Crypto Surge and Political Shifts: A Fortnight of Key Global Developments

London: 2 August 2024 (TraderMade): Significant political shifts have marked the past two weeks, notable developments in the cryptocurrency market, and key economic indicators influencing global financial trends.

As the world navigates through technological advancements and regulatory changes, the landscape continues to evolve, with implications for investors, businesses, and policymakers.

Key Takeaways

• Political Shifts: Biden drops out of the presidential race; Kamala Harris becomes the Democratic nominee, while Trump strengthens his pro-crypto stance.
• Crypto Market Dynamics: Record inflows into Bitcoin and Ethereum, with significant moves in Bitcoin holding addresses and Mt. Gox creditor payments.
• Economic Indicators: The British pound reaches a one-year high, while the Bank of Canada cuts interest rates, reflecting mixed global economic conditions.
• Technological Impact: The CrowdStrike software bug causes global IT disruptions, highlighting the need for robust cybersecurity.
• Market Movements: BTCUSD approaches all-time highs, with ETHUSD showing positive trends ahead of ETF launches.

Political and Economic Developments

• Biden Drops Out: In a surprising turn of events, President Joe Biden has dropped out of the election bid, endorsing Vice President Kamala Harris as his replacement. Harris has garnered enough support for the official Democratic nomination, positioning her as a potential crypto-friendly candidate, as noted by Mark Cuban. This shift sets the stage for a highly anticipated election with significant implications for the crypto market.
• Trump's Crypto Stance: Former President Donald Trump has made waves by expressing strong support for cryptocurrencies at a Bitcoin Conference, vowing to make the US the "crypto capital of the planet." He has proposed creating a strategic Bitcoin reserve and firing SEC Chair Gensler, further solidifying his pro-crypto stance. Trump is also considering JPMorgan CEO and crypto critic Jamie Dimon for Treasury Secretary, adding an interesting dynamic to his administration's potential policies.
• Global IT Chaos: A CrowdStrike software bug caused widespread outages in travel, banking, and business sectors, highlighting vulnerabilities in global IT infrastructure. This incident highlighted the critical need for strong cybersecurity measures and effective incident response strategies.

Cryptocurrency Market

• Bitcoin and Ethereum Inflows: According to CoinShares data, Bitcoin and Ethereum have led record year-to-date inflows into digital asset investment products, reaching $17.8 billion. This surge reflects growing institutional interest and confidence in these digital assets.
• Bitcoin Addresses Decline: Despite positive inflows, the number of Bitcoin holding addresses has fallen by 672,510 over the past month, indicating some sell-off or distribution among holders.
• ETH ETFs Launch: The Chicago Board Options Exchange (CBOE) set 23rd July as the launch date for trading five spot ETH ETFs, with the SEC giving preliminary approval to at least three issuers. This marks a significant milestone for Ethereum, enhancing its investment appeal.
• Mt. Gox and FTX Settlements: Mt. Gox confirmed payments to over 13,000 creditors, with most opting to hold their assets. The bankrupt exchange also moved $9 billion in BTC to undisclosed wallets. Meanwhile, FTX and the CFTC agreed to a $12.7 billion settlement after months of negotiations, providing some resolution to the long-standing case.

Financial Markets and Macroeconomic Indicators

• Bitcoin and Ethereum Prices: Bitcoin (BTCUSD) continues its bullish momentum, closing at 68.2k following Trump's pro-crypto stance. The double false break higher suggests a potential run at all-time highs (~73,800). Ethereum (ETHUSD) also traded higher, albeit with less momentum compared to Bitcoin, with key levels at 4,000.
• Market Reactions: Despite the positive crypto sentiment, equity markets experienced a sell-off, partly due to the CrowdStrike software bug. Earnings season saw mixed results, with tech giants like Alphabet, Tesla, Amazon, and Coca-Cola posting varied performances.
• US Dollar and British Pound: The British pound hit a one-year high against the US dollar as inflation held steady. In contrast, the AUD/USD took a 4% hit over two weeks, reflecting concerns over Chinese demand for Australian commodities.
• Fed and BoC Rate Decisions: Fed Chair Powell expressed confidence that inflation is retreating to key levels, while the Bank of Canada cut interest rates again, trimming growth prospects.

Technology and Business Updates

• BlackRock's Bitcoin Endorsement: BlackRock CEO Larry Fink stated Bitcoin is a legitimate financial instrument, expressing major belief in the asset. The company's head of digital assets noted that client interest is mainly focused on Bitcoin and Ethereum.
• Crypto Payment Systems: Ferrari expanded its crypto payments system to European dealers, reflecting broader acceptance of digital currencies in traditional industries.

Market Technicals

• BTCUSD Key Levels: 59,000 / 66,000 / 72,000 / 73,794 (ATH!).
• ETHUSD Key Levels: 2,700 / 3,350 / 3,600 / 4,000.
• Spot Desk Activity: The desk observed large volumes of clients offramping stable coin flow into AUD and a balanced flow for BTC and ETH. Altcoin trading activity increased, particularly in SOL, XRP, AERO, TRX, OM, and FIL.
• Derivatives Desk: The ETH/BTC ATM IV spread saw compression, with potential IV expansion anticipated following the ETH ETF launch. The FOMC rate decision and Non-Farm payroll data could influence volatility, making short-term yield entry notes attractive.

Conclusion

The fortnight has seen a blend of optimism and caution across various sectors. The political landscape is shifting towards a potentially more crypto-friendly future while the cryptocurrency market continues to gain traction despite some volatility.

Economic indicators present a mixed picture, with central banks adjusting policies in response to evolving conditions. As these dynamics unfold, stakeholders must stay informed and adaptable to navigate the complexities of the current environment.