Why did crypto prices fall?
Despite recent crypto market turbulence, BTC ETFs recorded $300 million of inflows on Monday.
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
BTC dipped below $54K on Friday. Why prices have been down — and why some analysts see blue skies ahead.
3 key headlines in focus. ETH ETFs get closer to launch, crypto investment products surge back, and crypto use cases grow in South America.
This week in numbers. The annual fees earned by the biggest blockchains, the monthly users of a leading crypto-based predictions market, and more.
PRICE WATCH
BTC prices hit two-month lows. What might happen next?
Over the last month, crypto prices have generally been ticking downward as they encountered a wide variety of headwinds, including the reawakening of some long-dormant BTC, stubbornly high interest rates, and uncertainty over U.S. elections. BTC fell below $54,000 on Friday, down from more than $71,000 in early June, before climbing slightly this week.
But there are still plenty of signs that markets could ramp back up, with spot ETH ETFs set to begin trading this year, new applications for spot Solana ETFs, and crypto whales “buying the dip” via BTC ETFs to the tune of $300 million on Monday — the biggest day of inflows since early June. (More on these stories in the Market Bytes section below).
So what could have caused the dip, and where might prices be headed next? Let’s dig in…
The movement of decade-old crypto may have spooked markets
Way back in 2014, the Tokyo-based crypto exchange Mt. Gox shuttered after a major hack. This month, a court-appointed administrator has finally begun to return the crypto (worth around $9 billion) to customers, with a deadline of October to finish the process.
On Friday, the returns began in earnest when around a quarter of the Mt. Gox crypto moved to new wallets, after which BTC prices sank as low as $53,600.
As one analyst told CoinDesk, this “has caused some market fear due to the large potential sell-off ... However, it's worth noting that despite these concerns, the long-term impact may be less severe as the market gradually absorbs the selling pressure.”
In fact, some analysts suggest that the Mt. Gox returns have already been “priced in” by traders. So, what else could have contributed to Friday’s dip?
Macroeconomic news may have been a bigger factor
A new U.S. jobs report on Friday showed that employment remains strong, further dimming hopes that the Federal Reserve will begin cutting interest rates before the end of summer. (Crypto prices tend to be sensitive to interest-rate news.)
In a Tuesday speech, Fed Chair Jerome Powell noted that there has been “modest further progress” on consumer prices and added that the labor market is “strong, but not overheated.”
According to Bloomberg, traders are now “pricing in a just over 70% probability that the Fed first cuts rates in September. They see two quarter-point rate reductions in 2024.”
The German government has been selling some of its crypto holdings
Mt. Gox isn’t the only major crypto holder making moves that could have impacted markets recently. Over the last week or so, the German government — which has around $2 billion in crypto — has sold hundreds of millions of dollars worth of BTC.
While that number sounds large, it represents a tiny fraction of Bitcoin’s $1.1 trillion market cap, meaning that the sales themselves aren’t intrinsic market movers. (In fact, CoinShares head of research James Butterfill described them as “relatively minor.”)
Instead, as CNBC put it, “it’s all about how those sales are impacting the mood in the market.”
What might happen next?
One way to get a sense of where prices could be headed is to look at options markets, where traders can bet on the future price movements of assets, including crypto.
Analysts at crypto derivatives exchange Bitfinex suggested that the recent dip could represent a “local bottom” for BTC.
Data from Deribit, another major derivatives market, is also pointing in a positive direction. “The options market suggests some investors view the Bitcoin dip as temporary,” Bloomberg reports. “The highest concentration of bullish wagers is around a strike price of $100,000.”
MARKET BYTES
Ethereum ETFs inch closer to U.S. launch, crypto use cases grow internationally, and more
Even with prices slumping recently, there are plenty of reasons for optimism. Crypto investment products are roaring back, ETH ETFs are getting closer to launch, and there are more practical use-cases for crypto on a global level than ever before. As the CEO of crypto ETF firm Bitwise put it, “The outlook for Bitcoin has never been stronger.”
Let’s take a closer look at three key headlines.
