Daily analytical reviews of the crypto market by StormGain

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Less than a week to go before the potential approval of spot Ethereum ETFs​

On 25 June, SEC Chairman Gary Gensler noted that the registration process for the new ETFs is "going smoothly" and that the approval date depends on the speed at which applicants file amended S-1 forms. Based on the regulator's sudden show of loyalty, Bloomberg analysts have confirmed 2 July as the expected approval date for the new products. Citing anonymous sources, Reuters reports that a consensus has been reached between the receivers and the SEC in negotiations, and only the "finishing touches" remain to be done.

Image source: x.com/EricBalchunas

Open interest in Ethereum futures stands at $14.6 billion and is near the record high of $16.5 billion, which was reached on 28 May. At the same time, the financing rate remains in the neutral zone, indicating mixed expectations of the participants.

Image source: coinglass.com

The emergence of the long-awaited exchange product is certainly a positive factor. Bitwise's IT director, Matt Hougan, expects net inflows of $15 billion to go into the ETFs in the first 18 months.

In his analysis, he draws on the experience of Canada and the EU, where the inflow into Bitcoin for similar products is roughly 4 times greater than it is for Ethereum. In other words, while spot Bitcoin ETFs saw total inflows of $26.9 billion in the first quarter, Ethereum is expected to see inflows of $6.7 billion. In this case, Ethereum's price will rise to $4400-5000 in the first three months of the funds' operation.

Image source: cryptocurrency exchange StormGain

However, Matt Hougan doesn't factor in that the negative impact of the outflow from Grayscale will be stronger this time around. After GBTC's conversion, the fund lost 45.9% of its coins in the first quarter, or 284,000 BTC. Grayscale's ETHE fund holds $10 billion worth of Ethereum. With a similar rate of investor exit, selling pressure would be $4.6 billion, and net inflows would be $2.1 billion, which is six times below what Bitcoin ETFs achieved.

Image source: coinglass.com

Another reason the altcoin will have a hard time replicating these results is the forced cancellation of staking. The annualised return on blockchain coins is now 3.2%. With restaking, that number exceeds 10%. As investors see it, Ethereum is losing the key advantage it had over Bitcoin: passive income.

That's why the potential demand for new ETFs may be greatly exaggerated, and unlocking the ETHE fund's assets could trigger another correction.


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Bitcoin: Buying the Dip or the End of the Bull Cycle?​

Investors have split into two camps: some are warning about a sell-off and the risk of a big correction, while others point to the opportunity to buy Bitcoin at discounted prices. Let's look at the arguments on both sides.

Reasons for the price to continue to drop:

• Bitcoin has already reached its four-year cycle target, updating its price record.
• The chart shows a double top pattern.
• Long-term holders are locking in profits.
• Retail investors are panicking and selling ETFs.
• Old coins are now in play.
• The U.S. and German governments are selling bitcoin.
• In the coming months, Mt.Gox will return over 140k of BTC to former customers.

Image source: x.com/10x_Research

All of this news has bombarded investors in recent weeks, adding to the negative sentiment. But if you look closely at each point, things are not actually so bad. For example, the movement of older coins is due to the consolidation of Mt.Gox assets before the payouts (the crypto exchange went bankrupt in 2014), and the profit taking by long-term holders in June was a far cry from the March peaks.

Image source: glassnode.com

Coin sales by government agencies and former Mt.Gox customers may have a short-term negative impact and cause a correction, but over the course of the year, this will be offset by the April halving. Supply is estimated to have decreased by 164,000 BTC a year.

Image source: coinwarz.com

Reasons for buying the dip:

• Bitcoin gaining the status as an investment asset (commodity) through the authorization of spot ETFs.
• Record institutional interest at the end of the first quarter.
• Growth of the global money supply.
• Global institutionalization of cryptocurrencies (e.g. the MiCA regulation).
• Halving and the relentless churn from crypto exchanges to cold wallets.
• The entry of new companies with reserves in Bitcoin (e.g. Metaplanet).
• The growing number of hedge funds that now have Bitcoin in their portfolios.

