In Markets
Congratulations – you survived the bear market of August 5 to 8. This time last week, things were looking grim, with Bitcoin plunging to $A77K (US$49.8K) as traditional markets tanked. But Bitcoin went on to jump 12% on Thursday, which was the biggest single-day rise since February 2022. The Bank of Japan soothed fears of any further interest rate rises, and Bitcoin whales bought the dip, according to Santiment. Despite a “death cross” appearing on the charts (often not that deadly), Bitcoin has recovered almost all of the ground it lost in the crash and finishes the week up 5% from last Tuesday. Ethereum was hit harder, and while it finished the week at 7%, it remained 8% below its pre-crash price. Solana gained 3%, XRP (10%), Dogecoin (7%) and Cardano (2%). With Iran still indicating it will launch an attack on Israel and US inflation and retail sales data out this week, there are still plenty of risks. LMAX Group market strategist Joel Kruger told Blockworks: “Technically speaking, there has been nothing in recent price action to suggest anything more than choppy trade.” With August and September typically poor months for crypto market returns, analysts appear to be coalescing on October as the most likely time for price appreciation. The Crypto Fear and Greed Index is at 25, or Extreme Fear.
From the IR OTC Desk
While risk asset panic has somewhat abated, the broader investment market remains on edge. This has also been evident in the cryptocurrency market, which has traded cautiously this week, despite the upward pricing trend. BTC DVOL (30-day forward-looking annualised volatility) has moved back to 57, post a peak rate on the 5th of August, above 90!
Despite the DVOL retracement, this week’s event calendar will be watched with caution. In the Middle East, there has been ongoing concern regarding the relationship between Israel and Iran. Most recently, this has seen Brent Crude move back above USD 80. The US political landscape continues to morph, as the major party Presidential nominees outline their policy stance into the 5th November election. This week, it has been reported that both the Democratic nominee Kamala Harris and the Republican nominee Donald Trump, have agreed to a debate on the 10th September.
In the economic calendar, key event data this week includes the US inflation release for July, which is forecast to move down from 3.0% in June to 2.9% in July. Despite another 36 days until the next US Federal Open Market Committee (FOMC) meeting (18th September), each inflation and employment data point will prove critical to the Committee’s decision-making. It is expected that at this September meeting, the FOMC will instruct their first Federal Funds cash rate reduction. The Federal Funds futures market is currently forecasting a 50% chance that this reduction will be 50bps.
In Australia, today we received the quarterly wage price index (Q2), which surprised to the upside, maintaining a 4.1% (YoY) increase for Q2. Usually, strong wage growth data is a telling sign of labour market tightness. The Reserve Bank of Australia (RBA) will receive the July employment report this Thursday. The RBA have most recently upwardly revised their inflation forecast, and are now expecting inflation to return to the midpoint of the 2-3% target range in 2026! In Australia (SGT)
- Tuesday 9:30am AU Wage Price Index (Q2)
- Thursday 9:30am AU Employment (July)
In the US (SGT)
- Wednesday 8:30pm US Inflation (July)
- Thursday 8:30pm US Retail Sales (July)
In NZ (SGT)
- Wednesday 10:00am NZ Interest Rate Decision
In China (SGT)
- Thursday 10:00am CN IP/Retail Sales/Employment (July)
In Singapore (SGT)
- Tuesday 8:00am SG GDP (Q2)
On the OTC desk, stablecoin trading volumes continue to increase. This has been the general theme of 2024 – stablecoin growth remaining unperturbed by market volatility and event risks. Outside of this flow, the majors (BTC, ETH) and SOL remain clear standouts. This seems quite logical, with the observability of ETF flows creating pricing tangibility – in times of volatility it makes sense that additional investment weight is placed on those assets with better market observables (transparency). This may help to explain the underperformance of ETH/BTC which is down circa 16% on the month, to trade at 0.045 BTC. In the heightened period of volatility – between the 31st of July and the 7th of August – ETH/BTC moved down from 0.05BTC to 0.042BTC. Does the size of the ETF pool now contribute to outperformance? Something to ponder.
For any further information, please feel free to reach out.
In Headlines
Ether ETFs turn positive, Grayscale’s 0 outflow day
Amid the market carnage and terrible sentiment around ETH, the new Ether ETFs turned positive last week for the first time since launch, taking in net inflows of US$104.8M (A$159.1M). Outflows from Grayscale’s ETHE slowed down last week and stopped entirely for the first time on Monday. Santiment data also reveals that ETH’s supply held by top addresses increased sharply over the past month.
