PTGR SEPTEMBER HIGHLIGHTS
Dear valuable clients,
Please find the following key insights from our aggregated research:
Overall Take-Home Message:
The Rhythms of Crypto: Where Do We Stand in the Cycle?
Cryptocurrency markets, like other financial markets, move in cycles that include both bear and bull markets. Currently, it seems we’re somewhere between the “Distribution” and “Markdown” phases. After a decline that started in early 2022, we saw Bitcoin hovering around $26,000 in early August 2023. While the short-term outlook remains uncertain, we believe the crypto market could be close to bottoming out and entering a new phase of growth by year’s end, based on historical cycle lengths.
Phases of a Typical Crypto Cycle
Accumulation: This occurs post-crash when prices stabilize and smart investors begin to buy up assets.
Markup: The market sentiment turns positive, prices start rising, and FOMO (Fear Of Missing Out) kicks in.
Distribution: A period of uncertainty where price gains slow down and begin to reverse, often accelerated by external news like geopolitical instability.
Markdown: This is the phase where most retail investors face losses. It’s a time of reckoning but also an opportunity for long-term investors to buy assets at discounted prices.
These cycles are natural and offer savvy investors opportunities to strategize their entries and exits. Historical trends suggest that while bearish cycles can last close to a year, bull markets usually last longer.
Outlook for the Rest of 2023
Although August was a challenging month, optimism prevails for the coming months. Potential regulatory advances like the approval of Bitcoin and Ether ETFs could signal mainstream adoption. Economically, the downward trend in inflation and possible interest rate stabilization could instill confidence among investors.
In summary, despite a turbulent August, there’s reason to remain hopeful. Market cycles, both bearish and bullish, offer opportunities for strategic investing. As we potentially approach the end of this bear market, keeping an eye on both market-specific and broader economic indicators will be crucial for what lies ahead. Stay tuned with us for more insights as we navigate these fascinating yet volatile times.
NEWS UPDATE OVERVIEW
1) What happened in August?
August 2023 was a rollercoaster month for the crypto market, marked by intense volatility and a complex backdrop of global economic uncertainty. Amidst all the chaos, however, important regulatory advancements and promising signs of institutional interest in digital assets provided a glimmer of hope for the crypto community.
Market Dynamics and Performance
Down but Not Out
August saw Bitcoin dip below the $28,000 mark for the first time since May, signaling a cautious approach by investors. Risk aversion was the prevailing mood, reflected not just in Bitcoin but across the board in altcoins as well. However, some optimism returned at month-end, thanks to a landmark court ruling that requires the SEC to reconsider its previous rejection of Grayscale’s application for a Bitcoin ETF.
Resilience in Top Tokens
Despite the downward trend, the CF Ultra Cap 5 Index, which tracks the performance of mega-cap tokens like Bitcoin and Ether, limited its losses to a modest 6%. Ether’s future looks particularly promising, with growing institutional interest and pending applications for Ether futures ETFs.
Trouble in DeFi and Infrastructure
On the flip side, the CF DeFi Index saw an 18% drop, while the CF Blockchain Infrastructure Index wasn’t far behind with a 16% decline. The DeFi sector is still reeling from security breaches in July and faced significant setbacks over the month.
Regulatory Moves and Institutional Plays
U.S. Policy Shifts
In a hopeful sign for the crypto industry, the U.S. House Financial Services Committee approved four crypto-related bills aimed at improving regulatory clarity. The Federal Reserve also entered the fray, launching a new crypto oversight program and issuing guidelines for dollar-backed stablecoins. These moves, along with Representative Patrick McHenry’s vocal support for stablecoins, indicate a warming regulatory environment for crypto in the U.S.
Institutional Buoyancy
MicroStrategy further solidified its pro-Bitcoin stance by upping its holdings to 152,800 BTC and announcing plans to acquire more. They are using proceeds from a $750 million stock sale to fund these purchases. This is yet another signal that institutions are here to stay in the crypto space.
Other Notable Developments
The Stablecoin Move
PayPal launched PYUSD, a U.S. dollar-backed stablecoin, to streamline digital transactions and make remittances more affordable.