Crypto investment products just saw their highest inflows in three weeks
After three consecutive weeks of outflows, digital asset investments recorded $441 million of inflows last week, led by institutional investors in the U.S., Hong Kong, Switzerland, and Canada. Recent price weakness related to Mt. Gox and the German government was “likely … seen as a buying opportunity,” said the latest CoinShares report,
Spot BTC ETFs have attracted the lion’s share of inflows. On Monday, an additional $300 million filtered into funds from BlackRock (IBIT), Fidelity (FBTC), Grayscale (GBTC), and Bitwise (BITB) — the highest day of inflows in over a month.
Ethereum ETFs are nearing launch as major firms updated their applications
The U.S. Securities and Exchange Commission gave ETH ETFs initial approvals in May. But before the funds can begin trading, the SEC still needs to approve registration statements (S-1 forms) from the firms that would list them.
Monday was the deadline for these S-1 updates, and firms including BlackRock, Fidelity, VanEck, Grayscale, and Franklin Templeton all submitted amended filings. As Bloomberg notes, there may still be further rounds of updates coming, but the ETH ETFs could get approval by mid-July.
How big would the market be for ETH ETFs? Estimates vary. According to Bitfinex’s Head of Derivatives, ETH ETFs could see between 10% and 20% of BTC ETF inflows. Bloomberg’s Eric Balchunas makes a similar prediction, estimating the total market for ETH ETFs could reach 20% of the BTC ETF market — around $12.5 billion in value. Meanwhile, a JPMorgan report predicted a “modest” $1 billion to $3 billion of net inflows in 2024.
Are Solana ETFs next? On Monday, the Cboe exchange (home to six of the 10 spot BTC ETFs in the U.S.), officially asked the SEC to allow VanEck and 21Shares to list Solana-based ETFs. Both asset managers initially applied for SOL ETFs in June; the SEC has to make a final decision by March 2025, Balchunas noted.
Crypto use cases are on the rise in South America
In Venezuela, families are increasingly relying on crypto for remittances (money that gets sent back home from friends and relatives who live abroad), notes a recent Bloomberg report.
“Venezuela has become one of the primary remittance-dependent nations in South America” over the last decade, according to Bloomberg, as many have fled the country, with around 30% of households receiving international money transfers.
Traditional remittances using banks and wire transfers often come with high fees (up to 7%) and several-day waiting periods. International crypto transfers are often much faster and cheaper: According to research from Coinbase, a staggering $12 billion could be saved per year by using crypto for remittance payments.
“If I need to give my aunt or my grandma money quickly for any emergency,” said one Venezuelan living in Texas, “I ask my cousin to help me by giving them crypto, and they deposit the money.”
Meanwhile in Argentina… According to a recent Forbes report, Argentina’s crypto adoption is “higher as a percentage of its global population than any other country in the Western hemisphere.” The reason? Inflation. Argentina has suffered an inflation rate of 276% over the past 12 months (for reference, U.S. inflation currently sits at 3.27%). As the peso’s value has collapsed, citizens have increasingly turned to crypto, often in the form of U.S. dollar stablecoins. As one Argentinian put it: “back when I made a living in Argentine pesos, I transferred them into crypto so they wouldn’t lose value.”
NUMBERS TO KNOW
$2.7 billion
Annual fee revenue earned by Ethereum, the highest among leading blockchains, according to analytics firm Lookonchain. Bitcoin ranked second, with annual fee revenue of $1.3 billion, while Solana came in fourth on the list, with $241 million.
$503 million
Market value of BlackRock’s new tokenized treasury product BUIDL as of Monday, according to data from Etherscan. BUIDL, which launched in March, is the first tokenized treasuries product to reach $500 million; the overall market for tokenized treasuries has more than doubled this year to $1.8 billion, according to CoinDesk.
10 million
Approximate number of daily unique active wallets using decentralized applications in the second quarter of 2024, according to DappRadar, representing a 40% increase from the first quarter of 2024. Gaming led the trend, while the NFT sector recorded its highest activity since Q1 2023.
30,000
All-time high number of monthly active users for Polymarket, a crypto-based predictions market, according to Unchained Crypto. The platform, which allows users to place bets on real-world events like elections, raised $45 million in a series B funding round in May that included Ethereum co-founder Vitalik Buterin and Peter Thiel’s Founders Fund.
TOKEN TRIVIA
What percentage of Fortune 500 companies report having onchain projects?
A
17%
B
34%
C
56%
D
68%
Find the answer below.
Trivia Answer
C
56%