Image source: StormGain Cryptocurrency Exchange

As can be seen, the reasons for selling are predominantly short-term, while the reasons for buying are long-term. The impact of long-term factors is most clearly illustrated in the chart showing the growth of the money supply and Bitcoin as a limited-issue instrument. Each printing press run was accompanied by a new cycle of cryptocurrency growth. The world's central banks are now blowing the dust off them again: this year the ECB and the Bank of Canada have already lowered their key rates.

Image source: x.com/Jamie1Coutts

We should also not forget that Bitcoin was and remains a highly volatile instrument, which is characterized by both explosive growth and big drawdowns.

Image source: glassnode.com

In the current cycle, the drawdown is minor and uncharacteristic of a bull market. Even now it stands at 26%, whereas in previous growth phases it regularly surpassed 30%.


StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)

 

[StormGain_crypto]

Crypto Preservation Strategy: Where to Put Money During Inflation?​

Capital preservation is a hot topic for all kinds of investors. Whether you invest in fiat or digital currency, you want to fully mitigate the risk of losing capital. This is when creating a wise capital preservation strategy comes into play. Where should I put my money during inflation? Does inflation affect cryptocurrency? Let’s dive deeper into the world of cryptocurrency and inflation and where you should put your money during inflation.

What is inflation?

Inflation is the rate at which the cost of goods and services in the economy rise. When inflation occurs, the purchasing power of money decreases, meaning each currency unit buys fewer products or services.

Inflation has vast economic implications. High inflation rates can affect central bank policies and consumer and business spending, discourage long-term financial planning, and erode the actual value of money. Controlled inflation is often considered a sign of a growing economy.

Before starting to plan your capital preservation strategy, it’s worth specifying the major types and causes of inflation, which are as follows:

• Demand-pull inflation occurs when the demand for goods and services exceeds the supply, leading to a price boost.
• Cost-push inflation occurs when businesses increase the prices of their goods and services due to increased production costs, thereby passing these costs on to consumers.
• Wage-price (built-in) inflation is caused by worker expectations of rising wages to cope with the rising living costs.
• Monetary inflation is caused by an increased money supply that outpaces economic growth, decreasing the currency's value and price growth.
• Hyperinflation is an extreme and rapid inflation with very high rates, often resulting in a loss of confidence in the currency.

The effect of inflation on investments

Inflation can significantly impact your crypto investment portfolio. Different investment assets react to inflation differently, and understanding those behaviors is one of the critical factors to consider while working on your capital preservation strategy.

• Inflation has a mixed effect on stocks—it can boost company profits due to higher prices or impact earnings due to decreased consumer spending. In moderate inflation, stocks typically perform well. However, challenges may arise in higher inflation scenarios.
• Bonds are more sensitive to inflation than stocks. With high inflation rates, bond prices fall due to diminished bond payments. Long-term bonds are especially vulnerable to inflation.
• Real estate property prices usually increase with inflation, making such investments more profitable during periods of high inflation.
• Commodities like gold and oil can also benefit from inflation. These assists are often considered a store of value that protects against the erosion of purchasing power during periods of high inflation.
• When it comes to cryptocurrency and inflation, the value of digital assets is not impacted much, mainly due to the unique characteristics of cryptocurrency.

Does Inflation Affect Cryptocurrency?

During inflation, crypto acts differently from fiat money. Unlike traditional currencies, the crypto market is characterized by its decentralized nature and dynamics of crypto assets, making it less vulnerable to inflation. However, this does not mean that inflation has no impact on cryptocurrency at all.

A common scenario when crypto prices are affected by inflation is the increased demand for digital assets when the purchasing power of traditional money is reduced. Due to their decentralized nature and limited supply, crypto coins can be considered a hedge against inflation. Increased demand causes crypto prices to rise.

On the other hand, opportunistic sentiment can have an impact on cryptocurrency during inflation. When fiat money loses its value, people are more inclined to keep their funds, including digital assets, making them more willing to sell their holdings. As soon as many crypto investors start selling their digital funds, crypto coins start losing value, resulting in a drop in crypto prices.

