Dispatch #199: A Summer Crypto Storm

In this patch of your weekly Dispatch:

• Projecting ETFs 🏦
• Measuring Inflation 📉
• Bitcoin’s Price Levels 🔬

The Big Idea

Rain on the Crypto Gain, Again

No amount of wishful thinking can hide the sharp decline in crypto markets this week. Bitcoin settled below $55,000 for the first time in four months, while ETH saw a 24% decrease MoM, registering its largest outflows in two years of over $61M in June's final week. Those double-digit monthly losses could be explained by the current “villains'' in crypto. It’s not the first time we are seeing them:

• Government Sell-Offs: Media reports that Germany and the US recently sent $737.6M in BTC to exchanges, with Germany moving 7,828 BTC ($496.4M) and the US selling 3,940 BTC ($241.2M). Nexo experts shared their insights with leading outlets Cointelegraph and BeInCrypto.
• Liquidity Stress: Signs of liquidity stress in the U.S. banking market, marked by a rise in the secured overnight financing rate (SOFR) to 5.4%, indicate tighter liquidity, according to the media. This mirrors the 2019 repo market crisis and could negatively impact risky assets like Bitcoin. With Bitcoin acting as a liquidity gauge, its 23% decline over the past 30 days suggests tougher times for both crypto and stock markets.
• Miner Activity: Bitcoin miners sold $2B worth of BTC last month, the largest sell-off in over a year. Higher energy costs and reduced profitability have led some miners to shut down or pivot to AI data centers. With that said, miners' reserves are at their lowest since 2021, note researchers from QCP Capital. They say that these signs of capitulation are also the signs of a market bottom after a period of intense sell pressure.

So it’s a crypto storm amidst summer – one that saw bulls lose over $580M in long position liquidations. Yet, there is a lesson to be learned from this June – navigating turbulent crypto waters requires a critical understanding of market dynamics combined with a readiness to adapt strategies amid shifting conditions. 

This is a great idea, much akin to waiting out the storm on Nexo. But it’s Standard Chartered and their Head of Forex and Digital Assets Research Georffrey Kendrick that delivers the Big Idea. According to him, Bitcoin is still on track to set a new all-time high in August. Stay tuned as clouds, hopefully, disperse.

The Latest In…

ETH ETFs: A “Golden Egg” for Ethereum

With the doom-and-gloom situation out of the way, it is time to find the positive vibes. And it’s all the better when they come from a leading crypto analytics company. K33 Research analysts predict that the upcoming launch of spot Ethereum exchange-traded funds (ETFs) in the US could propel Ether to outperform Bitcoin in the short term. 

Analysts Vetle Lunde and David Zimmerman highlight these ETFs as a significant opportunity (a "golden egg") for Ether's price trajectory. Despite ETH's historically trailing Bitcoin, K33 anticipates the asset to benefit from ETF inflows, which Lunde anticipates to reach 0.75-1% of ETH’s circulating supply over five months post-launch – just below $4B in today’s prices.

The Latest In…

The Fed Measures (More) Before It Cuts (Less)

Federal Reserve officials, reviewing June's meeting, noted inflation's slow progress toward their 2% target but refrained from considering interest rate cuts. Discussions highlighted cautious optimism, with some members open to potential rate hikes if necessary, though the majority favored maintaining current rates. The meeting also covered economic projections and adjustments, including slight revisions in inflation expectations:

• Policy Decisions: No immediate plans to lower interest rates; awaiting more data before sustained inflation progress.
• Economic Projections: The dot plot shows a potential 0.25% rate cut by the end of 2024, down from earlier projections.
• Monetary Policy Outlook: Officials maintain a "data-dependent" stance, emphasizing the need for consistent economic data to guide policy adjustments.

The Latest In…

The Future of a Solana ETF? 

Matthew Sigel, Head of Research at VanEck, highlighted the potential for a Solana spot ETF, drawing parallels with Ethereum's regulatory journey and SEC Chair Gary Gensler's stance on commodities. Sigel was confident, stating, "If these products [ETH ETFs] are allowed to trade, then that confirms that Ethereum is a commodity. And the same thing will be true of Solana as well." 

He proposed a regulatory framework akin to Bitcoin and Ethereum ETFs, advocating for alternatives to the futures market criteria. Sigel underscored the pivotal role of the SEC chair, noting, "It all depends on the SEC chair. If Gensler remains in that role, approval won't happen unless there's a directive to treat this asset class differently."

The Week’s Most Interesting Data Story

About Those Bitcoin Prices…

The UTXO Realized Price Distribution (URPD) illustrates where Bitcoin has recently changed hands, indicating significant buying patterns, and identifying potential support and resistance levels based on price concentrations. It offers insights into market sentiment and genuine purchasing activities by entities. As usual, Glassnode analysts have it in fine detail. 

Hot Topics

What the Community is Discussing:

Yeah, looks super bullish from here too.

We’re trying to make a living!

It’s the discipline in the strategy.

What to Watch for Next Week:

• The first days of ETH ETF trading?
• The last days of BTC consolidation?
• Dispatch #200?

These materials are accessible globally, and the availability of this information does not constitute access to the services described, which services may not be available in certain jurisdictions. These materials are for general information purposes only and not intended as financial, legal, tax or investment advice, offer, solicitation, recommendation, or endorsement to use any of the Nexo Services and are not personalized, or in any way tailored to reflect particular investment objectives, financial situation or needs.

Digital assets are subject to a high degree of risk, including but not limited to volatile market price dynamics, regulatory changes, and technological advancements. The past performance of digital assets is not a reliable indicator of future results. Digital аssets are not money or legal tender, are not backed by the government or by a central bank, and most do not have any underlying assets, revenue stream, or another source of value. 

Independent judgment based on personal circumstances should be exercised, and consultation with a qualified professional is recommended before making any decision.