Market Update: Panic Replaces Euphoria

Hey there,

This week, we contextualise this market drawdown and explain why it isn't as worrisome as it seems. ??

BTC's price sinks for fifth straight week

This streak has not happened since Q2 2022, around the time of the TerraUSD collapse.

Altcoins have crashed by 40–60% in the past month, as the entire crypto market cap has shed ~20% since March's high.

Cooling the ‘up only’ price action

We’re quick to forget how incredible Bitcoin's run has been since the lows of late 2022. Even with this 17% pullback, it's still up by ~275% from $16,000, its price in the aftermath of the FTX collapse.

Even when you zoom in to more recent times, it's worth remembering that BTC has just gone on a record-setting run of seven straight monthly gains.

Euphoric conditions come and go

It's no surprise that market sentiment became overly euphoric in Q1.

Even the widely-tracked Fear & Greed Index hit 'Extreme Greed' for a number of weeks.

That was never going to last. In recent weeks, the index was swung back to a 'Neutral' reading.

In the past few months, we saw memecoins create overnight millionaires. Even dogwifhat (WIF) raised $750,000 to appear on the Las Vegas Sphere.

Talk about a local top signal!

Standard part of the market cycle

As last week's newsletter mentioned, after Bitcoin halvings, the price of BTC tends to slide.

A favourite chart of ours is BTC's historic drawdowns from all-time highs (ATHs).

As shown below, multiple drawdowns should be expected every bull market. It's entirely possible we get more of them as the year continues.

These 15% corrections are standard. During the bull markets of 2017 and 2021, there were 12 and 13 times, respectively, when BTC fell by at least 10%.

Why you shouldn't panic

During these drawdowns, ask yourself, "has anything tangible changed?"

For us, this is a hard no.

• Onchain adoption and value flows are growing.
• Major payment companies such as Stripe are re-entering the space.
• Stablecoin metrics keep climbing.
• Accessibility to Bitcoin ETFs continues to increase.
• The supply-side impact of the halving is yet to be fully realised.

Even BlackRock has deployed a public onchain fund for the first time amid this market correction. (Already, in under a month, it has become the largest onchain fund!)

Instead, paying attention is arguably more important now than a few months ago.

ETFs: Hong Kong fizzles; U.S. outflows; Australia next in line

What happened? Last week was the third straight week of net outflows for the new U.S. Bitcoin ETFs. Elsewhere, the first Bitcoin and Ethereum ETFs launched yesterday in Hong Kong to just $12M in volume (vs $655M on opening day in the U.S.). In Australia, speculation of an upcoming approval continue.

Why does it matter to you? Not everyone is concerned about the slowing ETF interest, with analysts at Bernstein expecting it to be only a "short-term pause" and BlackRock seeing the next wave of buyers will include large institutions like sovereign wealth funds and pensions.

Binance co-founder CZ sentenced to four months

What happened? Changpeng Zhao (CZ) pleaded guilty in November to violating U.S. money laundering laws. This week's sentencing was much less than the three years sought by the prosecution.

Why does it matter to you? Hopefully, the trial ends many years of uncertainty regarding Binance and mitigates its level of systemic risk to crypto markets.

Russia proposes crypto exchange ban

What happened? Russian parliament is considering a bill banning crypto exchanges but would allow transactions and mining by registered firms. If approved, it will go into effect on September 1.

Why does it matter to you? The bill doesn’t ban the circulation of cryptocurrencies, just the organisation of exchanges and those cryptocurrencies not backed by the ruble. Countries using cryptocurrency to skirt sanctions may continue to stir controversy, with Russia rumoured to be one of the largest doing so.

?? Did you miss the 'Bitcoin for Institutions' conference? ??

MicroStrategy launched an enterprise platform, MicroStrategy Orange, for building decentralised identity apps on Bitcoin.

• Eigen Labs introduced its EIGEN token and detailed its 'stakedrop'.
• Kamino’s KMNO launched and was sold off heavily.
• Avalanche integrated with Stripe’s brand-new crypto onramp.
• The latest batch of Solana (SOL) sales from the FTX estate ended with bids of ~$100 per SOL.
• Avail announced its upcoming airdrop.
• Uniswap enabled?crypto purchases via Robinhood Connect.
• Aave Labs proposed a strategic roadmap for 2030, which included the development of Aave V4.
• Immutable announced a $50M gaming rewards program.

Thanks for reading the Weekly Shift.

We hope you've enjoyed it, and look forward to seeing you next week!

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