Market sentiment and investor behavior also significantly impact cryptocurrency prices during inflation. On one hand, cryptocurrency prices can grow when investors deem digital assets a hedge against inflation and bring more capital to the crypto market. On the other hand, crypto prices can fall if investors lose confidence in the stability of digital assets and start massively selling their holdings. Other factors such as market volatility, technological advancements and regulatory developments can also affect cryptocurrency prices during inflation.

Additionally, not all crypto assets react to financial inflation in the same way. Well-established digital assets with a large capitalization and widespread adoption, like Bitcoin, are more likely to benefit from increased demand during inflation. Newer crypto assets with a smaller market capitalization may be more vulnerable to market sentiment and changing investor behavior.

Investment in Stablecoins - Effective Capital Preservation Strategy

Stablecoins are now the preferred investment solution for people seeking less risky crypto investment opportunities. Backed by the US dollar or gold, stablecoins maintain their prices at more or less the same level, holding reserves with a value equal to the number of tokens available.

Investors may consider stablecoins as a means of exchange that can be accessed internationally, with transactions hitting the destination wallet in seconds. Besides, as an investment option, stablecoins are preferred to fiat currencies and commodities like gold for the following reasons:

• Lower transaction fees and faster transaction speed compared to traditional banking.
• Since the price of stablecoins is backed by the underlying assets, they are less likely to be affected by inflation because their price is proportional to inflation.
• Stablecoins are digital assets that are accessible to everyone with an internet connection. They can be bought and sold at any time.

Stablecoins are especially useful for people living in countries where hyperinflation has made their local currencies a dangerous form of money. These include Turkey, Argentina, Ethiopia, Lebanon, and Zimbabwe, with a whopping monthly inflation rate of 50%. Rather than holding their funds in fiat money, people can invest in stablecoins like USDT and BUSD to protect their capital from hyperinflation.

Capital preservation in the form of stablecoins allows users from countries with hyperinflation to protect their funds from inflation by holding them as stablecoins. Besides, they can make their shaving more profitable by benefitting from the underlying peg.

Where to Put Money During Inflation?

Crypto behaves better during inflation than fiat money. Although some crypto assets have failed because of fraud cases and security issues, many other digital assets have proven to be a wise investment opportunity for people looking to preserve their funds or even monetize their investments during uncertain periods of inflation.

When developing your capital preservation strategy during inflation, consider holding your funds in well-established assets such as Avalanche (AVAX), Polygon (MATIC), BTC, and ETH. These are several of the best crypto investment choices for the long term. In addition to holding funds in cryptocurrency, you can also use tools like staking to generate a passive income from your investment.

If you are more interested in capital preservation during inflation, consider holding your funds in stablecoins. Assets like USDT and BUSD are more inflation-resistant, mainly because these are pegged to the US dollar.

According to historical data, it can be a wise capital preservation strategy to invest in cryptocurrency now while trading close to significant support levels and keep them as an inflation hedge.

 

[StormGain_crypto]

How crypto funds survived 'Black Monday'​

On 5 August, financial markets saw a mass sell-off of assets, ranging from stocks to precious metals. The VIX volatility index, also known as the Fear and Greed Index, jumped to its highest point since the coronavirus pandemic.

Image source: bloomberg.com

There were two primary reasons for this. The first is that Japan raised its key interest rate to 0.25% for the first time since 2006, which resulted in carry trades losing their previous appeal. The strategy for this kind of trade was to take out loans in Japanese yen at near-zero interest rates and exchange the yen for US dollars to buy US stocks and bonds. The increased interest rate made loans more expensive and strengthened the yen. After this, carry traders began liquidating their positions.

The second reason was that falling tech sector returns and disappointing US economic data for July led to a reassessment of risks. The Sahm Rule, developed by former Federal Reserve and White House economist Claudia Sahm, exceeded the crucial 0.5% threshold. Historically, this indicator has been surprisingly accurate at predicting economic downturns.

Image source: x.com/Dillon_Valdez

We see that the flight from risk and falling financial assets are based on objective reasons. What's more, fundamental factors for cryptocurrencies remained in the green zone. These include increased recognition around the world, the impact of new ETFs in the United States, the introduction of MiCA in the EU, and the increase in the number of companies with crypto reserves.

