In Markets

Crypto spring has returned with 11 straight days of inflows into the Bitcoin ETFs, this week’s scheduled launch of the Ethereum ETFs, and the appearance by pro-crypto Presidential candidate Donald Trump at Bitcoin 2024. The developments have temporarily outweighed concerns about a possible A$13.5B (US$9B) Mt Gox creditor dump (an unscientific Reddit poll of creditors suggests 56% plan to HODL their recovered Bitcoin anyway). Adding to the fun, Elon Musk has just changed his profile pic to laser eyes, but no one is quite sure if it’s a crack at Joe Biden withdrawing from the race, or a hint the X owner will be making a Bitcoin announcement at Bitcoin 2024 as well. Bitcoin dipped briefly after Biden’s withdrawal announcement came through (as someone replacing Biden makes Trump’s election less likely) but the price quickly recovered and Bitcoin is up 6.3% on the same time last week to trade around A$101,879 (US$68K). While the price is up, demand from retail investors (sub US$10K/A$15K traders) is at a three year low according to CryptoQuant. ARK invest analyst David Puell also says on-chain indicators suggest Bitcoin is currently oversold and in the “deep value” zone. Ethereum barely managed to recover earlier losses to trade around A$5,183 (US$3,425) suggesting uncertainty over the ETF inflows. Solana surged 15% as various rumours fly around about potential ETFs, XRP gained 11% on news it may soon settle litigation with the SEC, Dogecoin was up 12%. Cardano lost 3% and Shiba Inu declined 13%. Crypto Fear and Greed Index is at 70, or Greed.

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From the IR OTC Desk

In general, risk assets require: 1) Cheap funding; 2) Forward looking policy; 3) Product innovation; 4) Political stability.

As more surety becomes priced into the next US Presidency, political stability as well as an understanding of forward-looking policy has proven positive for digital assets. There is a general expectation that a Republican Presidency will be more accommodating of digital asset legislation – relative to the perceived hard line of the incumbent Democratic Party.

With the Democratic Party needing to appoint their next Presidential nominee, political polling suggests that former President Trump is on track to gain the +270 Electoral College votes required to re-attain the Presidency. According to the Economist, voting intention is currently 47% for President Trump and 44% for the Democratic nominee.

Key dates in the political calendar, include:

  • 19th August 2024 – Democratic National Convention
  • 10th September 2024 – Second Presidential Debate
  • 5th November 2024 – Election Day
  • 20th January 2025 – Inauguration

With so much time between now and the 5th November election day, near anything can happen. Polls can change quickly with surety of the Democratic nominee; this can also change forward-looking policy and cause bouts of political instability, the latter being something we expect to see.

In financial markets, the Federal Open Market Committee (FOMC) is expected to cut the federal funds rate by 25bps in September and (now) December. Scheduled to meet on Thursday the 1st of August, financial markets will be seeking a clear signal from the FOMC that a rate cut at the September meeting is a near certainty. Anything short of this will likely be seen as a disappointment. Between now and then, it will be US PCE inflation data (this Friday) that will be the core input into the FOMC decision. Trending lower since February 2022, core PCE inflation YoY is forecast to print at 2.5% (June). Watch this space.

Economic releases this week include: In the US (AEST)

  • Thursday 10:30pm US GDP (Q2)
  • Friday 10:30pm US PCE Inflation (June)

In China (AEST)

  • Monday 11:15am CN 1yr/5yr Prime Rate Review

In Singapore (AEST)

  • Tuesday 3:00pm SG Inflation (June)
  • Friday 12:30pm SG Unemployment data (Q2)
  • Friday 3:00pm SG Industrial Production (June)

On the OTC desk, US politics has buoyed pricing. This positive momentum has also been helped by falling US bond yields and an ETH ETF! With so many positive pricing influences, it makes sense that the OTC desk has seen large flows in the majors this week. In addition to BTC and ETH, SOL has also been of notable trading interest. The speculative market is warming to the notion that a SOL ETF could also be soon on the cards.

If positivity can be maintained within the digital asset complex, confidence may soon build in the alt space. In general, it takes several weeks of positive price movements and inflow into the majors and layer 1s before the marginal investor feels comfortable in moving into the lesser market cap tokens. For now, enquiries have remained relatively quiet in the alt space. Perhaps it is next week’s FOMC meeting which may be the catalyst for further risk taking.

For any further information, please feel free to reach out.

In Headlines

5 Ether ETFs to launch.

Despite the SEC’s best efforts to drag out the approvals process, five spot Ether ETFs are due to launch later today in the US. CBOE announced late last week that ETFs from Fidelity, Franklin, Invesco, VanEck and 21Shares will launch July 23 “pending regulatory effectiveness” (which has since been approved by the SEC). Most of the ETFs are waiving fees for the first six months or so, with fees ranging from 0.19% to 0.25%.

