Opening bell │ #19 │ 24th June

Report highlights:

1. Ethereum’s inflation rate is now at a new high since the merge, and back of the envelope calculations suggest that supply could hit back to levels above moving to Proof-of-Stake within the next six months.
2. Bitcoin markets are looking weak on the back of massive outflows last week, but there are some indicators both on-chain and technical that suggest some selling relief.
3. Tether liquidity injection for June at a low for the year. Meanwhile, gold continues to be an increasingly hot topic with even Tether starting a gold-backed synthetic dollar.

Ethereum supply?

Ethereum annualized inflation rate hits new high since merge.

As markets gear up for the listing of the Ethereum ETF, participants are wary of whether the token’s economics will attract investors.

With staking yields off the table for ETF investors, the supply burn rate for Ethereum becomes exponentially more important and closely monitored.

?Ethereum’s supply has increased for 70 consecutive days, with an annualized inflation rate of 1.39%, slightly less than Bitcoin’s miner reward.

Ethereum annualized inflation rate? |? %

Ethereum 30-day rolling inflation rate? | %

At this rate, Ethereum’s circulating supply will surpass what was outstanding since the merge by the end of 2022 within six months.

Despite this, Ethereum itself is becoming less available as the token moves into smart contracts at a record pace.

Since the merge in September 2022, the percentage of Ether supply in smart contracts (including staking) has increased from 25% to 39%, representing a 50% increase since the merge.

% of Ethereum supply in smart contracts

The supply remains approximately 350,000 Ether below pre-merge levels, amplifying the percentage of circulating supply in smart contracts.

However, ETF investors will need to assess the markets moving forward rather than relying solely on data since the merge.

And with markets currently in a little flux, the summer listing would be a boon for a little market hype to revive prices (but with fears of low demand on the table).

Bitcoin ETF AUM & flows?

Rattled Bitcoin markets still trading within historical range.

Bitcoin markets might seem frazzled after back-to-back daily outflows exceeding $540 million last week.

However, as markets focus on ETF dynamics, Bitcoin’s price is following a uniform path relative to these flows.

?Although this is not a measure of bullish demand, it indicates whether investors are less enthusiastic about offloading their Bitcoin at a discount, even if they anticipate a crash.

On May 1st, ETFs experienced their largest single-day outflow of $563 million, and Bitcoin’s price closed 4% lower. Similarly, last week’s outflows led to a 3.7% price drop.

This suggests investors might be taking profits rather than turning away from cryptocurrency allocations. Bitcoin has seen a 37% increase in current prices since ETFs began trading in January.

This is also visible in the percentage of outflows relative to total Assets-under-Management (AuM), which is on a declining trend (see chart).

% of outflows relative to total ETF AUM (USD)

Bitcoin is still trading within an acceptable low and high relative to holdings, indicating room for downward pressure.

For example, when ETF holdings of Bitcoin were at 810,000 BTC, the price ranged between $58,000 and $73,000. The current range relative to the ETF’s 869,000 BTC is $62,000 to $71,000, indicating a small range.

BTCUSD vs. Cumulative flows since March high

BTCUSD close price relative to AUM (in BTC)

As Bitcoin fluctuates between price and ETF holdings, these data points serve as a forward and backward viewpoint of market participants’ enthusiasm to buy or sell, amplifying these ranges.

Current on-chain data shows that both short-term and long-term investors are less enthusiastic to part ways with their Bitcoin at current prices (see chart on p4).

Technical indicators are also showing that markets are treading into oversold territory potentially marking a reversal in prices in the coming weeks.

Stablecoin supply?

Tether month-on-month supply growth takes big hit.

Tether, often used as a barometer of liquidity for market participants with over $120 billion in market cap, has seen significant month-on-month supply growth since the end of the year. However, for June (to date), USDT supply has grown by less than 1.5%, a massive drop from the over 5% seen in both April and May. This indicates that less liquidity is moving into crypto markets as Bitcoin and Ethereum face downward pressures, and altcoins remain far behind with little hope of any significant rally in the short term.

Technical analysis?

Bitcoin daily relative strength index shows signs of upcoming selling relief.

