It is evident that U.S.-based Bitcoin ETFs have facilitated an increase in basis trading. Therefore, it is important not to view each dollar of Bitcoin ETF inflow as equivalent to one dollar of buying pressure on Bitcoin. We estimate that $5 billion to $10 billion of the assets under management by Bitcoin ETFs are attributable to basis trading.
Bitcoin spot ETFs had net inflows of $1.829 billion last week, with last Tuesday marking the second-best day since their January 11 launch, bringing in $887 million. The key question is how much of this inflow is due to basis trading, with no price impact. At least some of it is.
There is no reason to fear the imminent Mt. Gox repayment to creditors. Instead, you should be encouraged by the extremely positive developments happening right before our eyes. In this note, we compare these factors with the Mt. Gox estate situation.
In our view, we are likely to witness the third consecutive unsuccessful launch of exchange-traded crypto products within a month and a half. It is up to the upcoming Ethereum spot ETF to break this trend. Despite being a decade old, the Mt. Gox bankruptcy still haunts the industry.
We strongly expect that exchanges will need to delist the world’s largest stablecoin, Tether, for all residents within the European Union exactly a month from now. This will be negative in the near term as it fragments liquidity and ecosystems. However, in the long run, it is positive as it reduces what is arguably the largest systemic risk in the crypto market.
Although it is unlikely that this week will surpass last week in terms of positive crypto developments, there is still plenty on the horizon to be optimistic about. This includes Trump’s ongoing pro-crypto statements, the launch of exchange-traded products in the U.K., and the imminent increase in liquidity.
Ethereum’s market outlook is highly bullish following the approval of its spot ETFs, expected to attract $15 to $20 billion in net inflow within a year, despite initial outflows from the Grayscale Ethereum Trust. With a friendlier regulatory environment and unique attributes like deflationary supply and staking rewards, Ethereum’s price is projected to reach $6,500 by October. The ETH/BTC ratio is anticipated to hit at least 0.065 later this year.
President Biden and his administration have made a complete 180 to attract pro-crypto voters. Now, the approval of the Ethereum spot ETF seems more likely than ever. We estimate a 95% chance of approval this year, most likely as early as this week. These ETFs, combined with a more favorable U.S. regulatory environment for crypto, will propel us to new heights.
While macroeconomic factors like improved liquidity and a favorable CPI report boost optimism, crypto-specific factors such as disappointing institutional holdings in Bitcoin ETFs, an unfavorable seasonal trend for crypto, and stagnant Tether (USDT) supply suggest bearish trends.
There have been no recent updates regarding the SEC’s impending decision on an Ethereum spot ETF. Nevertheless, the upcoming U.S. Presidential Election and Trump’s unexpected pro-crypto stance are exerting pressure on President Biden to adopt more crypto-friendly policies.
This is the final week before the U.S. Securities and Exchange Commission (SEC) must make a decision on the Ethereum spot ETF. Given the potentially transformative impact of an Ethereum spot ETF, the next two weeks are critical for the entire industry. There have been several developments regarding this matter in the recent weeks.
Ethereum’s rollups are poised to realize its potential as a decentralized global computer; however, these same rollups are undermining Ethereum’s current strongest narrative as an appealing yield-generating asset. The promises of rollups will only counterbalance this undermining of Ethereum’s narrative as a productive asset in a few years.
This weekend saw Bitcoin, Ethereum, and the broader crypto market surge, despite our bearish stance. It seems the market rose primarily due to anticipated improvements in liquidity conditions. However, our bearish arguments remain intact, and we continue to hold the same market position.
The crypto market experienced a remarkable rally from late last year up to now. However, all good things eventually come to an end. The market is facing a shortage of compelling short-term narratives, significant selling pressure, and unfavorable seasonal trends. While increased liquidity might provide some relief, it is unlikely to make a significant impact in the near term.
The crypto market lacks drivers to push prices higher, yet many factors loom that could lead to declines. Short-term narratives are unconvincing, and the buying pressure prior to the Bitcoin halving – motivated by expectations of rising prices – has faded, resulting in bitcoins returning to the spot markets.
