Bitcoin & Co: 5 Learnings from last week + insights from the INVAO Trading Desk

What's new in crypto?

Bitcoin stands above $45k this Friday, Ethereum is back above $3k. That’s despite the fact that U.S. lawmakers are discussing tighter regulations. The market is growing massively, with coin listings at a record high and?digital assets funds back above $50 billion. Still, crypto is not yet too big to fail.

From the markets, here is what I was?interested in this week:?

1. Bitcoin above 45k: Are the crypto bulls back??

Bitcoin broke above $45k for the first time in almost three months. Ethereum is back above $3k, and other cryptocurrencies have seen significant gains as well. Ethereum underwent a closely-watched upgrade last week, helping it outpace bitcoin. Overall, the market has become more optimistic again than in the past weeks.?Are we seeing the start of a rally toward a?fall 2021 double peak?

2. The empire strikes back: tighter regulations coming

The regulatory debate in the U.S. has entered the next round. SEC Chairman Gary Gensler called for more regulations and said the crypto industry was “rife with fraud, scams, and abuse.”?The U.S. Senate did not adopt a bipartisan compromise on a crypto tax provision in its $1 trillion infrastructure bill after a vote on Monday. That was a blow to the digital assets industry because the bill would have specified that software developers, node operators, and validators would not be required to carry or report transaction information. Altogether, it seems the next round of regulatory tightening and heavier taxation is ahead in the U.S. Put your seatbelt on!

3. Digital assets funds reach $50 billion

Recent gains in Bitcoin and Ethereum have brought the total assets under management?of digital funds back to over $50 billion, the highest level since May. The combined crypto market cap now stands at $1.6 trillion, showing funds still only make up a fraction of the market. Crypto prices now showing renewed upward momentum will likely result in more inflows again over the coming weeks, after a period of net outflows

4. Get rich (or poor) quick

Only a year ago, about 6,000 digital assets were listed on CoinMarketCap; today, there are 11,145. 2,655 new crypto assets were added in the first half of 2021 alone. That shows two things: First, the asset class is exploding, with new ideas and innovative technologies being brought to market almost every day. Second, it’s more important than ever for investors to do their due diligence. If history is any indicator, only a few dozen of the thousands of newly launched assets will survive, and only a handful will make investors insanely rich. Choose wisely!

5. Too big to fail? Not yet.

The Economist conducted a crypto stress test, asking what effects it would have on the traditional financial system if Bitcoin went to zero. The result would be significant wealth destruction, as many institutional investors today have crypto exposure, including hedge funds, university endowments, mutual funds, and some companies. A crash might also cause stablecoin issuers to sell off the assets with which they collateralized their coins. The Economist concludes that a crypto crash could result in about $2 trillion in overall economic value being destroyed. That doesn’t make crypto too big to fail yet, but the importance of crypto market stability for the greater financial system has certainly increased.

Insights from the INVAO Trading Desk

I still owe you an answer to the question raised earlier on: Are the Bitcoin bulls back? Judging from the recent trend reversal, it looks like it. For the past weeks, Bitcoin has traded in a range between $30k and $42k. That’s been an important range for institutional and retail investors alike, and it has proven quite stable. Now Bitcoin has broken out of that range and even topped $45k. Keep in mind that all of that happened despite regulatory threats made in the U.S., and despite a massive tech crackdown in China, and despite the fact that it’s August! All of those concerns are still in the market, making the recent price moves even more exciting. A double peak this year is absolutely possible. Yet still, what goes up quickly may come down even faster. We are excited, but we remain cautious.

Have a bullish week ahead!

This letter is an informational document and does not constitute an investment recommendation, investment advice, legal, tax or accounting advice or an offer to sell or a solicitation to purchase any securities and therefore may not be relied upon in connection with any offer or sale of securities. The views expressed in this letter are the subjective views of INVAO personnel, based on information which is believed to be reliable. INVAO and its principals have made investments in some of the instruments discussed in this communication and may in the future make additional investments.?