Market Analysis with Mike Ermolaev
Welcome to the 21st edition of GoMarket Weekly, brought to you by seasoned crypto market analyst and journalist Mike Ermolaev. Crypto market fluctuations have been in the spotlight – and we find out what's causing this turbulence. Also, we look at some of the key takeaways that Trump made at the Bitcoin conference. With Ethereum holding steady, Tether posting record profits, and miners and regulators stirring up excitement – we'll sort through it all and get to the bottom of what matters.
Market Reaction to Trump's Crypto Promises and Eased Mt. Gox Concerns
Bitcoin remained within a volatile range of $62,303 to $69,842 this week, struggling to break the $70k resistance level. Despite a brief surge close to the $70K threshold following a speech by Donald Trump at the Bitcoin Conference 2024 in Nashville, the price quickly fell back, exactly as predicted in the previous analysis.
Former President Donald Trump announced a series of policies aimed at bolstering the US cryptocurrency market, should he be elected again. Key proposals include retaining 100% of Bitcoin acquired from seized assets by creating a "strategic Bitcoin stockpile", removing Gary Gensler from office, and reducing energy costs to promote domestic mining. According to the conference organizer, Trump raised $25 million during this conference, the second-highest donation of all his presidential campaigns.This substantial amount came from a combination of industry insiders and major cryptocurrency investors.
While Trump's statements initially sparked optimism, this sentiment was short-lived. According to Arkham Intelligence's data, two days later, the US government transferred 29,799.99 BTC worth approximately $2.02 billion to an unidentified wallet, introducing significant market uncertainty. This transfer, recorded in block #854525 on July 29, 2024, caused Bitcoin's price to drop by more than 2% within an hour. As of now, it remains unclear whether the US plans to sell the recently transferred Bitcoin, adding to the prevailing market volatility.
Source: Arkham Intelligence
At the same time, concerns about Mt. Gox payouts affecting market stability were mitigated by the fact that many recipients appear to be long-term holders, reducing immediate selling pressure. This echoes the market's resilience after absorbing the sale of 48,000 BTC by German authorities, where prices rebounded from $53,000 to over $68,000.
According to the latest Glassnode report, the total recovered coin volume was over 141,686 BTC, with just under 59,000 BTC redistributed to creditors via Kraken and Bitstamp, and another 79,600 BTC soon to follow. Despite these large distributions, the Bitcoin price is likely to face less sell-side pressure and a resilient demand profile. The proportion of wealth held by new investors is declining and is well below the levels typically witnessed at macro market tops, highlighting a shift back towards HODLing. Long-term investors currently hold 45% of the network wealth, a relatively elevated level compared to macro cycle topping events, indicating that these holders are waiting for higher prices to divest into market strength. This aligns with the observed market behavior, where the cumulative volume delta (CVD) metric showed only a marginal uptick in sell-side pressure post-distribution, within typical day-to-day ranges on Kraken and Bitstamp.
Source: Glassnode
Fed's Rate Decision, Election Impact, and New Bitcoin Reserve Legislation
Meanwhile, the Federal Reserve's decision to maintain the base interest rate at 5.25-5.5% is in line with market expectations. Fed Chair Jerome Powell said a September rate cut is “on the table,” contingent on favorable inflation data.
While election news will remain in the spotlight, major macroeconomic events will also draw significant attention. Discussions among US presidential candidates and senators about backing a national Bitcoin reserve, potentially inspiring other countries to follow suit, might have substantial effects on the BTC price. The market is shrugging off Trump's latest speech, essentially seeking a more compelling catalyst that could emerge as the US election approaches and policy details start taking shape.
Amidst these developments, Senator Cynthia Lummis introduced a draft bill titled the "Boosting Innovation, Technology, and Competitiveness through Optimized Investment Nationwide Act of 2024," or the "BITCOIN Act of 2024," which would allow US states to hold Bitcoin. This program would accumulate up to 200,000 bitcoins each year for five years, ultimately amassing a staggering 1 million BTC. For complete clarity, the US Treasury Department will issue quarterly reports that divulge its holdings. States can voluntarily participate in storing Bitcoin as part of the reserve, adhering to specific security protocols. The proposed reserve aims to enhance the financial resilience of the US, by diversifying its national assets with Bitcoin, akin to its holdings of gold and petroleum.
Source: Lummis.senate.gov
Ethereum Resilience Amid ETF Inflows and Major Outflows
In the meantime, Ethereum traded within a range of $3,098 to $3,391 this week, supported by net inflows of $795.0 million into ETH spot ETFs from July 25 to August 1. Blackrock led the inflows with a significant $428.9 million, followed by Fidelity with $145.3 million, and Bitwise with $54.3 million.
However, Grayscale's Ethereum Trust (ETHE) experienced significant outflows, with a total of $1.244 billion during the same period. This includes $78 million on August 1 alone. Despite these substantial outflows from ETHE, the positive cumulative inflows from other ETFs helped mitigate the impact on Ethereum's price.
This provided a much-needed boost, helping ETH prices recover after a period of underperformance relative to Bitcoin. Analysts believe that as the outflows from ETHE begin to subside, it could serve as a bullish catalyst for ETH prices.
Source: Farside Investors
Tether Reports Record Profits and Robust Reserves in First Half of 2024
On the stablecoins front, Tether reported a record profit of $5.2 billion for the first half of 2024, with a net operating profit of $1.3 billion. The company's reserves in US Treasury bills surpassed $80.9 billion, outpacing countries like Germany, the UAE, and Australia. Over 8 billion USDT were issued in Q2, with reserves totaling $118.4 billion against liabilities of $113.1 billion. The value of the assets composing the reserves as of June 30, 2024, exceeds the liabilities of the companies issuing Tether tokens by $5.334 billion.
Rising Bitcoin Hashrate and Declining Miner Outflows Indicate Accumulation
Meanwhile, as of August 1, 2024, Bitcoin's true hashrate stands at approximately 613.07 EH/s, with a mining difficulty of 90.666T, indicating a significant increase in network security and computational power. Despite fluctuations, the overall trend shows a continuous rise in hashrate, reflecting increased miner activity and investment. A recent downtick in hashrate drawdown percentage suggests miners are holding onto their assets, instead of cashing out.
Source: CryptoQuant
Additionally, a decline in miner outflows further supports the idea that miners are accumulating rather than liquidating their holdings, contributing to the stability and potential upward momentum of Bitcoin's price.
"Daily bitcoin miner outflows have remained between around 5,000 BTC and 10,000 BTC in July, compared to 10,000 BTC and 20,000 BTC in early March, when Bitcoin first touched $70,000, and lower than the spikes seen in April-May, after the bitcoin halving," CryptoQuant analysts said.
Conclusion
This week, Bitcoin remained volatile, struggling to break the $70,000 resistance despite a brief surge following Donald Trump's speech at the Bitcoin Conference 2024. Trump's proposed policies, including a strategic Bitcoin stockpile and reduced energy costs for mining, initially sparked optimism but were overshadowed by a large BTC transfer by the US government and significant outflows from Grayscale's Ethereum Trust. Tether reported record profits of $5.2 billion for the first half of 2024, with substantial reserves in US Treasury bills. Additionally, the decline in miner outflows and hashrate drawdown percentage suggests that miners are in accumulation mode, rather than selling, and this is seen to contribute greatly to Bitcoin's price stability. Overall, regulatory shifts, macroeconomic trends, along with election-related developments are about to leave their mark on the market.
Catch us next week for the latest updates and breakdowns in GoMarket Weekly.
August 2, 2024