As such, the future movement of Bitcoin and Ethereum largely depends on investors' resistance to panic attacks. US spot ETFs, a key driver in 2024, have seen an outflow of $406 million in the past two days. However, that's far from the record-high seen on 1 May, when the indicator hit $564 million.

Image source: StormGain infographic

Things with spot Ethereum ETFs are even more interesting. Investors in this type of product bought the dip on 5 August.

Image source: StormGain infographic

However, Ethereum has reacted to recent events much worse than Bitcoin. We have repeatedly warned that the altcoin's movement will continue to lag behind the pioneer cryptocurrency's. This is, first and foremost, due to the large weight Grayscale has and the natural negative net inflow since the ETFs launched.

Image source: StormGain Cryptocurrency Exchange

Leading market makers' sell-off of coins also negatively impacted Ethereum. In one day, Wintermute got rid of 47,000 ETH, while Jump Trading sold 36,000 ETH, worth a combined $250 million. The value of ETH staked in DeFi fell by 2.4 million ETH or $6 billion in one day.

Image Source: defillama.com

Meanwhile, Ethereum ETF investors saw the altcoin's 48% decline from its March high as a great opportunity to build on their positions. They posted a net inflow of $48.8 million on Monday.


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While some panic, others buy up Bitcoin​

This week, Bitcoin saw its most serious correction in the current bull cycle, dropping to $50,000 per coin. That's an over 32% drop from its record high.

Image source: glassnode.com

The sharp drop, exacerbated by talk of a US recession and the rise in geopolitical tensions, panicked some investors. On 5 August, the spot market saw realised losses of $1.4 billion. That's the 13th-largest sell-off in Bitcoin's history in dollar terms.

Image source: glassnode.com

One extremely curious aspect is that only short-term holders (STH) panicked. They accounted for 97% of the losses.

Image source: glassnode.com

Long-term holders (LTH), on the other hand, not only showed restraint but actually increased their positions by taking advantage of relatively low prices. Over the past 30 days, the total volume of permanent holder addresses (two incoming transactions and no outgoing ones; ETF addresses are excluded) jumped to a record-high 404,400 BTC or $22.8 billion.

Image Source: x.com/ki_young_ju

Traders saw opportunities and increased their net inflow into crypto exchanges. For the largest of them, Binance, the indicator this week was $1.8 billion. This once again emphasises the absence of an all-out panic since days when panic hits the platform always result in a net outflow. Unfortunately, Binance CEO Richard Teng didn't specify whether the inflow primarily consisted of fiat (which indicates buying) or cryptocurrency (which signals selling).

Image source: x.com/_RichardTeng

The key difference in behaviour between STH and LTH is their timeline for planning. The former usually don't hold coins for longer than two months, even in rising markets, and undergo sharp mood swings. LTH, however, focus on long-term trends. They accumulate coins during corrections and take profits as the asset rises to new highs.

Bitcoin's prospects remain good despite the higher risk of a recession in the United States. The government still hasn't reoriented itself to combat the deficit, and the rise in unemployment will force the Federal Reserve to return to stimulating the economy ahead of schedule. That means that new liquidity injections are coming.

Image source: StormGain Cryptocurrency Exchange

As Bitmex co-founder Arthur Hayes said, "Both the Trump administration or Harris administration will print [fiat]... The Bitcoin price in this cycle is going to go very, very high. Hundreds of thousands of dollars, maybe $1 million."


StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)

 

[StormGain_crypto]

Leading mining companies' total costs exceed Bitcoin's value​

Bitcoin has fallen by more than 30% from its record-high price, with mining difficulty jumping by 10.5% during the last correction. Publicly traded mining companies have found themselves in a hard spot.

Mining difficulty is adjusted every fortnight, depending on the total power of the rigs involved in mining. Adjustments are necessary to maintain the mining rate of one block every 10 minutes. On 31 July, difficulty rose by 10.5% in one go, the biggest jump since October 2022.

Image source: coinwarz.com

At the same time, Bitcoin's price began to correct, collapsing to $49,000 on 5 August.

