcoin dipped in the post ETF approval "Sell the Rumour" phase spurred on by FTX related BTC sales. BTC fell from over $47K to under $39K USD in a fall described by one crypto OG as "What is this a crash for Ants?"

The old heads know that a 15-20% correction on the way up is a healthy consolidation. It was however interesting to see that many were panicking and expecting BTC to fall below $38K USD. It got us thinking about the fear that investors experience being an even more powerful motivator than greed at times.

In the field of behavioural economics there is a concept called "Loss Aversion". This concept states that the emotional and psychological impact of a fall is perceived by investors as more impactful than a gain of the same exact magnitude.

In other words people are irrationally affected by falls more than they should be. It's an interesting concept and we think it played out nicely in January. Here is an asset that is up over 100% even at the very worst of the DIP since November 22. Every investor on this ride should be happy but yet many were fearful. Here is an asset that is heading to a supply shock (The halving) at the exact time of a demand shock (ETF approval) and yet a small fall sees some want to sell.

Well a week on from the worst and BTC has already recovered 10% and Alts are also bouncing. The constant buy pressure from the ETF's is eating up all the cheap BTC from any panicked weak hands.

• Short term pain vs long term gain. FTX/GBTC drawdowns weigh on BTC price in January as ETF demand starts in perpetuity 140,000 BTC was bought in the first 11 days of the ETF's operation.
• In signs that the US economy is over the Banking crisis on 2023 and moving towards a new expansionary cycle of interest rates the Fed Board announced it will be ending the BTFP program propping up the banking system.
  
• Coinbase appeared in court defending itself against the SEC. The SEC has come off significant defeats against its crypto over regulation recently with the largest of those defeats to GBTC. Coinbase is also likely to win with the giant exchange trying to work with regulators without any luck so far.
  
• Dr. Arthur Leffer says “You can have a system that uses #bitcoin as the monetary base”, seemingly endorsing the possibility of major economies being based on BTC. An incredible statement from the "Father of supply-side economics".

In case you wanted to know what the worlds leaders were discussing at Davos January 2024. I guess Covid-19 is no longer an issue.

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