The Celebrity and Controversy Angle
Former President Trump’s foray into the crypto world has been profitable, as revealed by an FEC filing showing his crypto wallet earned $2.8 million. His NFT sales also surged by 426%, thanks to the release of his mugshot.
Macro-Economic Concerns
Adding complexity to the crypto landscape are global economic uncertainties, including China’s economic woes and a downgrade in U.S. debt ratings. These could have a far-reaching impact on investor sentiment in the crypto market.
Concluding Remarks
Despite August’s volatility, the crypto market is showing resilience and potential for recovery. Positive regulatory moves in the U.S. and growing institutional involvement underscore the maturing landscape of the digital asset space. While hurdles remain, there is plenty of room for cautious optimism as we move into the coming months.
2) Where do we stand?
The London Stock Exchange Group’s Digital Markets Initiative
The London Stock Exchange Group (LSEG) is not merely experimenting but is decisively moving into the realm of digital assets. With blockchain technology as a key component, LSEG is aiming to redefine traditional financial markets. The past year of research and development has brought the group to a critical juncture where they’re prepared to fast-track their aspirations for creating a comprehensive digital ecosystem. This ecosystem is planned to revolutionize the methods of trading, transferring, and raising capital. While cryptocurrencies are not the primary focus of this initiative, the underlying blockchain technology is set to enhance security, accessibility, and transparency in asset trading. Regulatory approval remains a hurdle, but the signs are encouraging.
What sets LSEG apart is its focus on tokenizing a wide array of assets, a move closely aligned with a broader industry trend. Financial giants like Bank of America and leading voices such as BlackRock CEO Larry Fink have gone on record, acknowledging the game-changing potential of asset tokenization.
Regulatory Hurdles and Court Rulings
On the regulatory front, several contentious issues are under active discussion. The Securities and Exchange Commission (SEC) has found itself in the spotlight for its seemingly inconsistent stance on Bitcoin ETFs. While it has given a nod to futures-based Bitcoin ETFs, it has held back from approving spot-based ones. Although this may not herald a seismic shift in policy, it is a crucial indicator of a more nuanced, possibly evolving, regulatory stance.
Binance Amidst Regulatory Challenges
In the cryptocurrency exchange world, Binance commands unparalleled attention. Currently facing legal challenges from several regulatory bodies, including the SEC and the U.S. Commodities and Futures Trading Commission, Binance is nevertheless resilient. Its CEO, Changpeng Zhao (commonly known as CZ), is undeterred by the recent influx of lawsuits and allegations. He contends that these legal struggles will only serve to prove Binance’s merits and resilience.
CZ believes that his company has significantly advanced its regulatory compliance efforts compared to its status two years ago. The CEO also remains optimistic about the broader global regulatory landscape for cryptocurrencies. He points to recent positive developments in several countries, including France, Hong Kong, and Japan, as hopeful signs. His perspective is that more open dialogue between the crypto industry and regulators can resolve many current issues and move the industry forward constructively.
Industry Sentiments and Trends
The mood in the industry is one of cautious optimism. Ark Invest CEO Cathie Wood is particularly bullish about the future, expecting synergies between Bitcoin and artificial intelligence that could revolutionize cost structures and productivity metrics across industries. In a related vein, CZ from Binance anticipates that decentralized finance (DeFi) has the potential to eclipse centralized financial systems (CeFi) in the next significant upswing in the crypto market.
Moreover, global adoption rates of cryptocurrencies are pointing upwards. One striking example is Turkey, where the adoption of digital currencies has surged from 40% to 52% of the population in less than two years, largely as a hedge against rampant inflation.
In Conclusion
As we stand at this intersection of traditional finance and digital innovation, it is evident that both legacy institutions and fintech newcomers are pivoting toward a digital future. While regulatory clarity remains a pivotal concern, the advancements in blockchain applications and tokenization trends can’t be ignored. They signify a palpable shift in how assets are perceived, managed, and traded. The road ahead may be fraught with regulatory and legal challenges, but the overall direction is unequivocally toward a more digital, transparent, and accessible financial ecosystem.
