Sophia’s Thoughts On Summer 2024 Winding Down
We explored the events that shaped the crypto market over the summer of 2024. How did these developments influence the market? And what might be in store for the months ahead?
These are Sophia's Thoughts:
The summer of 2024 was marked by many key events, resulting in a volatile yet ultimately downward trend.
Despite the market's poor performance, metrics such as trading volumes and market caps reached new highs.
As we move into the final quarter of 2024, with potential rate cuts and renewed market participation ahead, the crypto market is poised for a promising 4th quarter.
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🚀 Last week’s market performance
The market rose this week gaining 5.1%. Again, Bitcoin (BTC) closely followed the market's movements, rising 5.8%. The worst performing coin was Zcash (ZEC), which dropped 12.4% over the week. The best performing coin was Artificial Superintelligence Alliance (FET), an artificial intelligence lab working to democratize access to AI technology through a permissionless network. FET rose 47.2% this week as investors gear up for the much anticipated NVIDIA earnings coming out on Wednesday August 28th.
🧐 What is your crypto mood today?
In each Sophia's Thoughts newsletter, we ask about your crypto mood. Your response to this question helps Sophia get a better sense of the pulse of crypto markets. And this ultimately translates into better insights for you when combined with Sophia's AI models. Your data empowers Sophia to provide you with even better intelligence going forward!
☀️ A Sideways Summer
The summer of 2024 saw significant action in the crypto market. Beginning in late May, analysts' increased their likelihood of spot Ethereum ETF approvals, which propelled Bitcoin to all time highs above USD 70,000 and Ethereum over USD 3,800.The official approval and launch of these ETFs in late July granted investors direct exposure to Ethereum through traditional financial markets.
In June, the crypto market took a turn as fears around macroeconomic concerns like job reports, inflation, and delayed rate cuts set in. Bitcoin started the month near USD 70,000 but fell to the mid USD 50,000s by June's end. Germany's Federal Criminal Police began liquidating nearly USD 400 million in seized Bitcoin, adding to the downward pressure. This was compounded by the start of long-awaited Mt. Gox repayments in early July, with nearly USD 4 billion distributed so far out of an approximate USD 9 billion total.
At the end of July, the market was full of anticipation for the Nashville Bitcoin Conference featuring key figures like former President Donald Trump, former presidential candidate Robert F. Kennedy Jr., and Michael Saylor. Trump proposed a national strategic Bitcoin reserve, while Kennedy advocated for significant government Bitcoin purchases. However, after the conference, the market faced challenges. The unwinding of the Japanese carry trade, a weak U.S. job report, and rising geopolitical tensions in the Middle East that led to a sharp sell-off. Bitcoin dropped from USD 60,000 to a wick low of USD 49,500. The market has since rebounded into the end of August, with Bitcoin returning to the USD 60,000 level.
💾 The hard numbers
In the end, the summer of 2024 will have been another lousy summer for crypto. Overall, the crypto market lost 11% since June 1. The volatility of the crypto market over the summer months was 53% on an annualized basis. This value is larger than last summer's volatility but lower than the volatility of prior summers.
Nevertheless, the poor performance of the market stands in contrast to some key metrics. First, trading volumes and market caps reached new highs this year. Over the summer months, trading volumes have exceeded USD 2 trillion monthly. Total monthly trading volumes matched the average monthly crypto market cap one-to-one, as measured by the turnover. What we read from these data is that demand for crypto has remained strong throughout the summer month despite the lousy performance. Some of this demand has been provided by the new spot crypto ETFs that launched this year. For example, from June to August, the spot Bitcoin ETFs have absorbed over 60 thousand Bitcoin, rising from 860,000 BTC to 920,000 BTC.
Sentiment for the crypto market has fluctuated between positive and very positive for most of the summer, outside of a brief period from August 4th to August 11th. This was when the market became fearful due to the Japanese carry trade unwinding, tensions in the middle east, and a weaker than expected U.S. job report.
Sophia's intelligence over the summer was more or less in line with the performance of the market. Sophia saw coins as being fairly valued – maybe a tad bit overvalued – relative to their fundamentals. Sophia also viewed sentiment as providing a strong boost for coins. All in all, Sophia remained mostly neutral on coins over the summer. When she did take a position, Sophia primarily fell on the bullish side.
➡ ️ Where to now?
As we move beyond the summer months, the crypto market appears to be poised for an exciting 4th quarter as many fundamentals are aligning. For starters, there is a high probability of rate cuts beginning as early as September, with potentially more to come in November and December, which could inject fresh momentum into the market. Moreover, with summer vacations coming to an end, market participants are expected to return and we may see an increase in activity. Additionally, the upcoming U.S. election season could serve as a catalyst for the market.
The resolution of political uncertainties, renewed market participation, combined with strong demand and sentiment, sets the stage for a robust final quarter of the year. As we head into the final months of 2024, all signs point to a promising period for the crypto market ahead.
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