Image source: StormGain Cryptocurrency Exchange

Even after the price partially recovered, yields from petahesh capacity are still near an all-time low and now stand at $41/day.

Image source: hashrateindex.com

According to the head of the analytical firm CryptoQuant, Ki Young Ju, with such profitability, the average cost of mining one coin is $43,000. The calculation is based on the performance of leading mining company Marathon Digital for Q2 2024.

Image Source: x.com/ki_young_ju

It may not seem that bad, but these calculations don't take into account payments on loans taken out earlier to build mining centres and purchase ASICs, as well as all sorts of administrative costs. TheMinerMag has calculated the cost of Bitcoin mined in July for the largest mining companies, including associated costs.

Image source: theminermag.com

It turns out Marathon and Riot are operating at a loss, which is reflected in their financial reports for the past quarter. This is a consequence of both increasing difficulty and falling revenues as a result of the halving.

Image source: investing.com

Both companies continue to accumulate coins in anticipation that Bitcoin's price will rise significantly and return net profits in the future. Core Scientific followed the same vision until 2022, but the subsequent bear phase drove the company into Chapter 11 bankruptcy (business reorganisation).

The above metrics help answer the simple question of whether to invest in mining companies or buy Bitcoin directly.


StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)

 

[StormGain_crypto]

Cryptocurrencies recover after Monday's market meltdown. What happened?​

Bitcoin (BTC) soared past $56,000 early Tuesday, leading a broader market rebound in Asia as investors capitalised on Monday's sharp price drop. As BTC surged by 6%, marking its most significant 24-hour increase since May, it appeared to spark a market-wide recovery, with Ethereum (ETH) and Ripple (XRP) climbing 8%. Notably, Solana (SOL) led the pack, recovering 31% after the so-called 'Black Monday'.

Even as markets shake off the water from Monday's plunge, traders are left reeling from the impact. What just happened? What to do?

How the bank of Japan caused a worldwide storm

Calling to mind an old saying about butterflies and hurricanes, the sharp decline experienced by the cryptocurrency market can be traced to a seemingly unrelated incident. It was sparked by the rising fortunes of a fiat currency — specifically, a sudden surge in the value of the Japanese yen.

This surge followed the Bank of Japan's unexpected increase in interest rates on short-term government bonds on 31 July, ending a long-standing low-interest rate policy of over 17 years. This slight rise of 0.1% to 0.25% made large yen-denominated loans, which many traders had used for leveraged investments, significantly more expensive. Institutional investors who had borrowed yen at close to zero interest rates to finance other investments, so-called 'yen carry trades', panicked.

This led to massive sell-offs. Japan's Topix 100 index experienced its biggest drop since 2011, while Bitcoin's price in yen plummeted nearly 15%, a steeper decline than its dollar-denominated price on Western exchanges.

The entire crypto market saw a $510 billion drop in total market capitalisation, with the majority of top tokens wiping out their hard-won gains of 2024.

However, the impact went far beyond the crypto sector. Global stock markets took a nosedive as billions of dollars were wiped out, with even tech giants such as Microsoft, Meta, Apple, and Google suffering losses upwards of 5%.

The Japanese yen wasn't the only factor shaking the stock market. The latest US employment figures and monthly job report (released on the first Friday of every month) indicated that the American economy was in weaker health than previously believed. At the same time, the Federal Reserve decided to hold interest rates high at 5.3%, further concerning investors about the state of the economy. Rising tensions in the Middle East contributed to a feeling of unease in the market.

The leverage-fueled trading environment, with open interest peaking at nearly $40 billion, exacerbated the situation, causing widespread liquidations and losses. However, some analysts believe this market correction could be beneficial in the long run, as it forces traders to reduce high-risk positions. There is also speculation that potential rate cuts in the US and Japan might stabilise the markets and potentially lead to a sustained recovery in the crypto sector.

Recovery or recession?

In Japan, the Topix 100 index rose by about 10% as the yen weakened against the US dollar, breaking a five-day upward streak. Futures linked to the S&P 500 gained 1.5%, while the Nasdaq 100 rose by 2.1%. The potential for quicker Federal Reserve rate cuts following Monday's global market downturn has seemingly revived risk appetite among investors.

