PTGR JULY HIGHLIGHTS
Dear valuable clients,
Please find the following key insights from our aggregated research:
Overall Take-Home Message:
On news that major financial institutions were preparing to launch significant new products in the digital assets sector, Bitcoin (BTC) and other leading cryptocurrencies soared to fresh 12-month highs in June.
The Securities and Exchange Commission has received new requests from BlackRock and a few other top U.S. asset managers to authorize a brand-new kind of exchange-traded fund for Bitcoin. In the meanwhile, a group of Wall Street power players created EDX Markets, a brand-new cryptocurrency exchange.
The SEC continued to pursue legal action against Coinbase and Binance as new, reputable crypto trading platforms entered the market.
In the second half of 2023, specialists in the crypto business will continue to keep an eye on institutional crypto activity, the erratic US economy, and the prognosis for interest rates.
NEWS UPDATE OVERVIEW
1) What happened in June?
In June, the resurgence of institutional interest in cryptocurrencies propelled Bitcoin to new 52-week highs over $31,300, though it gave up some of those gains in the last week of the month. BTC finished June 8.5% higher than it started it, closing the first six months of 2023 over $30,600.
Prices for Ethereum (ETH) decreased 3.8% in June, ending the month at $1,871. With an 80% increase so far in 2023, bitcoin is on pace to have its greatest year since 2020. The price of Ethereum has increased by 52% so far in 2023.
2023 has seen a downward trend in inflation, which has led to a recovery in cryptocurrencies and other risky assets. Solana (SOL) and Bitcoin Cash (BCH), two of the most well-known cryptocurrencies, excelled in the first half of 2023. A hard fork in Bitcoin Cash’s blockchain in May that increased the network’s security and privacy served as a catalyst for the cryptocurrency’s upward trend.
The entire market value of the cryptocurrency industry worldwide reached a high of over $2.9 trillion in November 2021 but significantly declined in 2022 due to the “crypto winter.” Just $1.1 trillion is the current market size as we enter the second half of 2023.
Large Institutions Are Once Again Interested in Crypto
Asset management behemoth BlackRock submitted an application to the SEC on June 15 in order to start a Bitcoin spot ETF. Actual Bitcoin will be held in the iShares Bitcoin Trust rather than futures contracts.
The SEC has authorized a number of crypto ETFs based on futures, but it has repeatedly turned down requests for a spot Bitcoin ETF due to worries over investor safety. WisdomTree and Invesco also resubmitted proposals for their own Bitcoin spot ETFs only days after BlackRock submitted its fresh application.
The platform of the cryptocurrency exchange EDX Markets, which supports trading in Bitcoin Cash, Ethereum, Litecoin (LTC), and Bitcoin, was formally launched on June 20. A group of powerful financial institutions, including Charles Schwab, Fidelity Digital Assets, and Citadel Securities, support EDX Markets.
A second fundraising round that included investments from Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology has also been closed, according to EDX.
To escape the wrath of the SEC and other crypto authorities, EDX seems to be taking precautions. Unlike Coinbase, Binance, and the defunct cryptocurrency exchange FTX, EDX intends to run as a non-custodial exchange, which means the exchange won’t keep its users’ crypto assets while they trade. Furthermore, the SEC has not designated any of the four cryptocurrencies that were first traded on EDX Markets as securities.
According to Konstantin Shulga, CEO and co-founder of Finery Markets, institutional adoption and acceptance of cryptocurrencies have been difficult to achieve, but Wall Street’s endorsement is crucial for crypto investors.
It demonstrates that many individuals have a strong belief that Bitcoin has the potential to be a recognized and legitimate financial tool, according to Shulga.
If the application is accepted, it will provide people and organizations a simple way to invest in bitcoin without having to maintain a cryptocurrency infrastructure for settlements and custody.
According to Branson Knowles, head of U.S. digital banking at Top Mobile Banks, institutional crypto adoption might potentially assist reduce some of the market’s severe volatility.
Cryptocurrencies are becoming more widely accepted as a reliable form of investment, and powerful institutional investors are getting involved. The more often this occurs, the greater market stability we can anticipate, which will result in fewer of those erratic price fluctuations, adds Knowles.
Ongoing SEC Cryptocurrency clampdown
The SEC filed a complaint against Binance and its founder Changpeng Zhao on June 5, accusing them of breaking 13 sections of the Securities Exchange Act.
The accusations include claims that Zhao and Binance improperly combined customer assets with business cash and promoted unregulated securities to American clients. The SEC complaint also alleges that Binance participated in “wash trading,” which refers to the practice of selling and then repurchasing the same digital assets in an effort to raise their value.
The U.S. Commodity Futures Trading Commission (CFTC) sued Binance in March on the same grounds as the SEC accusations.
The SEC filed a second complaint against Coinbase the next day, accusing the business of operating as an unregistered securities exchange and of selling unregistered securities as part of its staking-as-a-service program. This came only one day after the SEC accused Binance. At least 13 cryptocurrencies offered by the Coinbase network, including Solana (SOL), Cardano (ADA), and Filecoin (FIL), are allegedly unregistered “crypto asset securities,” according to the lawsuit.
In response to the accusations, Coinbase said that the SEC had not established any clear guidelines for the cryptocurrency sector and declared that it will continue to conduct our business as usual.
Following the legal actions taken against Binance and Coinbase, SEC Chair Gary Gensler was forthright in his criticism of the conduct of the cryptocurrency sector.
Gensler said in an interview that he had been involved in finance for four decades. and has never seen so much hype passing for reality as just noncompliance.,
Given the unfavorable regulatory reports, Crypto Capital editor Eric Wade thinks the positive price activity in the cryptocurrency market has been especially noteworthy.