Ethereum metrics improve
With gas fees at five-year lows, Ethereum is seeing a surge in use (from a lowish base) with a 55% increase in DApp activity over the past week. Its total value locked of 19.7M ETH is the highest since November 2022. Ethereum L2 activity approached an all-time high on August 7 of 318 transactions per second, with the L2s now processing 24 times more transactions than the base chain. Uniswap is also hitting some huge numbers and was used by more than 8.5 million addresses on L2s last month which is almost double the previous all-time high. Overall, Base has 2.64M weekly active users, Arbitrum One has 1.37M while Linea (843K) and ZKSync Era (453K) are also popular.
Bitcoin ETFs are negative but retail is returning
Clients of the Bitcoin ETFs bought the dip on August 7 and 8 last week, with two net inflow days. However, the week ended up seeing outflows of US$404.4 million (A$614.1M) mostly due to Grayscale but with some notable outflows from Fidelity and Ark during the market turmoil. However, the number of new Bitcoin addresses is finally trending upwards, which may be a sign that retail is carefully dipping its toes back into the market. In other good news, Microstrategy does not appear to have yet bought that US$2 billion (A$3B) in Bitcoin it raised capital for recently.
War on crypto continues
The Federal Reserve has told Customers Bank, one of the few remaining crypto-friendly banks in the US, that it must give it 30 days advance notice before providing services to crypto companies. Gemini co-founder Tyler Winklevoss said the move was proof that “Operation Choke Point 2.0 remains in full swing … and verified that the Harris crypto ‘reset’ is a scam.” DLNews also reported that three unnamed crypto VCs have been subpoenaed by the SEC as part of an investigation to see “if violations of the federal securities laws may have occurred.” In potentially related news, several venture capital funds including Andreessen Horowitz and Union Square Ventures received letters from the SEC over their involvement with Uniswap. The news has increased speculation the SEC will charge Uniswap Labs for operating an unregulated exchange. The SEC also announced charges today against the operators of NovaTech for operating a fraudulent scheme affecting 200,000 users.
Crypto reset faces an uphill battle
This week’s meeting between top Biden administration officials and crypto leaders from Ripple, Coinbase, Kraken and Uniswap went poorly, with crypto leaders explaining at length how much damage the administration had caused the industry. In one tense exchange, Deputy Treasury Secretary Wally Adeyemo told the attendees that the government and banks weren’t trying to cut the industry off from the financial system. In response a crypto executive called for a show of hands of firms who have been denied banking services due to the administration’s policies. Nearly every hand shot up. Democrat candidate Kamala Harris’s campaign has also just launched the Crypto4Harris “grassroots network of crypto advocates organising, fundraising, and developing a nuanced crypto-policy approach for the Harris For President campaign.” As of today, it has just 1,860 followers. It will be holding a town hall meeting on Zoom featuring politicians and crypto figures such as Mark Cuban and Anthony Scamucci later this week. On the other side of the fence, Donald Trump Jr has announced plans to launch a new DeFi platform, although it’ll be a while before it launches.
Options trading for Bitcoin ETFs
The prospect of approval for options trading on spot Bitcoin ETFs grew nearer this week after CBOE refiled a new application with 44 pages of detail. First filed seven months ago, the more extensive refiling suggests the SEC may have provided feedback to issuers. The final deadline for a decision is September 21, but trading isn’t expected to go live until the fourth quarter due to the need for additional regulatory steps.
Ethereum L2 interoperability
Optimism is building an interoperability system so that users of the L2s in its ecosystem (Base, OPmainnet, Zora etc) can easily swap assets between chains. The plan involves creating a message-passing protocol, a universal token standard (SuperchainERC20) and a fault-proof system for secure asset transfers. The lack of interoperability between L2s has been a big factor in dissatisfaction with Ethereum this year. Polygon is working on a similar concept with its AggLayer as in ZKSync dev Matter Labs with its Elastic Chain.
Christian Westerlind Wigstrom joins the Independent Reserve podcast
The latest Independent Reserve Crypto & Bitcoin Podcast features a conversation between Lee Eaton, and Christian Westerlind Wigstrom, co-founder and CEO of Monoova. In this episode, Christian discusses the evolution of the payments landscape, unique fintech challenges, and the shift from academia to entrepreneurship. We also explore captivating stories from his background, from speechwriting in the House of Lords to economic consulting in Zimbabwe.
Watch the full episode on YouTube or listen to it on Spotify.
Until next week, happy trading!