Despite the recent gains, some market analysts urge caution regarding the sustainability of the rally in major cryptocurrencies. Even if Bitcoin and the crypto sector bounce back after the initial shock, they could still face headwinds due to ongoing pessimism in broader markets.

Crypto traders can't ignore the stock market

Although cryptocurrency was conceived as an alternative to the international fiat currency system and mainstream financial markets, recent years have proved that traditional markets and digital assets are deeply tied.

The recent popularity of spot ETFs for Bitcoin and Ethereum has only strengthened this bond. Institutional investors reacted to the turmoil by offloading spot BTC exchange-traded fund (ETF) holdings, resulting in a heavy trading day on Monday. US-listed crypto products saw $168.4 million in net outflows, bringing total withdrawals to over $300 million for the month.

This means that crypto traders need to keep up to date with the stock market and currency exchanges in addition to crypto, carefully feeling out investor sentiment in the wider economy.

Catching the rebound: strategies for crypto market volatility

Although the characteristic volatility of crypto markets has traditionally put off institutional investors, the rapid and dramatic highs and lows of digital assets are exactly what makes them exciting for retail traders and enthusiasts. With that in mind, let's look at some strategies, opportunities, and positive indicators for crypto trading in the current market correction.

Buying the dip

During the recent market downturn, large Bitcoin holders, known as whales, increased their holdings, consolidating their positions while smaller investors sold off their assets. Given that Bitcoin has steadily increased in value over the years, hitting new all-time highs after dips, keeping a calm head in a crisis can be an opportunity to snap up BTC or other tokens at a discount.

Options trading

Even if you're pessimistic about prices, you can still profit in a falling market. StormGain offers crypto options trades that allow traders to position themselves to take advantage of price dips. In falling markets, traders can profit from long put options by selling the asset at a higher strike price than its current market value, while short call options generate profit through premiums if the market price stays below the strike price. Additionally, options can serve as a hedge to protect against losses by offsetting declines in the underlying asset's value.

Ethereum could break out to 100% gains

Ethereum is showing a strong rebound from its recent eight-month low, mirroring a pattern from October 2023 that led to a significant price increase. If the current trend continues, ETH could potentially rally over 100% to reach around $4,560, driven by technical indicators and the expectation of US Federal Reserve rate cuts, which may shift investor interest towards riskier assets.

Trade cryptocurrencies with StormGain, the premier platform for all market conditions

For those looking to navigate the volatile cryptocurrency markets and come out on top, StormGain offers an unbeatable trading platform.

Key features and unique advantages of StormGain include:

• Intuitive interface: Enjoy the easy-to-use platform designed for traders of all experience levels.
• iOS and Android apps: Have convenient access to the top cryptocurrencies on the go.
• Advanced crypto assets: Trade call and put options, crypto indices, and tokenised stocks.
• Competitive fees: Take advantage of low-cost trading to maximise your returns.
• Full suite of trading tools: Employ advanced analytics and tools for market analysis and decision-making.
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• Passive income stream: Use the built-in Bitcoin cloud miner that rewards users with free BTC just for using the platform.
• 24/7 customer support: Rest assured with round-the-clock assistance in multiple languages to ensure a smooth trading experience.

Don't miss out on the opportunities in the cryptocurrency market. Take just a few seconds to sign up with StormGain today and try a demo account to start your crypto trading journey!

 

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Bitcoin's crypto market share hits highest point since 2021​

The major cryptocurrency's share of the digital asset market has reached its highest in three years at 55.9%. Altcoins' market share continues to gradually decline.

Bitcoin hit its lowest market share in 2018 when it stood at just under 33%. It reached another local low in 2022 at 38%. Since then, this figure has risen, reaching its previous high in 2021, when Bitcoin accounted for more than 60% of the market. On average, Bitcoin's share during these years has fluctuated between 40% and 50%, mostly staying within that range.

Image source: coinmarketcap.com

The number of liquidations per day has also fallen to around 700 million from more than $1 billion at the time of Bitcoin's biggest price drop-off.