3) On Chain Data:
The price of Bitcoin (BTC) has recently buckled under persistent bearish pressures against a backdrop of muted market activity and a complex macroeconomic landscape. These factors have caused the cryptocurrency to once again give up the psychological support level of $26,000, which is a major setback for the most valuable digital asset. The on-chain activity of BTC has also been negatively impacted by the negative sentiment surrounding it. Notably, crypto behavior analytics platform Santiment noted on August 28 that the volume of Bitcoin on-chain transactions saw a significant decline to a 3-year low.
What message is being sent?
According to Santiment, this on-chain data is based on the volume of peer-to-peer BTC payments, exchange deposits and withdrawals, as well as miner costs. The decline may not necessarily be a bearish sign, but it does show trader FUD. FUD, or “Fear, Uncertainty, and Doubt,” is a term used in the cryptocurrency world to refer to negative sentiment or rumors that circulate within the community and sow doubt and apprehension about a specific asset or the market as a whole. The graph above shows that the decline in BTC network activity represents a significant drop of more than 90% from its peak in mid-2022.
Further declines in Bitcoin?
Ali Martinez, a cryptocurrency analyst, cautioned that Bitcoin may not have bottomed out yet in his Monday analysis, citing historical Proof of Work (PoW) Floor Pricing Model data. The analyst claims that this level is currently at $14,800, representing a potential decline of more than 42% from the cryptocurrency’s current price. This model alludes to a theory that cryptocurrency investors and analysts use to predict potential price floors during bear markets; however, Martinez noted that a drop to $14,800 would be strongly resisted by a strong support level at $20,900.
In August, the combined adjusted on-chain volume for the top two crypto assets fell by 6.3% to $176 billion. According to data from The Block, the monthly volumes of Bitcoin and Ethereum both decreased by 6.7% and 5.7%, respectively. Furthermore, on-chain volumes are down 56% from the same month last year, and this is the fifth month of declines since March.
Bear market gloom
However, the study found that the adjusted on-chain volume of stablecoins increased by 6.8% to $520.9 billion. This metric, though, is down roughly 35% from March’s numbers. Issued stablecoin supply fell by 2.2% in August to $115.1 billion. The market shares of Circle (USDC) and Tether (USDT) both slightly increased. The data also shows a decline in crypto revenue. Ethereum staking revenue fell by 7.5% to $130 million, while Bitcoin miner revenue fell by 6.8% to $805 million in August. As secondary sales decreased, the monthly NFT marketplace volume on Ethereum fell by 8% to $391 million. The spot volume on the centralized exchange fell by 2.8% to $261.6 billion, the lowest volume since October 2020, and was also in retracement. With a 73.4% market share, Binance continues to be the market leader despite regulatory pressure. According to The Block, Kraken is in second place with 5.3%, followed by Coinbase with 10.2%.
Trading in cryptocurrency derivatives also decreased for the month. The number of unresolved futures contracts, or futures open interest, decreased 14% and 18%, respectively, for Bitcoin and Ethereum contracts. Additionally, the monthly volume of BTC futures fell by 5.4% to $603 billion and the monthly volume of ETH futures dropped by 15.5% to $264 billion. Historically, September has been a quiet month for cryptocurrency, with more declines than gains. Anthony Sassano, a cryptocurrency investor and expert on Ethereum, continued to be optimistic. He stated, “Late-stage crypto crab markets are worse than the bear market for most people,” before adding: “It’s the “what if there’s never another bull market?” phase of the crypto cycle and its where even multi-cyclers get shaken out and start to lose faith. Ironically, this is usually when the bull returns.”
On-chain XRP activities seem unaffected by the ongoing regulatory obstacles and are achieving new milestones that will probably have an impact on the token’s value. Data from the cryptocurrency analysis platform Santiment specifically shows unheard-of increases in XRP’s utility metrics, revealing a thriving ecosystem. Santiment reports that on-chain volume for XRP reached a seven-month high of 4.8 billion on September 2. The data also reveals that at the time, there were 2.03 billion XRP in circulation, a three-month high. The behavior analysis platform also pointed out a notable increase in development activity within the XRP ecosystem in addition to the surge in on-chain activity.
