The Range Bound Trading of Bitcoin

July was marked by significant volatility in the crypto market. Bitcoin experienced a sharp decline, breaking crucial weekly support levels to reach a low of $53,500, primarily due to a substantial sell-off by the German government. However, Bitcoin swiftly recovered, rebounding to the $70,000 mark following former President Donald Trump’s assassination incident and his participation in Bitcoin Conference held in Nashville. This recovery was further bolstered by robust capital inflows into Bitcoin ETFs, which saw net inflows of $3.1 billion in July, up significantly from $666 million in June. As of the end of July, Bitcoin oscillated around the mid-range level of $64,000 to $66,000. We anticipate that Bitcoin might retest its range lows in the near term due to multiple failed attempts to break above $70,000 and ongoing supply pressure. Nonetheless, we maintain an optimistic outlook for Bitcoin's price for the rest of the year, supported by strong ETF inflows and the anticipated rate cuts improving global liquidity.

The End of German Government Sell-Off

The German government's sale of approximately 50,000 bitcoins originating from asset seizures significantly contributed to the market downturn in June and July. This sell-off, spanning from June 19 to July 12, exerted roughly $3 billion in supply pressure on the market. Despite this, Bitcoin demonstrated remarkable resilience, as evidenced by the swift rebound and strong ETF net inflows during this period, amounting to $1 billion, and reaching $3.1 billion in July alone. We believe this sell-off has established a robust support level for Bitcoin in the near term.

Image & Data Source: Arkam Intelligence

Supply Pressure Continued with Mt. Gox Distribution

While the German government's sell-off has come to an end, the market faces additional supply pressure from the Mt. Gox distribution. After a prolonged legal process, Mt. Gox creditors are finally receiving Bitcoin recovered from the exchange hack. According to Glassnode, 59,000 of the recovered 142,000 BTC have been distributed to creditors via Kraken and Bitstamp. Despite the potential market impact, we believe only a fraction of the 142,000 BTC will enter the market, partly given that many repayment obligations have been sold to long-term holders. The distribution's spread over several months further supports our view that the market can absorb this supply pressure effectively.

Bitcoin Conference Highlights

The Bitcoin Conference in Nashville was a key highlight of the month, featuring notable speakers such as presidential candidates Donald Trump and Robert F. Kennedy Jr. Trump proposed establishing a strategic Bitcoin reserve for the country, while Kennedy advocated for daily purchases of 550 Bitcoin by the Treasury Department until the U.S. holds a reserve of 4 million Bitcoin. Their pro crypto stances could positively influence regulation and attract more institutional investment if they are elected.

Ethereum ETFs Debut

The approval of spot Ethereum ETFs marked another significant milestone for the crypto industry, reflecting regulatory advancements and growing acceptance of crypto assets. Nine spot Ethereum ETFs began trading on July 22, but the first seven trading days saw a net outflow of $542 million, with Grayscale's ETHE alone experiencing $1.97 billion in net outflows. This outflow pressure has impacted Ether's price, which fell to $3,000 by the end of July, down from $3,500 pre-ETF. If the outflow pace continues, we expect Grayscale’s ETHE outflow pressure to diminish within 1-2 months.

Solana Overtakes Ethereum?

Solana has been a standout performer in the current bull cycle, driven primarily by the meme sector. Pump.fun, a leading meme token launch platform, has generated significant activity, facilitating the creation of over 1.5 million meme tokens and generating 510,000 SOL in revenue.

From the chain perspective, Solana has topped Ethereum in daily active users and daily transactions, driven by the meme trading wave. Additionally, Solana overtook Ethereum in DEX trading volume for the first time in July, although much of this volume may be attributed to "wash trading." Despite this, Ethereum remains superior to Solana in terms of total value locked (TVL), transaction fees, and revenue accrued to protocols.

Stablecoin Inflows and Market Liquidity

July saw a recovery in stablecoin inflows, with net issuance of approximately $2.9 billion, nearing levels seen in December of last year. This recovery, following a low point in the previous two months, suggests improved market liquidity. Comparing this to the previous cycle in August 2021, after a two-month correction, stablecoin inflows rose, facilitating the next wave of market growth. We anticipate even stronger stablecoin inflows in the upcoming months of August and September, which would set a positive tone for the rest of the year.

Economic Data & Events to Watch in August 2024

Disclaimer

The content provided in this report is for illustrative purposes only and is intended to offer insights into the cryptocurrency market. It is not, and should not be interpreted as, investment advice or recommendations. The information contained herein is based on sources believed to be reliable; however, we do not guarantee its accuracy, completeness, or suitability for any purpose, and it should not be relied upon as such. Any opinions expressed reflect a judgment at the date of publication and are subject to change without notice. Readers are advised to conduct their own research and due diligence and, where appropriate, seek professional advice before making any investment decisions. The authors and publishers of this report accept no liability for any loss or damage arising from the use of the information provided.

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