Weekly Crypto Wrap: Market Shifts, Institutional Milestones, and Macro Influences

London: 26 August 2024 (TraderMade): The cryptocurrency market experienced a mix of optimism and caution this week, driven by significant developments across institutional finance, macroeconomic policy, and geopolitical events.

From institutional milestones to unexpected arrests, here's a deep dive into the key events that shaped the crypto landscape.

Key Takeaways

• Bitcoin gains momentum, breaking $61,500, as dovish signals from the Fed suggest rate cuts are likely in September.
• Institutional adoption accelerates with BlackRock and Fidelity's Bitcoin ETFs ranking in the top 15 global ETF inflows.

Institutional Developments

Goldman Sachs now estimates the likelihood of a U.S. recession at 20%, reflecting increased confidence in the economy's resilience. This more optimistic outlook coincided with positive news in the crypto world: 75% of all available Bitcoin has now been "handled" by investors for over six months, showing strong conviction among long-term holders.

Meanwhile, the institutional adoption of Bitcoin continues to gather steam. BlackRock and Fidelity's spot Bitcoin ETFs ranked among the top 15 global ETF inflows, marking a significant milestone in Bitcoin's integration into mainstream finance. This trend underscores the increasing role that Bitcoin plays in diversified investment portfolios.

Coinbase's BASE blockchain also saw significant growth, reaching 4 million active on-chain users. This achievement highlights the ongoing expansion of blockchain ecosystems and increased user adoption, particularly within the decentralized finance (DeFi) space.

Setbacks and Surprises

Not all the news was positive this week. USDT (Tether) is one of the largest stablecoin by market cap. It has paused its blockchain launch due to concerns about current market conditions. This decision raised questions about the timing and feasibility of future blockchain projects amid the volatility and uncertainty in the crypto space.

In a shocking turn of events, Telegram founder and CEO Pavel Durov was arrested in France under undisclosed circumstances. The arrest sent shockwaves through the market, with the TON cryptocurrency plummeting by 14% in response. Investors are closely watching for further details, as this incident could have broader implications for the TON network and Telegram's crypto ambitions.

Macro Events

The macroeconomic landscape played a crucial role in shaping crypto market sentiment this week. At the Jackson Hole symposium, Federal Reserve Chair Jerome Powell reaffirmed the Fed's commitment to its 2% inflation target.

Despite a dovish tone suggesting possible rate cuts in the near future, Powell's comments left the door open for further rate hikes, depending on upcoming economic data.

The Federal Open Market Committee (FOMC) minutes released this week added to the anticipation, signaling that rate cuts are likely coming in September. Bond traders have been eagerly speculating on the size of the cuts, which could have a significant impact on both traditional financial markets and cryptocurrencies.

Geopolitical tensions in the Middle East, particularly Israel's attacks on Hezbollah sites in southern Lebanon, also contributed to market volatility. While Asian equities began the week with a rally, largely taking cues from Powell's comments, further escalation in the region could have inflationary effects and negatively impact global growth.

U.S. Political Landscape

In U.S. politics, Vice President Kamala Harris officially accepted the Democratic nomination for the 2024 Presidential race after President Joe Biden stepped out. Her campaign has raised a staggering $540 million since Biden's departure. The crypto industry is closely monitoring Harris's stance on digital currencies, as her policies could significantly influence the future regulatory environment for crypto in the U.S.

A wildcard scenario would be if Harris outlines a more positive policy direction for the crypto space during her campaign, which could further boost sentiment in the market, especially among Bitcoin and blockchain advocates.

Technical Analysis

BTCUSD

Bitcoin showed positive momentum this week, with a wedge breakout to the topside, moving toward the $66,000 range. The dovish tone from Jerome Powell and the likelihood of upcoming rate cuts provided a bullish backdrop for Bitcoin. However, geopolitical risks remain a potential wildcard, especially in the Middle East.

Key levels to watch include $50,000, $55,000, $66,000, and $72,000, with the all-time high of $73,794 remaining a distant but attainable target if the current momentum holds.

ETHUSD

Ethereum followed a similar upward trajectory, though its performance continues to lag behind Bitcoin. The technical setup suggests the potential for a move higher, especially if geopolitical risks remain contained. However, Ethereum is still viewed with caution as the U.S. election looms, and potential regulatory changes could shift market dynamics.

Key levels for Ethereum include $2,100, $2,800, $3,600, and $4,000.

Market Insights

Spot Desk

This week saw balanced flows between on-ramping and off-ramping activity, with USDT continuing to trade above par. Trading activity picked up slightly, with a notable buy skew for both BTC and ETH. Bitcoin's price consolidated throughout the week but broke through the $61,500 level on Friday, fueled by the positive sentiment from the Jackson Hole symposium.

The desk remains strategically positioned to offer competitively priced stablecoin pairs and T+0 settlement, with increased interest from corporates, exchanges, and other trading desks.

Derivatives Desk

On the derivatives front, basis rates for both Bitcoin and Ethereum remained relatively unchanged despite the weekend's spot market moves. Bitcoin's 90-day annualized basis rate held steady at 9.7%, while Ethereum's was slightly lower at 7.7%.

Interestingly, Ethereum's skew at the front end of the curve has shown a bias toward puts for several weeks, while Bitcoin's front-end skew recently flipped toward puts, indicating cheaper call options.

What to Watch Next Week

Next week, keep an eye on several key economic indicators that could influence the market:

• Tuesday: U.S. Consumer Confidence Report
• Thursday: German preliminary monthly CPI, U.S. preliminary quarterly GDP, and U.S. unemployment claims
• Friday: Canadian monthly GDP and U.S. core PCE price index

These data points will be closely watched as the market assesses the likelihood of rate cuts and potential impacts on both the traditional financial and crypto markets.

As the crypto world continues to evolve amidst macroeconomic shifts and geopolitical events, staying informed and adaptable is key to navigating these turbulent waters. Keep an eye on the headlines, and prepare for another week of exciting developments.