Dispatch #209: Bitcoin, The Labyrinth Ahead

Sep 13 4 min read

Dispatch

In this patch of your weekly Dispatch:

Ether projections 📽️
Crypto partners 🫂
Female HODLers ♀️

The Big Idea

Which Way Now, Bitcoin?

Bitcoin’s back in the driver’s seat, roaring past $55,000. Spot Bitcoin ETFs are showing signs of life again with fresh inflows early this week. But hold your horses. These ETFs have hit some turbulence lately, and when they sneeze, Bitcoin catches a cold. So what’s behind the tame performance recently?

ETF Flows and Market Pressure: U.S. Bitcoin ETFs experienced their longest stretch of net outflows, with nearly $1.2B pulled in early September. This coincides with broader market pressures, including mixed U.S. jobs data and deflationary concerns in China. Bitcoin has faced a challenging September, as analysts suggest Bitcoin's short-term price movements will likely depend on upcoming U.S. inflation data.
Market Sentiment and Future Outlook: Bitcoin remains positioned for a potential year-end rally despite recent turbulence, reports Cointelegraph after talking to Nexo’s Kristian Haralampiev. He noted that if Bitcoin maintains its position above $50,000, potential interest rate cuts could spur a significant price surge by the end of 2024. Standard Chartered seems to agree.
Response to CPI Data: Despite the U.S. Consumer Price Index (CPI) coming in as expected, Bitcoin’s reaction was muted. Core CPI, which excludes food and energy costs, rose more than forecast, reinforcing expectations of a 25-basis-point rate cut by the Federal Reserve next week. Traditional markets, including stocks and gold, also experienced declines.
ETF Resilience: Despite the $1.2B net outflow this dip is seen as a natural part of the growth cycle, according to Eric Balchunas. He emphasizes that such fluctuations are typical and that ETFs have effectively mitigated deeper declines, showing their role in stabilizing Bitcoin's market.

TL;DR Bitcoin has found itself in a labyrinth of fluctuating investor interest and macroeconomic pressures. The potential game-changer? September 18. That's when the Fed might cut interest rates, possibly catapulting Bitcoin's next big move. It's a Big Idea currently unfolding.

The Latest In…

Ether Optimism

Ether’s recovery over the past week hasn’t been as strong as Bitcoin’s, yet there are notable optimists when it comes to it. Analysts at VanEck forecast significant potential gains for ETH by the end of the decade.

$22,000 By 2030? VanEck's Matthew Sigel predicts Ether could reach up to $22,000 by 2030, driven by an expected $66B in annual free cash flow. ETH could climb to around $4,600 in the next 18 months, with an upside potential of $12,621.
Robust Network Growth: Ethereum’s extensive transaction volume, processing about $4T annually in settlements and $5T in stablecoin transfers, supports these forecasts. Sigel highlights Ethereum’s growing value proposition, noting its transactions now rival networks like Visa.
Technological Improvements: Despite a recent dip in revenue due to the March Dencun upgrade, which cut transaction fees by 95%, Sigel believes Ethereum’s price may rebound as the network leverages further upgrades and value recovery mechanisms.

The Latest In…

Strength in (Crypto) Unity

We love it when forward-looking partnerships form in the cryptocurrency sector. Now, Paxos is partnering with Arbitrum to bring its tokenization platform to the Ethereum layer-2 network. The collab brings:

Efficient Tokenization: The integration will streamline institutional use of Arbitrum, benefiting from faster speeds and lower costs on Ethereum.
DeFi Innovation: This move aims to drive innovation in financial products and services, with details on new tokenized assets to be announced.

Stablecoin Adoption: Paxos and Arbitrum will focus on advancing stablecoin issuance and regulated tokenization, with expectations for significant growth in the coming years.

The Latest In…

Bitcoin Miners Look Ahead

Despite facing rising operational costs and declining revenues, Bitcoin miners are showing strong confidence in the network’s future through continued investment in advanced hardware.

Hash Rate Remains High: Bitcoin’s hash rate is near all-time highs, reflecting ongoing robust mining activity and confidence in the network's security and future growth.
Efficient Hardware Investments: Miners are investing in new, energy-efficient ASIC hardware, which has more than doubled its energy efficiency from 2018 to 2023.
Strategic Holdings: Many miners are retaining a portion of their mined Bitcoin instead of selling it, signaling long-term confidence in Bitcoin's value and potentially reducing market sell pressure.

Potential for Future Growth: Analysts highlight that Bitcoin's price could surge in the next bull cycle, attracting more participants to mining and driving further investment in the industry.

The Latest In…

Do Women HODL Stronger Than Men?

Decrypt reports that women are holding their own in the crypto world. A recent survey reveals that, despite fewer female investors overall, women are just as likely as men to “HODL”—keeping their digital assets through market ups and downs.

The survey also notes that women in the UK are actually leading in long-term holding compared to their male counterparts. Additionally, 10% of American crypto investors now use ETFs to gain exposure to major cryptocurrencies like Bitcoin and Ethereum.

The Week’s Most Interesting Data Story

ETH’s Supply Management Revisited

Bitcoin is often hailed as a store of value, but let’s shine a spotlight on Ethereum’s unique appeal. The Proof-of-Stake system ensures that as more validators join, ETH issuance increases, but it's the EIP1559 burn mechanism that keeps things interesting. This mechanism actively reduces the total supply of ETH, often resulting in deflationary pressure. In short, while Bitcoin may be the gold standard for value storage, Ethereum is showcasing a compelling alternative with its innovative supply management.