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:

• A lot happened in November. Here’s what to watch before 2024 ends.

• How Donald Trump’s planned tariffs could impact the Euro Area.

• Data this week could be crucial in determining the Fed’s next interest rate decision.

What to watch for in December after an eventful November

November was an eventful month for crypto, as you know — jumpstarted by Donald Trump’s election win. 

Bitcoin rose 37.3% last month, CoinGlass data shows. That was the asset’s best performance in November (the month with the highest average BTC returns, at 46%) since 2020, when bitcoin gained 43%.

Looking ahead, December is not historically as good a month for BTC (+4.9% returns on average). Bitcoin price did rise by 47% in December 2020 (also after a presidential election); but from 2021 to 2023, the asset’s returns were -18.9%, -3.6% and +12.2%, respectively. 

Bitcoin has been unable to breach the $100,000 level — with some analysts attributing that to investor profit-taking, as well as put option-fueled resistance as traders hedge against possible dips.

BTC was trading around $95,650 at 2 pm ET — down 1.6% from 24 hours prior.

Jeff Embry, managing director of crypto hedge fund Globe 3 Capital, told me he does not necessarily expect specific developments this month to impact crypto markets. Rather, he predicts “an across-the-board continuation” from November of strong crypto demand spurred by the US “taking its boot off the throats of the innovators, risk takers and investors and telling them ‘we support you now.’”

“Before November, the most recent peaks for BTC and ETH were in mid-March,” he explained. “That is an eight-month consolidation period in a bull market, so that market was ready for a catalyst to push to new highs, and the November election provided that catalyst in a gigantic way.”

Globe 3 Capital’s end-of-year BTC price prediction (proclaimed at the start of 2024) was $124,000 — a number Embry said the firm is sticking to. Some others have pointed to $80,000 as a support level in the case of a drawdown. 

“Of course, higher prices depend on higher demand and we are seeing demand across the board from retail, [high-net-worth individuals], institutions, sovereign wealth funds and governments themselves,” Embry added.

We certainly saw plenty of examples in November of companies buying BTC for their treasuries. That appears set to continue. 

From Nov. 25 to Dec. 1, MicroStrategy bought 15,400 bitcoins for roughly $1.5 billion in cash, according to a Monday filing. Bitcoin miner Marathon Digital revealed (also today) it intends to offer $700 million of convertible senior notes — the proceeds of which will primarily go toward buying more BTC. 

MicroStrategy founder Michael Saylor shared a video explaining why Microsoft should hold BTC on its balance sheet. Such a proposal is on the tech giant’s agenda for its Dec. 10 shareholder meeting; though the board recommends a vote against it (noting it already considers this), it’s something to keep an eye on. 

Then there’s the Federal Reserve’s rate decision on Dec. 18. Polymarket odds suggest the market expects a 25-basis point decrease (67% chance). Rate cuts have historically been good for risk assets like bitcoin.  

Finally, the industry continues to await clarity around a possible US strategic bitcoin reserve. To Embry’s point about governments showing interest, US support for this would likely lead to more countries doing the same.

But analysts at Compass Point Research & Trading believe the BITCOIN Act (floated by Sen. Cynthia Lummis) has a less than 10% chance of becoming law.

“We do not expect the Republican-controlled Congress, which will be focused on expiring tax provisions and the federal budget, to allocate funds for this purpose,” Joe Flynn and Ed Groshans wrote. “The primary challenge this action would encounter is the deficit financing of BTC purchases.”

Though Trump could issue an executive order (perhaps creating a subaccount within the Treasury’s general fund), they added, a future administration could undo the action. 

The bottom line? As the weather gets colder for many of us, the crypto narratives are poised to keep heating up.

— Ben Strack

The net capital that flowed into US spot ether ETFs the day after Thanksgiving (and the highest amount to enter these products in a single day). The previous record was $296 million on Nov. 11. 

While $634 million entered Ethereum investment products last week, bitcoin-focused offerings saw net outflows amount to $457 million “in what we believe is profit-taking following bitcoin testing the very psychological level of $100k,” according to a CoinShares report.

Clearly there was some ETH discussion around certain Thanksgiving dinner tables.

The transatlantic trade-dependent Euro Area is prepping for Donald Trump’s second term and the return of higher tariffs. 

US tariffs may lower Euro Area GDP by 0.4%, the Institute of International Finance (IIF) estimated in a Monday note. With many European countries yet to fully recover from the pandemic and increased competition from China, renewed tariffs could lead to a "substantial economic hit,” the report adds. 

Among the countries most likely to be impacted are Germany, France and Italy. Machinery and industrial goods exports from Italy and Germany are expected to be hit especially hard by new policies. Germany, the US’s largest exporter, also heads into its second straight year of zero growth. France could see exports of goods in the aerospace and luxury industries decline by as much as 4% over Trump’s next term, according to the IIF. 

But, as a new tariff scenario chart from Bloomberg Economics points out, Trump’s statements, which often shake global currencies, come much faster than the tariff policies themselves. Those could take weeks if not months, depending on how liberally Trump plans to take advantage of the International Emergency Economic Powers Act. 

Aside from timing, there’s also likely to be a discrepancy between Trump’s threats and what actually happens (during his first term, Trump walked back his initial proposed tariff on Mexico after the country agreed to increase border patrol). 

We’ll be watching as policies unfold, and as the next administration continues to tease its plans (I’d keep an eye on Truth Social).

— Casey Wagner

Happy Monday! We hope our US readers enjoyed the Thanksgiving holiday. We are two weeks out from the last FOMC meeting of the year, and these next five days are going to be crucial in determining whether or not we see committee members lower interest rates. Here’s what’s on tap: 

• The big week of data kicked off this morning with the latest ISM manufacturing PMI report coming in a bit hotter than expected. November’s PMI came in at 48.4%, up from 46.5% in October. Still to come is the services PMI report, scheduled to be released on Wednesday. Services PMI has hovered in the high 50s; as long as November’s numbers come in around that range, the Fed should be on track to lower interest rates. 

• The headline report this week will be the November jobs report, to be released Friday. Analysts expect the unemployment rate to be unchanged from October at 4.1%. They are calling for 200,000 jobs added in November, which would be a significant increase from October’s 12,000 (remember, the Boeing strike and two major hurricanes weighed on this figure). All in all, a Goldilocks report on Friday bodes well for a rate cut later this month, which in turn makes a so-called “Santa rally” much more likely.

— Casey Wagner

• Like BTC, ether also saw a price decline early Monday, dropping to $3,610 by 2 pm ET — down 2.7% from a day ago. XRP, meanwhile, was up about 36% at that time, reaching as high as $2.81 during that span.

• Crypto investment product net inflows dropped to about $270 million last week (from more than $3 billion the week before), according to CoinShares data. Still, the positive total means year-to-date inflows reached a new record, at roughly $37.3 billion.