Sophia’s Thoughts On Crypto’s Summer Stance
The crypto market has been navigating significant headwinds, but there have been positive developments and more on the horizon. Is the stage set for continued momentum?
These are Sophia's Thoughts:
BlackRock CEO Larry Fink went public with comments on how he went from a Bitcoin skeptic to a fan. This is signaling increased institutional interest.
The market appears to have stabilized after the German government completed its large-scale Bitcoin sell-off. We are observing rising inflows into Bitcoin ETFs.
The outlook for the crypto market appears increasingly positive. For one, Bitcoin holdings in ETFs have surpassed 1.05 million BTC.
In addition, investors are now increasingly expecting that the Federal Reserve will begin to cut rates by September. If so, it will provide a boost for the crypto market.
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🚀 Last week’s market performance
The market had a strong reversal this week rising 14.9%. Bitcoin (BTC) trailed the market gaining 14.2%, amidst positive macroeconomic news. The worst performing coin of the week was SafePal (SFP), a hardware and software wallet solution platform, which lost a modest 3.1%. This was upon a rise in users experiencing problems such as frozen wallets and delayed fund releases. The best performing coin of the week was Internet Computer (ICP), which gained 42.1%.
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🪨 Larry Fink’s Positive Stance
During a CNBC interview on July 15th, BlackRock CEO Larry Fink openly discussed his change of heart regarding Bitcoin. In his conversation with CNBC's Jim Cramer, Fink admitted, “I was a skeptic, a proud skeptic,” but after extensive research, he now sees Bitcoin as a valuable asset. Fink now describes Bitcoin as “digital gold” and a “legitimate financial instrument.” He emphasized Bitcoin's potential for providing uncorrelated returns and its utility in times of economic uncertainty and currency debasement. This shift from the head of a USD 10.5-trillion asset management giant is a pivotal moment for the traditional finance and cryptocurrency market.
Fink also highlighted Bitcoin's role as a safe haven in politically and economically unstable regions, offering individuals an investment option outside their country's control.
Bitcoin experienced a notable rise on the 15th, reversing weeks of negative price action, gaining over 6%. Fink's endorsement may be a catalyst for further institutional interest and investment into cryptocurrency. BlackRock's iShares Bitcoin Trust (IBIT) continues to grow, with year-to-date inflows surpassing USD 18 billion.
👏 Sell Pressures Subsiding
Over the past few weeks, the cryptocurrency market has been significantly impacted by the German government's large-scale Bitcoin liquidation. The German government began this process in late June, selling off a substantial portion of the Bitcoin it had seized from criminal activities. In total, the government sold 50,000 BTC, with the final transaction of 3,846 BTC completed on July 12, 2024.
This large-scale sell-off coincided with a significant drop in Bitcoin's price, reaching a low of around USD 54,000 in early July. However, since the German government concluded its sales a couple days ago, the market has begun to stabilize and recover. On the final day of sales, the U.S. Spot Bitcoin ETFs saw inflows of USD 310 million, reversing a trend of suppressed inflows into these investment funds.
Moreover, the Bitcoin spot ETFs have seen a continued increase in inflows. On July 15 alone, these funds recorded a net inflow of USD 300 million, marking the seventh consecutive day of net inflows. BlackRock’s iShares Bitcoin Trust (IBIT) and Ark’s 21 Shares led the inflows, attracting USD 117 million each. This surge in investments was accompanied by significant trading volumes, with IBIT recording a volume of USD 1.24 billion. The lifetime net inflows into the U.S.-based spot Bitcoin ETFs surpassing USD 16 billion since their launch in January.
💸 What Lies Ahead?
Across all ETFs globally, Bitcoin holdings have recently surpassed 1.05 million BTC, spread across 39 funds. With more financial products and investment vehicles incorporating Bitcoin, the overall market depth and liquidity are expected to improve, providing a more stable environment for investors.
The probability of a Federal Reserve rate cut has increased significantly, as shown by the latest data. For the upcoming September meeting, there is now a close-to 100% chance that the Fed will cut rates. There is a 89.6% chance of a 0.25% cut. There is also a 10.2% chance of a 0.50% cut. The likelihood of a rate cut is seen as a potential catalyst for the crypto market, as lower interest rates generally encourage investment in higher-risk assets, including cryptocurrencies.
On another note, MicroStrategy, a company well-known as a Bitcoin proxy, has announced a 10-for-1 stock split, set to be executed on August 1, 2024. This move is expected to make MicroStrategy’s shares more accessible to a broader range of investors, particularly those interested in the company’s substantial Bitcoin holdings. Comparably, NVIDIA completed a 10-for-1 stock split earlier this year. After announcing the stock split on May 22nd the stock ran up over 28% into the actual splitting on June 10th. The stock split increased the number of shares in circulation, making them more affordable and attractive to smaller investors.
The upcoming Bitcoin Conference in Nashville will feature a keynote speech by former U.S. President Donald Trump, who has also recently shifted his stance to support Bitcoin. This high-profile endorsement is expected to bring significant attention to the event and further legitimize cryptocurrency as a mainstream political topic. There will be other notable speakers including presidential candidate Robert F. Kennedy, MicroStrategy CEO Michael Saylor, and ARK Invest CEO Cathy Wood. The conference will serve as a platform for industry leaders to discuss the future of Bitcoin and blockchain technology, with potential implications for market sentiment and regulatory developments.
The subsiding sell pressures from the German government's Bitcoin liquidation and the completion of the Mt. Gox repayments, combined with positive institutional inflows and favorable macroeconomic conditions, suggest an improving outlook for the crypto market. As we move forward, continued institutional adoption, favorable monetary policies, and increasing political engagement with cryptocurrencies are likely to play a role in shaping the market’s trajectory.
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