GSG Weekly Recap (Jul 29, 2024)

Market Watch

Things to Watch This Week (July 29?– August 2)

July 31:?U.S. FOMC Interest Rate Decision?

This week, the focus should be on the U.S. FOMC meeting mid-week.?Rates will almost certainly be unchanged, as CME FedWatch shows interest rate futures are pricing in a 96% chance of rates staying as is. However, the market is expecting a rate cut to take place in the Sept FOMC meeting, and thus it will be important to watch out for the guidance that comes and whether it hints at a shift in attitude towards rate cuts this year.???

Random Musing This Week?(July 29?– August?2)

1. Bitcoin Technical Analysis Update

Last week was a big week for Bitcoin, as we saw some major developments in the space, of which some might have gone slightly under the radar.

In the U.S., the Bitcoin Conference in Nashville went almost as expected, with candidate Trump making several promises that excited the market. However, the most interesting development from the conference may have been?Senator Cynthia Lummis announcing a bill to create a Bitcoin reserve to reduce the national debt. The proposal aims to accumulate at least one million BTC over five years, including the 210,000 BTC currently held by US authorities.

Add to this the headline of the State of Michigan Retirement System disclosing that they hold 110,000 shares of the ARK 21Shares Bitcoin ETF and we can see just how far the industry has come in just the past year with regard to the shift in attitude from a regulatory perspective in the U.S.?Michigan is now the third state to explore allocating a part of its pension fund to crypto.?In May, the State of Wisconsin Investment Board reported a $164 million investment in spot Bitcoin ETFs and on July 25, Jersey City Mayor Steven Fulop hinted at a 2% investment in Bitcoin ETFs by the city’s pension fund. With U.S. pension funds estimated at over $35 trillion, it is hard to not be excited for what the future holds for Bitcoin.?

With that said, Bitcoin's weekend rally may be faced with its first major challenge. Since reaching the all-time high mark of $73.8k in March, Bitcoin has been trading within the boundaries of a flag of which it is currently testing the upper range. In the long run, this flag is a bullish formation, as breaking through the upper boundary resistance could see BTC price reach a potential target of $85k in the mid-term. But with no way of knowing when it will break out of the range, there is an equal chance of BTC being turned away by resistance and trending back downwards to test the lower boundaries of the flag.?

Hopefully, the aforementioned developments over the past week add fuel to the regulatory narrative coming out of the U.S., allowing for more bullish sentiment to spark the upside breakout that we need.?

2. Ethereum Technical Analysis Update

The launch of the ETH spot ETF amounted to a "sell the news" event, similar to the outset of the BTC spot ETFs. Below, we can see how BTC traded lower for roughly 12 days before recovering. Eventually, BTC would surpass the spot BTC ETF launch price in under a month.?

Given that the lackluster performance of both launches have been attributed to outflows from Grayscale products, we could see a similar reversal once sell pressure from these outflows recedes. While ETH hasn't dropped in price as much as BTC had during its post-launch period, we're also only one week into the existence of the ETFs and more outflows could be in store.

Should ETH experience the same 20+% decline that BTC did in its post-launch period, we would see ETH revisit the $2.8 - 2.9k region it saw in the beginning of July. However, $3.2k is a long-term pivot level that could serve as major support and we're already seeing a considerable bounce of this level at time of writing, so we wouldn't count on ETH dropping under $3k any time soon barring any unforeseen circumstances.?

The ETHBTC picture also reinforces the view that we could see a rebound in ETH price in the near-term. We're close to a support level and RSI levels show oversold conditions, so a rebound back above 0.05 would not be a surprise. However, what we will be closely monitoring is whether ETH can break the long-term downtrend that it has been in since mid-2022 versus BTC.

Perhaps the regulatory environment improving throughout the world may alleviate some of the legal scrutiny the Ethereum ecosystem has suffered in the past few years and allow for a more conducive environment that will allow its price to flourish.? ?

