Welcome to the Forward Guidance newsletter, brought to you by Casey Wagner and Ben Strack. Here’s what you’ll find in today’s edition:

• After BTC breaks $86,000, a closer look at how the asset is worth five times what it was two years ago. 

• The election may have you feeling like it’s 2016, but things are very different. 

• It’s a busy week of Fed speakers and inflation data. Stay up to date with Forward Guidance.

BTC surging 2 years after FTX’s demise

It’s Veterans Day. It’s also now known as the day bitcoin climbed above $86,000 for the first time. 

And, oh yeah, that crypto exchange filed for bankruptcy exactly two years ago. FTX, I think it was called. Not to mention US spot bitcoin ETFs launched 10 months ago, today.

First, about bitcoin: Donald Trump’s crypto-related promises and ultimate election win (along with pro-crypto Congress members) certainly has sparked additional industry euphoria.  

Bitwise’s Matt Hougan had said he expects BTC to hit $100,000 by the end of the year and continue upward in 2025. Aside from the expected general crypto regulatory clarity, he and others continue to point out the possibility of BTC becoming a US reserve asset — an idea floated by US Sen. Cynthia Lummis.

“I think it makes it a harder market to short because we could wake up at any moment and the US could be establishing a strategic bitcoin reserve or another country could be front-running the US establishing a strategic bitcoin reserve,” Hougan explained. “That was just a wild idea that you couldn’t consider [before].”

There were rumors that a nation-state snatching up BTC was driving the latest price boost. We did find out that the company best known for hoarding BTC made another big purchase (more on that later).

Blockworks co-founder Jason Yanowitz summed up the crypto market vibes with a screenshot of a Monday research note from financial firm Bernstein: 

“We recommend investors who have so far remained shy of any crypto exposure due to regulatory concerns invert their mental model,” the analysts wrote. “We are in a regulatory tailwind zone now.”

Some have warned of short-term “retrenchments,” or dips, as we know BTC is a volatile asset.

Copper.co research head Fadi Aboualfa also cautioned that securities laws won’t change overnight, and that BTC remains closely tied to broader economic forces.

“Inflation is still elevated, interest rates haven’t eased, and the US dollar remains strong; these forces are not sustainable in tandem,” he wrote in an email. “One will eventually weaken. The real question is: Which one, and why?” 

Taking a step back, it’s pretty wild that BTC reaching a new peak comes exactly two years after FTX filed for bankruptcy. Re-reading a piece I wrote on Nov. 11, 2022 — titled “What’s next for FTX and its customers after bankruptcy filing?” — was a bit surreal.  

Bitcoin’s price had dropped to as low as about $16,000 that month. That’s less than one-fifth of what it is today. 

Sentiment seemed to shift a bit when BlackRock entered the race to launch a spot bitcoin ETF in June 2023. Less than seven months later, the SEC greenlit those products; BTC eclipsed $73,000 a couple months after that — a high that would stand until election night last week.

Today is an even 10 months since the US spot BTC ETFs launched. Net flows into those products hit a single-day record of nearly $1.4 billion on Nov. 7. After reeling in another $293 million on Nov. 8, the category’s total inflows now amount to more than $25.8 billion.

These vehicles are poised to play a big role in allowing institutions wanting exposure to bitcoin (particularly in a friendlier environment) to more easily execute that desire.

Then there are the other planned spot crypto ETFs, which industry watchers noted would have a better chance of gaining approval in the short term with a Trump win and new SEC leadership.

 Dare I ask: What could go wrong?

— Ben Strack

The number of BTC that MicroStrategy bought between Oct. 31 and Nov. 10, the company revealed Monday. It paid $2.03 billion in cash for the bitcoin (avg. price of $74,463).

The business intelligence firm now holds a staggering 279,420 BTC total. This latest purchase comes shortly after MicroStrategy shared its intent to buy more BTC by raising $21 billion from equity issuances and another $21 billion by issuing fixed income securities.

Shares of MSTR were up 22% on the day, as of 2 pm ET.

You may be experiencing some déjà vu. But for the Fed, 2024 is very different from 2016. 

While our president-elect and his ambitious economic plans (tax cuts, tariffs, stricter immigration policies) are the same today as they were eight years ago, the economy is in a vastly different place. Last week’s election results may have come too late for committee members to consider them in their interest rate decision, but there is still one more meeting before the end of the year. 

Back in December 2016 (roughly six weeks after Donald Trump was elected for his first term), the FOMC, as expected, raised interest rates for the first time in a year. What came as more of a surprise was that committee members — including current Fed Chair Jerome Powell — went on to increase the pace of rate hikes for the following year. 

“Many participants noted that the effects on the economy of such policy changes, if implemented, would likely be partially offset by tighter financial conditions, including higher longer-term interest rates and a strengthening of the dollar,” according to minutes from the FOMC’s December 2016 meeting.

Inflation is higher than it was in 2016, and the Fed is just at the beginning of its rate-cutting cycle. The labor market is in a precarious position, one that could be disrupted by Trump’s mass deportation plans. Prices on goods and services are easing, but higher tariffs pose a threat. 

We’ll get some Fed speak this week that could shed some light on the central bank’s plans. The next policy-setting meeting is slated for Dec. 17-18.

— Casey Wagner

Happy Monday! With the election almost behind us — there are still some races that are too close to call — the focus this week is back on inflation. We also have several scheduled Fed speakers who could shed some light on what’s to come next month. 

• The headline report this week will be Wednesday’s CPI print, expected to show a 2.5% year-over-year increase for October. That would be a slight increase from September’s +2.4% annual reading. Core CPI, which excludes volatile food and energy, is expected to remain unchanged over the month and year. 

• Fed Governor Chris Waller and Richmond Fed President Tom Barkin will kick off a busy week of Fed speakers tomorrow morning. On Wednesday we will hear from NY President John Williams, Dallas President Lorie Logan and St. Louis President Alberto Musalem before Powell takes the stage Thursday afternoon.

— Casey Wagner

• The stock price of crypto exchange Coinbase had jumped by 23% on Monday, as of 2 pm ET. Shares were around $333 at that time, marking a three-year high. 

• Assets under management in crypto investment vehicles reached a record $116 billion at the end of last week, according to CoinShares data. This rise was driven by post-election net inflows of roughly $2 billion and asset price increases. 

• While BTC surged to a peak on Monday, ETH gained 4% over 24 hours, hitting $3,340 at 2 pm ET. The asset remains nearly 32% off its record high of roughly $4,880 set in November 2021.