Effect on the price of XRP
It is impossible to overstate how important these figures are because they show strong network activity for XRP, which denotes increased usage and engagement within the cryptocurrency ecosystem. Notably, these metrics occur during the same time frame that Ripple, the parent company of XRP, is still engaged in litigation with the Securities and Exchange Commission (SEC). In addition, the court’s decision that XRP is not a security coincides with these metrics, giving the company a partial victory. Overall, XRP’s prospects are looking up thanks to the current on-chain momentum and increased development activity. It’s important to remember, though, that while XRP’s on-chain metrics look strong, the token’s long-term value will be greatly influenced by how the legal matter turns out in the end. The SEC has already filed an appeal and provided trial dates, and both parties are preparing for the second phase. The XRP community is eagerly anticipating the token crossing the crucial $1 threshold in terms of price movement. Notably, despite initial gains following the favorable court decision, this milestone has remained elusive for XRP. According to Finbold, PricePredictions.com, a tool that employs machine learning algorithms, predicted that on September 30, 2023, XRP is likely to experience modest growth and trade at around $0.52.
4) What Could Happen?
The September Effect
September has typically been a challenging month for Bitcoin’s price, with gains recorded only in 2015 and 2016. The rest have been bearish months according to historical data collected by Finbold. For example, September 2019 and 2014 were particularly harsh, marking significant losses for Bitcoin investors.
Unreliable Patterns and High Speculation
While many might be tempted to find a pattern, such as linking low-volume years with a more positive September performance, historical data doesn’t substantiate such theories. In fact, in both 2014 and 2019, even after experiencing a low August, Bitcoin faced severe losses in September, contradicting any potential pattern.
As a result, making price predictions for September 2023 solely based on this information would be quite speculative. Investors need to take into account a multitude of factors, including Bitcoin’s own developments and the broader economic landscape.
A Watchful Eye on Regulatory Movements
Another game-changing element could be regulatory actions, especially from the U.S. Securities and Exchange Commission (SEC). Nigel Green, the CEO of deVere Group, suggests that recent court decisions could compel the SEC to finally approve spot Bitcoin ETFs, potentially setting off a new era for crypto investments.
Wall Street’s Upcoming Financial Earthquake
A colossal financial event with an estimated value of $155 trillion is predicted to shake Wall Street this coming September. Such a financial tremor could have sweeping implications, not just for traditional markets but also for cryptocurrencies like Bitcoin, Ethereum, and XRP.
Current Market Health
As of the latest data, Bitcoin is consolidating around $26,000 with a 24-hour trading volume that is less than 3% of its total market cap of $506 billion. Liquidity is at a remarkable low across the crypto market, making it even more susceptible to external shocks.
Summary
Given Bitcoin’s checkered history in September and the current low liquidity in the crypto market, September 2023 could be a volatile month. While some anticipate a possible market upswing due to upcoming regulatory changes, the looming Wall Street event could bring about an entirely different outcome.
Therefore, extreme caution is advised for investors navigating through the complex and unpredictable waters of cryptocurrency investment this September.
Disclaimer: All material in this market study, including the thoughts and opinions expressed in it, has been supplied in good faith. Readers must conduct their own due diligence and research. The reader solely assumes all risk for whatever action they may take.
MONTHLY SPECIAL OFFER
25% discount on Starter packages booked this month:
If you want to learn more, book a free consultation call or speak to your personal advisor.
The First Free Consulting Call:
We are offering a free 30-minute consulting call for you or friends of your network you want to refer to us. The call can either be in German or in English. Please feel free to share the link within your network or use it yourself.
We @PTGR help you to find the right moment.
Have feedback about The Monthly Wrap?
Your opinion matters to us.
Thank you for reviewing us on Google.
Warm regards, PTGR AG
Subscribe & never miss any crypto insights.
