Dispatch #205: HODLing Through Headwinds

Aug 16 4 min read

Dispatch

In this patch of your weekly Dispatch:

Bitcoin’s Summer Tides 🌬️
Ethereum’s Scalability 🖥️
Solana’s Firedancer 🪩

The Big Idea

Bitcoin: Amidst Economy and Politics

On Monday we asked you on X if more choppiness lay ahead for BTC. The answer was a resounding yes, which also turned out to be the correct answer. One look at BTC’s weekly chart is enough… After the scary market-wide correction par excellence on August 5, Bitcoin seems to have found a new plateau just below $60,000.

One question is on many minds.

Which way to Mt. All-Time High?

In this week’s Big Idea, there’s more clarity on politics and inflation:

BTC dropped over 4% in the past 24 hours to $58,000 after July's U.S. Consumer Price Index showed a 2.9% YoY increase – the first dip below 3% since 2021. This inflation data has raised concerns in the crypto market, despite a recovery in the NASDAQ and S&P 500, with some predicting a potential pullback to $55K.
With the 2024 U.S. election approaching, cryptocurrency is becoming a key issue. Senate Majority Leader Chuck Schumer has expressed hope for crypto legislation this year, reflecting growing political attention. Bernstein reports that market sentiment suggests a Trump win could benefit crypto markets. At the same time, a Kamala Harris victory might be detrimental, as evidenced by Bitcoin's weakening with Harris's rising poll numbers.

Despite the uncertainties there are more than a few positive perspectives:

Morgan Stanley now holds $188M in BlackRock’s Bitcoin ETF. A top shareholder.
The State of Wisconsin Investment Board holds nearly $99M in Bitcoin ETFs.
Bitcoin miners expanded capacity with network hashrate hitting a record 627 exahash per second.
The Norwegian Government Pension Fund boosted its indirect Bitcoin exposure by 62% in H1 2024, reaching 2,446 BTC.

And while some say stablecoins are the next propeller, leading analyst Glassnode shows it’s back to HODLing, which sounds fair. Just be careful at the week closing – that’s a Big Idea too.

The Latest In…

A Toast to Ethereum L2s

Ethereum's Layer 2 scaling networks have reached a new milestone, surpassing 12.42M daily transactions on August 12, media reports. That’s a 140% increase in activity in 2024, highlighting rapid scalability improvements. These networks now hold more stablecoins than Solana and Binance Smart Chain combined.

Despite stable daily transactions on Ethereum’s mainnet, L2 solutions are driving significant growth and reducing costs across the ecosystem. The result? Lower average gas fees on the Ethereum mainnet.

The Latest In…

Bitcoin City Gets Seaports

El Salvador has secured a record-breaking $1.6B investment from Turkey’s Yilport Holding to fuel its ambitious Bitcoin City project. President Nayib Bukele announced that this landmark deal will modernize two key seaports – Acajutla and the long-neglected Port of Union to lay the essential groundwork for Bitcoin City.

This is the largest private investment in El Salvador’s history, a direct result of Bukele’s 2022 visit to Turkey. Nexo’s CPO Elitsa Taskova told BeInCrypto that such partnerships are indicative of the new, powerful global connections crypto can forge.

El Salvador currently holds 5,840 BTC, worth about $343M.

The Latest In…

The Solana Expansion

Solana's blockchain is booming, according to recent media reports. Active addresses reached a record 54.33M in July for a 151% increase year to date, driven by a surge in memecoin activity. Non-vote transactions also peaked at 1.3B, highlighting high engagement but raising concerns about the sustainability of this growth. Looking ahead, the upcoming Firedancer upgrade promises to enhance Solana's transaction speed and network resilience, potentially setting a new standard for scalability.

The Latest In…

Is It Winter in DeFi?

DeFi dominance, representing DeFi's share of the total crypto market cap, has fallen to a three-year low, dropping from 3.82% to 2.84% last week amid a broader market sell-off. Since September 2022, it has steadily declined from around 4.8%. In 2024, sectors like memecoins and institutional interest in Bitcoin and Ethereum ETFs have overshadowed DeFi, leading to a 29% year-to-date drop. Despite brief outperformance by some DeFi tokens like Maker (MKR), most have underperformed compared to Bitcoin, with factors such as the memecoin craze, high valuations, and investor concerns contributing to the trend.

The Week’s Most Interesting Data Story

Hold ‘Em

Long-term holders have begun accumulating Bitcoin again after selling off heavily during the recent price surge. In the past three months, over 374,000 BTC have shifted to long-term holding status. Meanwhile, short-term speculators are likely selling to protect against potential losses. This natural market dynamic shows a shift towards holding rather than selling. Thanks, Glassnode.