Greythorn Monthly Market Update - July 2024

OPENING REMARKS

Welcome to Greythorn Asset Management's July 2024 Monthly Market Update. We're excited to share insights and analyses on the market trends we're observing. Our mission is to invest in groundbreaking technologies and asset classes, aiming to generate significant value and positively impact the industry.

At Greythorn, we provide monthly updates on the cryptocurrency market, including detailed analyses of market dynamics, regulatory developments, and macroeconomic factors affecting digital currencies.

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MARKET ANALYSIS

Reflecting on Bitcoin's July: A Surge in Price and Sentiment

July has been a good month for Bitcoin, with both its price action and market sentiment showing significant improvement from last month.

Investors continue to accumulate positions in crypto assets, the University of Wyoming established a Bitcoin Research Institute and Cantor Fitzgerald announced plans to launch a bitcoin financing business, allowing clients to leverage their BTC holdings.

On the political front, Trump reaffirmed his support for the industry during Bitcoin 2024 in Nashville, suggesting the relocation of all Bitcoin mining to the US, a promise to fire SEC Chair Gary Gensler and an intention to establish a Bitcoin and crypto presidential advisory council.

Senator Cynthia Lummis presented a bill to establish a Bitcoin Strategic Reserve aimed at reducing US debt. Meanwhile, reports surfaced that VP Kamala Harris’ team reached out to crypto industry representatives, including those from Coinbase, Ripple, and Circle, in an effort to improve relationships.

Overall, July has brought a wave of positive news and actions that have boosted Bitcoin's market performance and the sentiment around it.

Ethereum's ETF Approval Boosts Price and Sentiment

The end of July has been a notable month for Ethereum as well, marked by the approval and trading of Ethereum ETFs on July 23, 2024. The ETH spot ETFs performed remarkably well on their first day, surpassing expectations. Net inflows exceeded $100 million, an impressive feat considering the strong outflows from Grayscale’s $ETHE fund. Total recorded volume reached over $1.1 billion, which was about a quarter of what BTC spot ETFs achieved on their first day – better than anticipated. BlackRock’s $ETHA saw a quarter of the day one volume of its $IBIT BTC fund.

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However, the second day brought significant net outflows between $113 million and $133 million, mainly due to substantial selling from Grayscale's Ethereum Trust, which experienced $326.9 million in outflows.

Despite this, it's interesting to see ETH outperforming, at least for now. This could indicate high expectations for net ETH spot ETF inflows next month or a technical bounce after last week’s drop.

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Altcoins: Mixed Performance and Market Sentiment

July has been a month of mixed performance for altcoins, with varying levels of success and market sentiment across the board.

Several altcoins saw notable gains, including $MANTRA (+64.8%), $HNT (+53.2$),? $JUP (+41.4$), $SOL (+33%), $TAO (+27%) and $PYTH (+23%) driven by positive news and developments within their respective ecosystems. For instance, projects within the Solana ecosystem outperformed the market in July.?

However, not all altcoins enjoyed such positive momentum. Some experienced price stagnation or declines, mainly $FLR (-21.8%), $FTM (-16.7%), $LDO (-15.0%), $AKT (-13.9%) and $TON (-13.6% ) among others.?

Overall, while some altcoins thrived in July, others struggled, with Investors remaining cautious yet hopeful, likely looking for signs of sustained growth.

Interestingly, the monthly trade volume of DEXs like Uniswap and Curve relative to that of CEXs such as Coinbase and Binance is at an all-time high. This surge comes as CEX volumes are decreasing, while DEX volumes reversed a declining trend in July.

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MACRO INSIGHTS

Stock Market Correction: Mid-July Sell-Off

The S&P 500 and NASDAQ experienced a significant sell-off by mid-July, following a strong uptrend earlier in the month. This correction, while sharp, is can be viewed as a natural adjustment from previously high levels. The market is currently at a crossroads, with mixed signals of economic slowdown and robust business conditions, compounded by political uncertainties. Investors seems to remain cautious, balancing optimism with the reality of potential market volatility.