Restaking of Ether, with initiatives like EigenLayer, has the potential to significantly enhance Ethereum, benefiting holders, stakers, developers, and the broader ecosystem. However, these benefits are not without their drawbacks. Engaging in restaking carries substantial risks for the individual holders involved and also poses systemic risks to the Ethereum network as a whole.
We anticipate the market will soon acknowledge the decreasing tensions between Israel and Iran, coupled with an improvement in US liquidity as tax season wraps up. There are now more compelling reasons to be bullish rather than bearish, despite the recent negative turn in the crypto futures market.
Bitcoin does not currently function as a safe haven. According to our quantitative model, it behaves more like a risk-on asset, similar to technology stocks. However, there is potential for Bitcoin to become a safe haven in the future. At this point, there is evidence suggesting that Bitcoin effectively serves as an inflation hedge.
Over the weekend, geopolitical tensions sent Bitcoin and Ethereum tumbling, but the crypto market quickly rebounded, arguably thanks to Hong Kong’s new ETF approvals and the upcoming Bitcoin halving. Despite this recovery, ongoing Iran-Israel tensions could still disrupt the market.
Since their debut three months ago, the US-based Bitcoin spot ETFs have attracted a significant inflow of capital, totaling $12.5 billion. The momentum does not stop here, with additional countries poised to roll out their own exchange-traded Bitcoin products.
Bitcoin is at the forefront of the market, with other cryptocurrencies attempting to keep pace. We anticipate a continued upward trajectory until a shift occurs, particularly for Bitcoin, in the months following the upcoming Bitcoin halving.
We foresee the next Bitcoin halving as a short-term “buy the rumor, sell the news” event, echoing the 2016 halving’s pattern, this time around even with heightened anticipation from Bitcoin ETF holders. However, long-term, we expect it to bolster Bitcoin’s price significantly, as the market tends to underappreciate the impact of these supply shocks.
Recent weeks have seen a notable absence of volatility in the crypto market. However, current indicators suggest that we are on the cusp of a change. We anticipate increased volatility in the coming weeks, predominantly characterized by an overall upward trend.
Avalanche, despite its standing as the 10th largest cryptocurrency and a significant player among Layer 1 blockchains with smart contract capabilities, faces a grim outlook. With a nearly $40 billion fully diluted market capitalization, its onchain activity is declining, lagging behind competitors like Solana and Ethereum’s rollups. There is simply not much to celebrate for AVAX holders.
A showdown is unfolding in the crypto world, specifically between BlackRock’s CEO, Larry Fink, and Gary Gensler, the Chair of the US Securities and Exchange Commission. Moreover, echoing our view from last week’s Crypto Crisp, we are not anticipating significant volatility in the upcoming weeks, especially considering the recent net outflows from Bitcoin spot ETFs.
A week has passed since Proto-Danksharding was implemented on the Ethereum blockchain. This upgrade has transformed Ethereum and its rollup ecosystem, setting the stage for expansion into brand new territories. Our advice? It is not wise to go against this trend by placing bets on so-called “Ethereum killers.”
Suddenly, the tipping point was reached. Late last week, the crypto market underwent a correction, eliminating excessive leverage and optimism. We see this as akin to typical corrections seen in any bull market, rather than the beginning of a new downward trend.
Ethereum’s transition to a Proof-of-Stake consensus mechanism has been a significant boon, instantly positioning it as the most productive cryptocurrency among its peers. However, this success comes with a vulnerability; if future Ethereum spot ETFs gain the ability to stake Ether, Ethereum’s fate could largely fall under the control of traditional finance. The most feasible countermeasure to this scenario lies in the full adoption of liquid staking protocols.
This morning, Bitcoin hit record highs. Despite my colleagues hoping for a downturn to mitigate my cockiness, the mix of the UK’s crypto embrace, a liquidity boost, and the upcoming Bitcoin halving and an Ethereum upgrade this week only add fuel to the bullish fire. The market’s momentum largely seems unstoppable.
The crypto market is getting less speculative by the minute. There is no need to chase the next big thing by risking funds on obscure altcoins or memecoins. Instead, by aligning with institutional movements, crypto investors stand to gain significantly without taking on too much risk.