Recap of Top Stories (July 22?– July 26)

Bullish

• Jersey City?to invest in Bitcoin ETFs, the latest pension to dive Into crypto Commentary: The municipal pension plan of Jersey City, New Jersey, will soon invest in bitcoin via exchange-traded funds, according to a Thursday social media post from Mayor Steven Fulop. The move follows a Wisconsin pension making a similar decision earlier this year. Fulop added that the city’s pension fund, the Employees Retirement System of Jersey City, is currently updating paperwork with the SEC to allocate a percentage of the fund to bitcoin (BTC) ETFs. According to Fulop’s tweet, the investment is expected to be completed “by the end of the summer.”

Interesting

• Hashdex?files S1 for an ETF that holds Bitcoin and ether, leaving the door open for other assets Commentary: Hashdex took the next move in its plan to launch an exchange-traded fund that directly owns spot bitcoin and ether, establishing what could be the first index-based crypto ETF in the United States. The fund, called the Hashdex Nasdaq Crypto Index US ETF would own bitcoin and ether, but could later hold more assets depending on how the regulatory landscape unfolds.
• Franklin Templeton?eyes Solana ETF after Ethereum success Commentary: Franklin Templeton, one of the first firms to issue a spot Bitcoin exchange-traded fund (ETF) in the United States, is optimistic about more cryptocurrency ETFs, including a Solana product. Franklin Templeton wrote in an X post: “Solana has shown major adoption and continues to mature, overcoming technological growing pains and highlighting the potential of high-throughput, monolithic architectures.”
• Spot Ethereum ETFs?seen with over $1B in trading volume on debut Commentary: United States-listed spot Ether exchange-traded funds generated around $1.08 billion in cumulative trading volume on its first day of trading — roughly 23% of the spot Bitcoin ETFs saw on their opening day. The converted Grayscale Ethereum Trust (ETHE) and BlackRock’s iShares Ethereum Trust (ETHA) saw the most volume on July 23 at $458 million and $248.7 million, respectively. Bloomberg ETF analyst Eric Balchunas said the $625 million in trading volume excluding Grayscale’s ETHE was “healthy” and expects a “sizeable chunk” of that sum will convert to inflows.
• Mt. Gox?creditors to start receiving bitcoin and bitcoin cash from Bitstamp on Thursday Commentary: Bitstamp said it has begun returning digital assets to Mt. Gox creditors. The exchange received Bitcoin, Bitcoin Cash, and Ethereum from the Mt. Gox trustees on Wednesday and will begin distributing the digital assets to customers on Thursday.
• TON?introduces gasless fees with a new smart wallet Commentary: The TON Core team has launched its W5 smart wallet standard in collaboration with Tonkeeper, promising to deliver gasless transactions on The Open Network (TON) blockchain. The upgrade to the layer-1 blockchain’s pre-existing wallet smart contract will allow users to use Tether for gas fees for USDT transfers and Notcoin for gas fees when transferring Notcoin (NOT). Adding the gasless features for USDT and Notcoin payments aims to remove the need for users to hold Toncoin to facilitate payments and reduce barriers newcomers face.
• Trump?reelection campaign raised $3M in crypto for Q2 2024 Commentary: Donors to Donald Trump’s campaign to be reelected as United States president have contributed roughly $3 million in cryptocurrency since the candidate announced he would accept digital assets. The most significant contributions to the Trump campaign in Q2 2024 came from Gemini co-founders Cameron and Tyler Winklevoss, who pledged $2 million in BTC on June 20. Kraken co-founder Jesse Powell said he would donate $1 million in Ether on June 28.
• Coinbase UK?fined $4.5 million for ‘high-risk’ customer onboarding Commentary: Coinbase’s United Kingdom arm was fined $4.5 million by a British regulator for breaching a voluntary agreement related to user onboarding. Yet CBPL, part of the Coinbase Group,?has allegedly onboarded 13,416 customers that the FCA considered high-risk and offered them cryptocurrency services, which was also prohibited by the agreement. The British regulator fined Coinbase Group’s CBPL 3,503,546 British pounds ($4.5 million) for “repeatedly breaching” the agreement. The British regulator’s decision could mean more scrutiny for other cryptocurrency exchanges in the region and lead to platforms seeking more crypto-friendly regulatory jurisdictions.