Although the cryptocurrency industry is going through a difficult time right now, Wade claims that this is not apparent by looking at the market.
“Normally, you would expect two of the biggest [crypto exchanges] being sued by the SEC to cause more of a commotion in such a volatile market.”
2) Where do we stand?
According to a recent research by University of Chicago finance professor Michael Weber, as of December 2022, 12% of Americans were cryptocurrency owners, up from 2% in 2018. According to the report, cryptocurrency investors are disproportionately male, young, white, and independent- or libertarian-leaning ideologically.
Sam Bankman-Fried, the disgraced founder of FTX, unsuccessfully sought to have 10 of the 13 criminal charges against him related to the collapse of the cryptocurrency exchange in late 2022 dismissed by a New York federal court. Bankman-Fried may get a life sentence after entering a not guilty plea to 13 counts, which include conspiracy to conduct money laundering and wire fraud. His trial is scheduled to start in October.
Even if the price of bitcoin has increased significantly thus far in 2023, at least two cryptocurrency bulls think the uptrend still has lots of room to go. Tom Lee, the head of research at Fundstrat, said that Bitcoin values might reach $200,000 in the coming years during a recent interview with CNBC. According to Lee, interest from asset managers and institutional investors may act as a positive stimulus for cryptocurrencies.
Many players have kind of departed the stage, but we’ve replaced them with, you know, some of the established players that have a lot of credibility, like the BlackRocks and the Citadels entering the Bitcoin market, said Lee.
Early in June, Cathie Wood, CEO and CIO of ARK Invest, restated her goal of seeing Bitcoin reach $1 million. During the Covid-19 epidemic, when Arks’ flagship ARK Innovation ETF (ARKK) dramatically beat the market, Wood gained notoriety as a stock picker.
However, opponents have charged Wood with poor risk management, and over the previous three years, the ARKK fund has underperformed the S&P 500 by 81% on average.
3) On Chain Data:
The on-chain data for Bitcoin shows that miners are selling their holdings. Reduced revenues from a slowdown in Ordinals activity and record-high mining difficulty and hash rate might be the driving forces behind the selling push. Glassnode, an on-chain analytics company, reports that miners have been delivering a sizable number of coins to exchanges. On June 3, the amount of miners entering exchanges reached a three-year high, reaching levels last seen in the bull market that began in early 2021.
The measure of how challenging it is to discover a new block in the Bitcoin blockchain network, known as the “mining difficulty,” peaked around the beginning of June.
To guarantee that new blocks are uploaded to the network on average every 10 minutes, Bitcoin difficulty is frequently adjusted. The network adapts to make mining more challenging as its computational capacity rises and vice versa.
Every 2,016 blocks, or about every two weeks, the difficulty is changed. It is dependent on the network’s overall processing capacity, or hash rate. On May 31, there was a change that resulted in a 3.39% rise in overall difficulty.
Bitcoin miners’ profits are eaten away by the rise in Bitcoin difficulty, potentially increasing their losses.
Additionally, following the latest difficulty adjustment, there has been more rivalry among miners, resulting in the network’s hash rate reaching an all-time high of 381 exahashes per second on June 11. This week’s upcoming difficulty adjustment is anticipated to increase selling pressure.
May saw a fall in Bitcoin Ordinals activity, which cut miner revenues after previously increasing miner income. A two-month low was reached in the total fees paid for Ordinal inscriptions on Bitcoin, and nonfungible token exchange trade volumes followed a similar pattern.
According to Glassnode statistics, the miners’ seven-day average profits decreased from a high of $33.9 million in May to $25.8 million at the beginning of June.
Summer officially began in June, and because of the high temperatures in the Northern Hemisphere and the rising cost of power, several mining farms saw a huge load.
Summer heat waves in 2022 forced Texas miners to briefly halt operations. According to reports, Texas has around 15% of the nation’s mining capacity.
In 2023, the heat waves may become harsher, which would lower the network’s mining hash rate.
4) What Could Happen?
The cryptocurrency market had a definite positive month in June. Though there were notable outliers, on the whole, the Bitcoin (BTC) market outpaced the altcoin market.
Will there be a little alt season?
Since its 39% low in September 2022, the Bitcoin Dominance Rate (BTCD) has climbed dramatically. In February 2022, the pace of growth quickened, and soon after, the price emerged from the 48% resistance zone.
Given that the region had remained in place for the preceding 763 days, the escape was essential. Consequently, a break over such a persistent resistance level often results in substantial upward moves. It was projected that BTCD will peak at 52.20% in June. Even while there is clearly no above horizontal resistance, there are some indications that a local top could be in place.
It will be difficult for bitcoin bulls to push the price of BTC over $35,000, according to recent data. Trading company QCP Capital identified the mid-$30,000 level as a possible cooling-off point for the bull market in bitcoin in its most recent market report on July 5.
There are growing worries that the bulk of Bitcoin’s benefits have already been realized since the price has stagnated at roughly $30,000. Market players looking to catch a local peak are now especially interested in the range between $35,000 and $40,000, and QCP is one of them.
According to its intentions for H2 trading, “tactically (short-term), our favoured trade to play this is selling end-Sep 33k to 35k calls, and using the premiums to buy 30k puts.”
For the moving average convergence/divergence (MACD) indicator, which measures price strength at certain levels during a market trend, $35k was explicitly noted as entering resistance by QCP.
“The top-side levels work well as any rally from here would be considered the ending 5th wave from the November FTX lows,” the report said.
But by historical standards, July seems to be even better than June; during the course of its existence, BTC price movement has never seen a July monthly loss of more than 10%.
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