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Fed Chair Powell's Latest Statement?

Fed Chair Jerome Powell recently discussed the U.S. economic outlook, noting that no decision has been made regarding a potential rate cut in September. The Fed is closely monitoring risks on both sides of its dual mandate and will assess incoming data to guide future decisions. While Q2 inflation readings have increased confidence, Powell emphasised the need for caution to avoid weakening the economy too early.

Additionally, U.S. job openings for June came in at 8.2 million, surpassing expectations (8.2 million vs 8.0 million) and suggesting that the anticipated job market slowdown is still in its early stages. However, the percentage of industries experiencing employment growth has dropped below 65% for the first time since the pandemic, indicating possible challenges ahead.

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China's Policy Focus: Interest Rate Cuts and Tech Investment

China's recent interest rate cuts, although small at 0.1 percentage points, signal a coordinated effort to stimulate the lending market cautiously. The changes in key rates show the government's focus on "quality growth" and a careful approach to avoid aggressive fiscal policies that might fuel speculation. This means there might be less push for boosting crypto trading this year. The Third Plenum’s statement points to a move towards a "market economy" with socialist traits, including flexible real estate rules and support for private companies. There’s a notable emphasis on technology, aiming to surpass the US in tech. This focus on tech, including web3 and blockchain, highlights China’s long-term strategy for economic strength and innovation.

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Coinbase's Campaign Finance Violation

Coinbase might be in trouble after donating $25 million to the Fairshake super PAC, which might breach federal campaign finance laws. This big donation came while Coinbase was in the middle of negotiating a federal contract, drawing attention to the legal and regulatory risks in the crypto world. The situation highlights the challenge for crypto firms to navigate political influence while complying with regulations. This controversy could have lasting effects on Coinbase and the wider crypto industry, stressing the importance of strict legal and ethical adherence.

Japan Welcomes Crypto ETFs Amidst Interest Rate Hike

Japan is poised to launch its first crypto ETFs, a significant advancement spearheaded by a collaborative effort between Franklin Templeton and SBI Holdings. This partnership melds Franklin Templeton's extensive experience in traditional financial markets with SBI Holdings' expertise in the crypto sector, offering Japanese investors an innovative and accessible route to digital assets.

The introduction of these ETFs is anticipated to generate substantial interest, particularly from retail investors. One key advantage driving this demand is the more favorable tax treatment that ETFs receive compared to direct cryptocurrency holdings, making them an attractive investment vehicle. By simplifying the investment process and reducing tax liabilities, these ETFs provide a more streamlined and cost-effective way for individuals to gain exposure to the burgeoning crypto market.

In an interesting development, the Bank of Japan has raised interest rates for only the second time in almost 20 years, increasing by 0.15 basis points. This move signals a shift towards more active monetary policy management, supporting economic growth and impacting global markets. Japanese yields jumped, and the yen strengthened against the USD as a result. This move is particularly interesting as Europe and China are already cutting rates. Japan stands out as the only country still raising rates, perhaps because it is the largest holder of US government debt.

CLOSING THOUGHTS

Reflecting on July, we’ve observed significant developments across the crypto and traditional financial markets. Bitcoin and Ethereum have shown volatile performance, driven by positive regulatory and political news, as well as the introduction of new financial products like ETFs. Altcoins have had a mixed performance, with some showing potential for growth within their ecosystems while others faced challenges.

As we move into August, we anticipate continued volatility and opportunity in the markets. We remain committed to providing you with concise, insightful updates. The crypto landscape changes rapidly, and while we strive to offer comprehensive monthly overviews, we encourage you to conduct your own research for a deeper understanding.

Thank you for reading this month’s update. We hope you found it helpful. Please follow us on our social media channels for more real-time updates and insights.

DISCLAIMER

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