Image source: coinglass.com

Bitcoin's market capitalisation has now increased to $1.2 trillion, while the crypto market's total capitalisation sits at just over $2 trillion. In other words, altcoins only account for about $800 million.

Image source: coinmarketcap.com

Bitcoin's price has been rising in mid-August after experiencing a collapse earlier in the month triggered by sell-offs in Asian stock markets. At that time, the pioneer cryptocurrency's price temporarily dipped below the $50,000 mark, showing its sharpest drop since 2021. Since then, Bitcoin's value has returned to the psychologically important $60,000 mark as part of a corrective rise.

Image source: StormGain Cryptocurrency Exchange

According to market participants' optimistic predictions, Bitcoin could soon rise to above $70,000. If that happens, it will pull altcoins up with it, most notably Ethereum, which has a good chance of reaching $4,000 again. Nevertheless, Bitcoin's market share is likely to remain at its highest point in recent years and is unlikely to fall below 50% anytime soon.


StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)

 

[StormGain_crypto]

Crypto market navigates choppy waters amid macro turmoil​

Cryptocurrencies struggled to maintain upward momentum this week as the global stock market faces instability stemming from geopolitical events and economic figures. Macroeconomic events — such as the Bank of Japan raising interest rates, international conflicts, and fears of an imminent global recession — set off a chain reaction of panic across markets. This sense of unease amongst investors sparked a sell-off of perceived 'risk assets', including cryptocurrencies and tech stocks. However, there are signs that the market is beginning to stabilise as extreme leverage and positioning are being purged from the system, suggesting a calmer period is just around the corner.

Let's take a look at how major cryptos are faring this week and what traders can do to protect their gains and find opportunities in a difficult macroeconomic environment.

Bitcoin falls to $58K following US CPI data, drags major altcoins down

Traders watched with bated breath as crypto assets dropped at the start of the week before rising on Wednesday, only to fall again on Thursday. Bitcoin (BTC) experienced a sharp decline, dropping over 4% to around $58,000, triggering a broader downturn in the cryptocurrency market. Other major cryptocurrencies such as Ethereum (ETH), Solana (SOL), and Ripple (XRP) also saw losses, though slightly less severe, ranging from 2.5% to 3.8%.

The drop in Bitcoin's price occurred after the US released its Consumer Price Index (CPI) data for July. The CPI showed a 2.9% year-on-year increase, aligning with expectations, and marked the first time since 2021 that inflation had fallen below 3%. Despite positive reactions in the stock market, with the Nasdaq and S&P 500 closing in the green after an early sell-off, Bitcoin continued to decline.

Economic figures such as the US CPI, employment data, and interest rates have become key indicators to watch for crypto traders, even the diehard idealists who strongly wish to do away with the dominance of fiat currencies like the US dollar. Various analysts, from institutional investors to crypto community influencers, have acknowledged that cryptocurrency prices have become increasingly reactive to US economic data as investors seek safer assets over more volatile ones.

Some market observers predict that Bitcoin could fall further to around $55,000 in the short term before potentially rebounding. They point to significant downward pressure as over $1.4 billion in BTC options are set to expire on 16 August, potentially pushing its price below the $56,000 support level unless it recovers above $60,000. Others, however, point to signs of the Federal Reserve easing its monetary policy as a potential catalyst for Bitcoin to rise back up to $66,000.

The week in crypto ETFs

In the ETF market, US-listed spot Bitcoin exchange-traded funds saw $81 million in net outflows on Wednesday, breaking a two-day streak of positive inflows. Grayscale's GBTC was the hardest hit, with $56 million in outflows, followed by Fidelity's FBTC, which lost $18 million. Ark Invest's ARKB and Bitwise's BITB also recorded losses of $6.7 million and $5.7 million, respectively. However, Franklin Templeton's EZBC and BlackRock's IBIT bucked the trend, posting a combined $6 million in inflows.

Ether ETFs performed better, with $10 million in net inflows, continuing a three-day positive streak. BlackRock's ETHA led the gains with $16 million in inflows, while Grayscale's ETHE saw $16 million in outflows. Other Ether products, including Grayscale's mini Ether trust, Fidelity's FETH, and Bitwise's ETHW, collectively gained $11 million in inflows.

