Market Update July 2024: Volatility keeps the market on edge

The Bitcoin price has experienced ongoing volatility since our previous market update, marked by several steep corrections. One of the causes might be the news surrounding Mt. Gox, as it was announced that the long-lost bitcoins will be distributed to rightful owners sometime this month. In 2014, Mt. Gox was the leading Bitcoin exchange with 70% of all Bitcoin volume. More selling pressure might come from Bitcoin miners, as the total Bitcoin supply held by miners shows a significant decrease.

Meanwhile, corporate America remains highly active. MicroStrategy has increased its convertible note offering by 40% to $700 million, likely to acquire more Bitcoins in the near future. Currently, MicroStrategy holds 214,400 bitcoins on its balance sheet, with a total value of $14 billion. The Bitcoin ETFs have been active too, showing inflows again after multiple days of outflows. What will July bring this year?

📈 Market Update

Bitcoin Analysis

Since hitting a 2-month low at the beginning of May, Bitcoin has shown a remarkable recovery, retesting the €66,000 range twice. The trend has sharply reversed, seeing a 22% increase as sell-off pressure from long-term holders has eased. Buying pressure from short-term holders has created volatile price movements. During the previous all-time high, the bitcoins sold showed significant unrealised profits. This is now different; the bitcoins sold are closer to their acquired price with low levels of unrealised profits, suggesting a new equilibrium around €62,000.

Ethereum Analysis

A significant price surge in late May has been noted due to the approval of the Ethereum ETF. This approval caused a substantial rally as the SEC indicated this green light. A week prior, Bloomberg analysts increased the chance of approval by 50%, sparking a +30% price rally. During June, the Ethereum price suffered from selling pressure as well, resulting in a -10% price correction. Despite the ETF approval, it might still take months to become available. Whether this will be a "buy the rumour, sell the news" scenario remains to be seen.

Fundamentals

Blockrise offers comprehensive care with its asset management strategy called "Fundamentals." This strategy involves managing assets in Bitcoin and Ethereum versus a euro position, reassessing and adjusting these positions monthly.

In the previous month, Bitcoin showed a -7.5% price correction, as well as Ethereum with a -9.5% correction. Fundamentals limited the impact with its euro position, resulting in a correction of -5.5%. With this month’s rebalance, the Bitcoin position has been increased by +5% to 62.5% BTC, while correcting the Ethereum position back to 17.5% ETH. This results in a 20% euro position, which will be used to increase the crypto position with market corrections or when the Bitcoin cost price rises.

🗞 Crypto Highlights

An overview of the most notable events in crypto:

Falling Bitcoin Hashrate and Miner Reserve Depletion

The Bitcoin hashrate, indicating the total computational power used for mining, has decreased by 11% since the Bitcoin halving. This decline might indicate that some miners have suspended or limited their mining operations. Compared to the halving in 2020, the hashrate shows a longer downturn trend. This could be due to the significant price increase just before the halving, leaving miners indecisive about maintaining operations and hoping to mine for profit soon again.

Another important indicator shows that Bitcoin miner balances have been decreasing, with significant transfers to exchanges and OTC desks. For instance, the miner Marathon Digital sold almost 10% of their holdings. Since the recent halving, the total miner balance has decreased by about 12,000 bitcoins. Bitcoin miners have been selling more Bitcoin since the end of December, probably to build up cash reserves for the post-halving period. Currently, the Bitcoin price has been trading sideways for a longer period, with miners continuing to offload their Bitcoin positions. As the selling pressure decreases, the volumes are absorbed by the market.

First Solana ETF Filed in the US

Asset manager VanEck has filed to launch a Solana (SOL) ETF, marking the first SOL registration in the United States. The SOL price surged by +9% after the filing arrived at the SEC. VanEck was also the first to file for a spot Ethereum ETF in 2021, years before the SEC began engaging with issuers like BlackRock and Fidelity. The Solana ETF filing follows weeks after the spot Ethereum ETF approval by the SEC. If (or when) additional spot ETFs for crypto assets are allowed in the United States, the impact on SOL's price could be significant. The direction of major spot ETF approvals and more crypto legislation is influenced by the upcoming elections, with candidates mentioning crypto as part of their campaigns.

🏦 Macro Economy

The Petrol Agreement

After 50 years, the US-Saudi petrol agreement, established during the 1973 oil crisis, has ended. This means oil no longer needs to be denominated in dollars, allowing for alternative assets. The US Dollar's inflation rate has increased by over 20% in the last four years, making it less attractive for oil denomination. However, as long as foreign countries continue to denominate oil in USD, the short-term impact may be minimal.

The Diminishing Power of the SEC

The US Supreme Court has ruled to strip the SEC of a key enforcement process. The court decided that agency proceedings seeking penalties for fraud handled internally by the SEC instead of in federal court violate the Seventh Amendment right to a jury trial.

Previously, the SEC sometimes used an internal process overseen by administrative law judges rather than suing in federal court for civil securities fraud accusations and financial penalties. Some argue that agency proceedings offer benefits like greater efficiency, expertise, transparency, and reasoned decision-making.

The ruling to remove the SEC's administrative proceedings marks a significant change, potentially affecting many statutes and diminishing the power of various agencies. Several crypto cases resolved through administrative proceedings, such as ICO Superstore, will now have to be addressed in court by jury trial. This change will significantly impact the crypto space as future SEC cases against crypto companies will be tried by jury.