• Ferrari?to launch crypto payments in Europe after US success Commentary: Ferrari, the Italian luxury sports car producer, is preparing to expand its cryptocurrency payment system to Europe following a successful launch in the United States. Ferrari will extend its crypto payment feature to its network of European dealers from the end of July 2024, the firm officially announced on July 24. Ferrari’s entry into the European market follows the successful launch of the crypto payment system in the US in October 2023. To enable crypto payments in the United States, Ferrari initially partnered with BitPay. This major local crypto payment firm serves global brands like AMC Theaters, Newegg electronics retailer, and others.
• Crypto custodian?Hex Trust?receives in-principle MPI license approval in Singapore Commentary: Hex Trust, an institutional crypto custodian, has obtained in-principle approval for a Major Payment Institution (MPI) license in Singapore as it seeks to expand in the city-state. Hex Trust raised $88 million in its Series B funding round in 2022 and received regulatory approval in France in August 2023 to offer services including digital asset custody, purchasing, selling, and trading.
• BlackRock's?$500M tokenized fund pitches for Ethena's RWA investment plan Commentary: Ethena shared plans to allocate a part of its $235 million USDT stablecoin collateral and $45 million surplus reserve in yield-generating real-world asset (RWA) offerings. BlackRock's BUIDL fund pitched for a $34 million allocation, while Steakhouse Financial applied with a lending vault on Morpho Blue.
• Hong Kong?to launch Asia’s first inverse Bitcoin ETF Commentary: On July 23, Hong Kong will see the launch of Asia’s first Bitcoin futures inverse product, the CSOP Bitcoin Future Daily (-1x) Inverse Product. The new exchange-traded fund (ETF) by CSOP Asset Management — one of the largest asset managers in China — aims to offer investors a method of profiting from declines in the price of Bitcoin. This inverse product achieves this through a futures-based replication strategy, which invests directly into spot-month Chicago Mercantile Exchange Bitcoin Futures. Tristan Frizza, Founder of Zeta Markets, explained that the launch of the inverse Bitcoin ETF highlights the “increasing sophistication of crypto financial products” globally.
• The Digital Chamber?presses Kamala Harris to take a positive approach to crypto ahead of elections Commentary: The Chamber asked Harris specifically to pick a vice president who has "a proven track record of engaging with digital asset technology and proposing pro-innovation policies," singling out Colorado Gov. Jared Polis as an example. The Chamber also asked the vice president to include "pro-digital asset language" in the Democratic party's platform and have open discussions with crypto industry leaders.
• Binance. US?gets the greenlight to invest customer assets in Treasury Bills Commentary: Binance. US will be able to invest “certain" customer funds through a third-party investment manager as long as Binance. US ensures the funds are not being invested back into the company or any of its related entities. The court order also stipulated that Binance. US must produce data outlining any costs associated with maintaining the custodied US treasury investments in its monthly report detailing its business expenses and operations.
• Australian stablecoin startup?Stables?expands to Europe Commentary: Australian stablecoin payments startup Stables has announced its expansion to Europe in partnership with Mastercard, which co-founder Bernado Billota says indicates a wider trend of the dollar-pegged assets breaking into the mainstream. The new partnership will allow Stables users to make purchases with Circle’s USD Coin in 27 countries throughout Europe wherever MasterCard is accepted and through digital vendors like Apple and Google Pay.

Upcoming Market Events

• July 31?- U.S. FOMC Interest Rate Decision
• August 14?- U.S. Consumer Price Index for July
• August 30?- BTC CME August (BTCQ24) Options Expiry?
• September 18?- U.S. FOMC Interest Rate Decision
• September 27?- BTC CME September (BTCU24) Options Expiry?
• November 7?- U.S. FOMC Interest Rate Decision