Crypto Market and Global Economic Shifts: Fortnightly Review

London: 12 July 2024 (TraderMade): Over the past two weeks, the cryptocurrency market and the global economy have witnessed substantial developments that are reshaping the landscape of finance and investment.

From significant outflows in Bitcoin ETFs to new regulatory actions and economic indicators, these events underscore the dynamic nature of the financial world.

Key Highlights

• Spot Bitcoin ETFs Outflows: Witnessed $1.3 billion in outflows over two weeks, reflecting a shift in investor sentiment.
• New Crypto Tax Rules: The US Treasury announced new tax regulations for 2025, delaying rules for non-custodians.
• SEC Legal Actions: The SEC sued Consensys over MetaMask staking and broker allegations, targeting Lido and Rocket Pool as unregistered securities.
• Julian Assange Freed: WikiLeaks founder Julian Assange was released after a plea deal with the US, ending his long legal battle.
• German Sell-Off & Mt. Gox Repayments: Significant sell-offs from the German government and Mt. Gox repayments have increased market volatility.

Significant Outflows in Spot Bitcoin ETFs

Spot Bitcoin ETFs have seen substantial outflows amounting to $1.3 billion over the past two weeks. This withdrawal indicates a shift in investor sentiment, likely driven by market volatility or changing confidence levels. Investors are reevaluating their positions amidst uncertain market conditions.

New Crypto Tax Rules from US Treasury

The US Treasury announced a new cryptocurrency tax regime set to begin in 2025, delaying rules for non-custodians. This delay gives more time for adjustments and compliance from various stakeholders, providing the industry with a reprieve to adapt to the forthcoming regulatory changes.

VanEck Files for Solana ETF

VanEck has filed for a spot in Solana ETF, highlighting the growing interest in Solana's blockchain technology. This move could pave the way for increased institutional adoption of Solana.

SEC Sues Consensys

The SEC has initiated legal action against Consensys, alleging that its MetaMask staking and broker programs constitute unregistered securities.

This lawsuit also targets Lido and Rocket Pool, highlighting ongoing regulatory challenges within decentralized finance (DeFi). The outcome of these legal actions could have broad implications for the DeFi sector.

US Government Transfers Bitcoin to Coinbase

In a notable transaction, the US government transferred 3,940 BTC to Coinbase. These Bitcoins seized from Silk Road investigations mark a continued effort to liquidate assets from illegal activities, potentially impacting market dynamics.

Sharp Decline in Runes Transactions

After reaching more than 50% of all Bitcoin transactions in April, Runes transactions plummeted by 88% in June, according to Dune Analytics. This decline raises questions about the sustainability and future of Runes within the Bitcoin network.

US Presidential Debate Troubles for Biden

The first extra-official US presidential debate proved disastrous for President Biden, causing a crisis within the Democratic party's reelection bid. This performance has sparked discussions about the party's strategy and candidate viability, adding political uncertainty to the economic landscape.

Japanese Yen Hits 38-Year Low

The Japanese Yen has fallen to a 38-year low, prompting Japan to announce a new foreign exchange diplomat to address the currency's weakness and stabilize the economy. This significant depreciation highlights the ongoing economic challenges faced by Japan.

Julian Assange Freed

Julian Assange, the founder of WikiLeaks, has been freed after reaching a plea deal with the US. This agreement ended his long legal battle and allowed Assange to return to Australia, sparking discussions about press freedom and government transparency.

US Economic Indicators Show Mixed Results

The US economy grew by a modest 1.4% in the first quarter. Consumer confidence dipped, and core PCE inflation softened to an expected 2.6%, suggesting a mixed economic outlook as the country continues its post-pandemic recovery.

German Government's Bitcoin Sell-Off

The German government continued its aggressive Bitcoin sell-off, transferring an additional $75 million worth of BTC to exchanges, causing significant market disruption. Critics argue that the government needs to be made aware of over-the-counter (OTC) solutions that could mitigate market instability.

Justin Sun's Offer to Germany

TRON founder Justin Sun offered to buy all of Germany's Bitcoin off-market to prevent further market instability caused by large-scale public sell-offs.

Gox Repayments Begin

Mt. Gox moved $2.7 billion in Bitcoin to a wallet address, signaling the beginning of repayments to creditors. This development has added to the selling pressure on Bitcoin, contributing to its recent price decline.

Spot Ethereum ETFs Approaching Approval

The head of asset management at Galaxy stated that spot Ethereum ETFs are in the "window dressing stage" for potential U.S. approval in July. If approved, this could be a major milestone for Ethereum and the broader crypto market.

NFT Sales Plummet

NFT sales sharply declined by 44% during the second quarter of 2024, reflecting waning interest and possible market saturation.

TRON's Gas-Free Stablecoin Development

TRON is developing a gas-free stablecoin solution for the Ethereum and TRON chains to reduce transaction costs and improve efficiency.

Political Changes in the UK

Keir Starmer of the Labour Party became the new UK Prime Minister, ending the Conservative Party's 14-year reign. This political shift could have broad implications for the UK's economic and crypto policies.

FOMC Minutes and Fed Chair Powell's Stance

The FOMC minutes revealed a divided Federal Reserve, with no immediate plans for rate cuts until inflation reaches the 2% goal. Fed Chair Jerome Powell reiterated this stance at the ECB Forum, providing no timeline for rate cuts.

US Economic Data

The U.S. job openings unexpectedly rose to 8.14 million in May, and the non-farm payroll data showed a higher-than-expected spike, indicating a strong labor market despite economic uncertainties.

Technical Analysis & Market Sentiment

BTC/USD

Core PCE inflation provided a consensus figure, establishing a solid base in the range. Key levels to watch are 66,000 (midpoint of the current range) and 72,000 (range high). Despite immediate downside pressures, futures and options markets suggest a potential bullish sentiment.

ETH/USD

Ethereum is experiencing similar market dynamics, with a rising basis curve indicating long positions in anticipation of a spot ETF launch in the US. Upcoming SEC amendments on July 8 will provide further guidance.

Spot Desk Activity

Bitcoin's price dipped below 60K but quickly rebounded to close the week at 62.6K, up 7.75% from its weekly low. Ethereum followed suit, closing up 6.81% from its weekly low. USDT traded below parity, and AUD/USD saw a weekly gain of 0.81%.

Balanced flows were observed across stables and majors, with high volumes of altcoins such as PAXG, TRX, ILV, SOL, MATIC, and TON. ETH buying was prevalent, while BTC flows remained balanced.

Derivatives Desk Insights

Basis rates for BTC and ETH have risen to around 12.5% (30-day annualized), signaling a potential change in market sentiment.

Volatility remains relatively unchanged, continuing with a downtrend since the March highs. Selling volatility to capture yield premiums could be a strategic move, with Yield Exit Notes offering a way to capitalize on this trend.

Conclusion

Despite Bitcoin's downward trend, the number of addresses holding more than one BTC has surpassed one million, indicating broader adoption and confidence.

Amid significant sell-offs and market volatility, investors remain cautiously optimistic, particularly with potential Ethereum ETF approvals and TRON's gas-free stablecoin solution on the horizon.