?Technical analysis and indicators, though often inaccurate, provide good insights into possible market swings. The Relative Strength Index (RSI), which indicates whether markets are overbought or oversold, is extremely popular. For Bitcoin, it has proven less accurate on the overbought side (time to sell). However, an oversold RSI, which doesn’t occur often, is a more reliable signal for traders to buy in. Bitcoin markets are currently on the brink of being in oversold territory, suggesting potential buying opportunities.

Gold takes center stage.

Gold continues to be a focus for various organizations. The Federal Reserve has discussed how more countries are moving away from dollar reserves into precious metals, and the IMF has published similar findings recently. The US dollar share of forex reserves has dropped from over 70% to nearly 55%, while gold reserves have reached their highest levels since WWII. Meanwhile, Tether has announced its gold-backed synthetic dollar, indicating that the behemoth stablecoin issuer is aware of what’s to come.

Gold price needed to back each country's monetary aggregates

On chain |?$bn

Bitcoin transfers into exchanges from both long and short-term holders drops to new low.

Bitcoin exchange? supply?

Daily change in Bitcoin exchange reserves.

Derivatives

Forward-dated futures hit low for the year.

Economic calendar

Key events this week : Market volatility ahead of plenty of central bank speakers.

Disclaimer.

THE INFORMATION CONTAINED WITHIN THIS COMMUNICATION IS FOR INSTITUTIONAL CLIENTS, PROFESSIONAL AND SOPHISTICATED MARKET PARTICIPANT ONLY THE VALUE OF DIGITAL ASSETS MAY GO DOWN AND YOUR CAPITAL AND ASSETS MAY BE AT RISK

Copper Markets (Switzerland) AG (“Copper”) provides various digital assets services (“Crypto Asset Service”) to professional and institutional clients in accordance with the Swiss Federal Act on Financial Services (FinSa) of 15 June 2018 as amended and restated from time to time.

This material has been prepared for informational purposes only without regard to any individual investment objectives, financial situation, or means, and Copper is not soliciting any action based upon it. This material is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy in any jurisdiction in which such an offer or solicitation, or trading strategy would be illegal. Certain transactions, including those in digital assets, give rise to substantial risk and are not suitable for all investors. Although this material is based upon information that Copper considers reliable, Copper does not represent that this material is accurate, current, or complete and it should not be relied upon as such. Copper expressly disclaims any implied warranty for the use or the results of the use of the services with respect to their correctness, quality, accuracy, completeness, reliability, performance, timeliness, or continued availability. The fact that Copper has made the data and services available to you constitutes neither a recommendation that you enter into a particular transaction nor a representation that any product described herein is suitable or appropriate for you. Many of the products described involve significant risks, and you should not enter into any transactions unless you have fully understood all such risks and have independently determined that such transactions are appropriate for you. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or complete discussion of the risks which are mentioned. You should neither construe any of the material contained herein as business, financial, investment, hedging, trading, legal, regulatory, tax, or accounting advice nor make this service the primary basis for any investment decisions made by or on behalf of you, your accountants, or your managed or fiduciary accounts, and you may want to consult your business advisor, attorney, and tax and accounting advisors concerning any contemplated transactions.

Digital assets are considered very high risk, speculative investments and the value of digital assets can be extremely volatile. A sophisticated, technical knowledge may be needed to fully understand the characteristics of, and the risk associated with, particular digital assets.

While Copper is a member of the Financial Services Standard Association (VQF), a self-regulatory organization for anti-money laundering purposes (SRO) pursuant to the Swiss Federal Act on Combating Money Laundering and Terrorist Financing (AMLA) of 10 October 1997 as amended and restated from time to time. Business conducted by us in connection with the Crypto Asset Service is not covered by the Swiss depositor protection scheme (Einlagensicherung) or the Financial Services Compensation Scheme and you will not be eligible to refer any complaint relating to the Crypto Asset Service to the Swiss Banking Ombudsman.

It is your responsibility to comply with any rules and regulations applicable to you in your country of residence, incorporation, or registered office and/or country from which you access the Crypto Asset Service, as applicable.