Grayscale outflows and mini-ETF

Grayscale kept its Bitcoin ETF fees 10x higher than anyone else – banking on hodlers not wishing to realise a big capital gain by switching funds – which contributed to massive outflows and churn. It’s repeating the strategy with a 2.5% fee for its Ether ETF, but with a twist. It’s converting 10% of ETHE to a new ‘mini’ Ethereum ETF (ETHE holders get the shares for free) which will have the lowest fees (0.15%) of any Ethereum ETF as well as the coveted “ETH” ticker. This may stem some of the outflows. Grayscale’s mini- Bitcoin ETF will also launch on July 31.

What to expect from the Ether ETFs

While outflows from ETHE may mute the launch, Bitwise suggests we may see US$15 billion (A$22.5B) in inflows over the first 18 months, Galaxy says US$1B (A$1.5B) per month for five months and Grayscale thinks US$3.5B to US$4B (A$5.25B to A$6B) is likely over the first four months. The impact of inflows on the ETH price may be greater than on Bitcoin given the huge amount of the supply staked or locked in DeFi and Ethereum’s lower supply inflation rate. However it remains to be seen if Ethereum has anywhere near the brand recognition or appeal to TradFi as Bitcoin. You can keep track of the inflows and outflows in real time on Farside’s new page for ETH ETFs.

IR Podcast Episode 10 – Michele Levine

Episode 10 of the Independent Reserve Crypto and Bitcoin Podcast dropped last week and featured crypto lawyer, Michele Levine from Hamilton Locke. In this educational and entertaining discussion, we explore everything from plans of an AUD stablecoin, to the rise of state-sanctioned scam factories and the avid collection of designer sneakers. If you’re looking for an informative podcast from crypto insiders, make sure to subscribe to our YouTube channel or follow the show on Spotify.

You can check out Episode #10 of the Independent Reserve Crypto and Bitcoin Podcast right here!

Trumping Bitcoin 2024

Death defying Presidential candidate Donald Trump will appear at the Bitcoin 2024 conference in Nashville Tennessee later this week (July 27). The CEO of policy lobby group Satoshi Action Fund Dennis Porter claims that “sources” have told him Trump will announce the creation of a US Bitcoin reserve. If true, this could be as simple as deciding not to sell the 200K or so Bitcoin the Government has seized from various criminal enterprises, however such a move would be a huge symbolic endorsement of Bitcoin by the most powerful country in the world. Organisers are hyping up some sort of reveal that will “break the internet” (the other rumour is Elon Musk, who is in Tennessee currently, will turn up with a BTC announcement). Trump is charging Bitcoiners US$844,600 (A$1.3M) for a crypto roundtable/meet and greet and US$60K (A$90K) for a photo which may help explain his conversion to the crypto cause. In contrast to the Trump-mania in the crypto space, Ethereum creator Vitalik Buterin pleaded with crypto fans to not become single issue voters.

Bitcoin ETF inflows and JPMorgan’s bearish analysis

The Bitcoin ETFs have been going from strength to strength lately, as institutional investors gobble up relatively cheap Bitcoin. They have amassed US$17 billion (A$25.5B) in year to date net inflows so far and hauled in US$1.197 billion (A$1.8B) last week alone. But JPMorgan analysts led by Nikolaos Panigirtzoglou predict that any rebound in crypto prices is likely to be temporary and strategic rather than the start of a new upward trend. The report notes that Bitcoin’s current price is much higher than the production cost of US$43K (A$64.5K) and Bitcoin’s volatility adjusted comparison to gold which is around US$53K (A$79.5K). However, the report also notes that selling pressure from Gemini, Saxony and Mt Gox is likely to abate in August with a consequent rebound in Bitcoin futures.

Bits and pieces

Ripple CEO Brad Garlinghouse expects the company to settle its years long litigation with the SEC “very soon” according to an interview with Bloomberg. There is speculation that a closed door meeting at the SEC on July 25 will resolve the matter. A new study from the University of Queensland found that not only poor/disadvantaged people, but also university educated and apparently financially literate mortgage holders are falling for crypto scams. The authors argue that online financial education from trusted independent sources is urgently needed. Donald Trump is reportedly mulling over appointing JPMorgan CEO Jamie Dimon as Treasury secretary if elected (albeit in 2026 when Jerome Powell’s term expires). Dimon famously hates Bitcoin, but Trump reportedly claims he has “all of a sudden changed his tune a little bit.” Meanwhile SEC commissioner Hester Peirce has said that staking and in kind creation and redemption for Ethereum ETFs are “open for reconsideration” if the administration changes.