One positive sign for the health of the crypto market is the recent news that finance giant Goldman Sachs revealed in a recent 13F filing that it holds over $400 million in Bitcoin ETFs, despite earlier scepticism about cryptocurrency. The bank owns positions in seven out of the 11 BTC ETFs available in the US, with its largest investment being $238.6 million in the iShares Bitcoin Trust (IBIT). This shift in strategy marks a significant change, as Goldman Sachs had previously stated that it did not consider crypto a viable investment asset.

How to be the calm in the storm

Volatility, the likes of which we have seen this week, is nothing new to seasoned crypto traders but may be disturbing to newbies who are just coming to grips with the unpredictability of markets. As experienced traders with spare assets to play with will buy on dips and sell on rallies, a conscientious crypto trader should plan for a five- to ten-year investment horizon and not become too emotionally invested in daily price fluctuations.

The history of crypto market cycles over the past 14 years has still managed to deliver unprecedented returns for crypto investors, while long-term trends like the 200-week moving average can provide a better perspective on a token's overall health than daily movements.

Bitcoin, Ethereum, and major altcoins have already bounced back from the 30%+ drawdowns they saw as panic gripped the markets last week. For savvy traders, these dramatic dips presented attractive buying opportunities.

Trading during periods of volatility is a game of buying at lows and selling at peaks, and getting caught up in investor panic can trap you into doing the exact opposite! Instead, try to assess whether the reasons behind a price drop undermine your original investment thesis. If the fundamentals remain intact, then it may be time to buy the tip and enjoy the potential for greater returns in the future.

Maximise your gains in volatile markets with StormGain

Navigating the volatile crypto markets requires a robust platform that not only enables you to capitalise on rising prices but also equips you to profit during downturns. Enter StormGain, the premier trading platform designed for traders who want to make the most of both market ups and downs.

Key advantages of StormGain:

- User-friendly interface: Perfect for traders of all experience levels, from beginners to experts.
- Powerful mobile apps: Connect to the crypto market anytime on the go with full-featured apps for Apple and Android devices.
- Low-cost trading: Competitive fees ensure you keep more of your profits.
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[StormGain_crypto]

Over-optimism and signs of a Bitcoin correction​

In September, one of the leading growth drivers for risk-on assets was the Federal Reserve's 0.5% interest rate cut, the biggest such change to the rate in the past four years. The move caused Bitcoin to strengthen for nine days by 9.3% to $65,800.

Image source: StormGain Cryptocurrency Exchange

CME's FedWatch tool gives a 50/50 chance of the regulator making the same move in November, which, when coupled with the 21% average yield in October, gives investors high hope that Bitcoin will soon set new highs. The counterargument is that a number of metrics hint at a potential correction.

Image Source: cmegroup.com

Sentiment

Over-optimism is reflected in the elevated funding rate (indicating a predominance of buyers in the futures market), the rising premium on Coinbase, and the prevalence of bullish expectations in social media posts. According to calculations by the analytical company Santiment, for every bearish post about Bitcoin, there are 1.8 bullish ones. At the same time, every time optimism went off the charts, the market went into correction.

Image Source: x.com/santimentfeed

Low market activity

Bitcoin's significant growth has always been accompanied by an influx of new players, growth in retail capital and network activity. Right now, despite the consolidation around the high, this isn't being seen. The current volume of retail transfers is half the highs seen in the spring, and the difference with the rallies of 2017 and 2021 is even more significant.

Image source: glassnode.com

Lower network activity

The number of active network addresses is below the annual average, another sign of a potential correction.

Image source: glassnode.com

It correlates to the number of downloads of Coinbase's mobile app. During the 2021 bull run, the app was the most downloaded in the App Store. In the activity seen in Spring 2024, it reached the Top 200. The number of downloads is currently at its lowest level in the last four years.

Image Source: x.com/bitcoindata21

The arguments laid out above don't diminish the importance of long-term factors such as the growth of global liquidity or halving events. Nevertheless, they serve as a warning to investors who rely too heavily on 'Uptober'.


StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)