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For professional reasons, this communication is being sent to you on Thursday rather than the traditional Wednesday. However, it cannot be said that there have been major changes in the markets in the last 24 hours. On the contrary, volatility remains historically low with the market appearing to be in wait-and-see mode, operating within a tightly held transaction channel over the past week.
This calm might however only be illusory. James Butterfill, head of research at CoinShares, describes the current situation like a duck that seems calm on the surface, but is frenetically moving underneath. This underlying dynamism is the result of recent legal and emotional fluctuations in the market, including regulatory issues associated with the conversion of the Grayscale Bitcoin trust into an ETF, and the SEC’s postponed decision on several spot Bitcoin ETF applications. This week, the cryptocurrency market experienced relatively low outflows of 11.2 million dollars, while the trading volume reached a notable sum of 2.8 billion dollars, a 90% increase compared to the annual average so far, according to the latest report from CoinShares. The perspective of institutional investors is currently polarized, with some seeing a buying opportunity in the current price weakness, while others are withdrawing from the market. Although Bitcoin experienced a small decline of about 1% over the week, 2023 remains positive, supported by hopes and concerns regarding cryptocurrency regulation. The recent trend shows a slight recovery for Bitcoin with inflows of 3.8 million dollars after a difficult August.
Not surprisingly, the United States Securities and Exchange Commission postponed its decision on several applications concerning Bitcoin ETFs from companies such as BlackRock, Wisdom Tree Funds, and Fidelity until October. This decision comes after an increase in the anticipation of the launch of a spot Bitcoin ETF earlier this week, fueled by Grayscale’s success in its legal battle to convert its Bitcoin trust into a spot Bitcoin ETF. However, experts note that the court’s judgment does not equate to approval, and the SEC still has the option to appeal within 45 days. Since 2013, the agency has regularly rejected spot Bitcoin ETF applications, citing concerns related to fraud and market manipulation, although since 2021 it has approved applications for Bitcoin ETFs on futures.
Speaking of Grayscale, lawyers representing the company are urging the SEC to approve a spot Bitcoin ETF as soon as possible, pointing to inconsistent treatment between Bitcoin trusts and Bitcoin futures contracts. This move comes after a Grayscale court victory, where it was ruled that the SEC had not properly justified its previous rejection of the company’s ETF proposal. Grayscale argues that its proposed ETF should not be treated differently from exchange-traded products that invest in Bitcoin futures, especially since it plans to use the same market surveillance devices that have already been approved by the SEC for Bitcoin futures-based ETFs. Grayscale insists that the SEC’s refusal is causing unjust harm to investors, particularly given that the shares of its Bitcoin trust, currently the largest Bitcoin fund with over 16 billion dollars in assets, are trading at a discount compared to the fund’s Bitcoin holdings.
Continuing on the theme of ETFs, asset managers ARK Invest and 21Shares have filed a regulatory approval request with the SEC to create an exchange-traded fund that would invest directly in ether. Titled Ark 21Shares Ethereum ETF, this would be the first attempt to list such a fund in the US. The fund’s assets would be held by Coinbase Custody Trust Company. Although the announcement initially stimulated a rise in the values of ether and bitcoin, this was short-lived, with prices quickly returning to their previous levels. This ether ETF application comes in a context where many similar applications have been filed for Bitcoin ETFs, an initiative in which ARK and 21Shares have also participated, although the SEC recently postponed its decision on all of these requests.
Analysts at crypto research firm K33, formerly known as Arcane Research, believe that the crypto market is greatly underestimating the positive impact that the approval of a spot Bitcoin exchange-traded fund would have on prices. In a report published on September 5, Vetle Lunde and Anders Helseth, respectively lead analyst and vice president at K33, noted that the chances of approving a spot Bitcoin ETF have significantly improved over the past three months, but this has not yet reflected in the price of Bitcoin or other main crypto assets. They argue that approval would attract “huge inflows” and significantly increase buying pressure on Bitcoin, while rejection would have only a negligible impact. According to them, the market has a fundamentally incorrect view of ETFs, especially given the forecasts of several Bloomberg analysts who now see a 75% chance of ETF approval by the end of the year. They encourage “aggressively accumulating” BTC at current levels, calling the current market a “buyer’s market”.
Bankrupt cryptocurrency lender Genesis Global Capital (GGC) initiated legal proceedings on September 6 to claim repayment of overdue loans from affiliated companies, loans amounting to over 600 million dollars in total. The complaints were filed against Digital Currency Group (DCG) and DCG International Investments (DCIG), two entities also owned by DCG Holdings, which is the parent company of GGC. The complaints relate to loans from 2017 and 2018 that GGC claims were guaranteed by DCG Holdings. It accuses the companies of delaying repayment, leading to an “unjust enrichment” to the detriment of GGC and its creditors. According to the filings, GGC provided loans to DCG and DCIG for various purposes, including buying shares in a company named Blockchain Ltd, and funding the acquisition of a company named Foundry Services Inc. It claims that the loans have not been repaid and that this non-repayment has led to the bankruptcy of GGC.
The former CEO of Celsius Network, Alex Mashinsky, is facing asset freezes ordered by the Department of Justice following charges brought against him in July, including seven criminal counts. According to a court order filed yesterday, multiple bank accounts of Mashinsky have been frozen, prohibiting any withdrawal of funds from banks such as Goldman Sachs, Merrill Lynch, First Republic Securities, SoFi Bank, and SoFi Securities. The directive also mentions a property in Texas owned by Mashinsky and shared with his wife Kristine. Mashinsky is accused of fraud for allegedly misleading investors through “risky trading practices,” and personally pocketing 42 million dollars by deceiving customers.
According to a study conducted by KuCoin, the fifth largest cryptocurrency exchange platform in the world, over half of the Turkish population now holds cryptocurrencies, a figure that has increased compared to the previous one and a half years. This increase, which went from 40% to 52%, is mainly due to the rapid inflation the country is experiencing, with the Turkish lira losing over 50% of its value against the US dollar. This phenomenon is not unique to Turkey; similar trends have been observed in Brazil and Nigeria, countries also affected by high inflation. The study reveals that 58% of respondents see cryptocurrencies as a means to accumulate wealth in the long term, while 37% see it as a store of value. The majority of Turkish investors own Bitcoin, closely followed by Ethereum and other stablecoins. The study also notes an increase in the number of young women investing in cryptocurrencies, with 47% of female investors aged between 18 and 30 years. Clearly, the theoretical proposition of using cryptocurrencies as protection against inflation is being tangibly confirmed today.
According to a recent study conducted by Henley & Partners, although the cryptocurrency market is currently down, the number of millionaires and billionaires in this sector continues to grow. Currently, there are six Bitcoin billionaires and 22 billionaires who have diversified cryptocurrency portfolios. Additionally, there are 88,200 individuals worldwide who hold more than one million dollars in cryptocurrencies, nearly half of whom hold more than one million in Bitcoin. However, compared to the over 20 million global millionaires based on net investable assets, crypto millionaires only represent a small fraction. The United States has the highest number of these millionaires, closely followed by India, China, Brazil, and Russia. Regarding crypto adoption, the study highlights that the sector represents the “pinnacle of trade and technology of the past three decades.” It compares the current period to that of the internet bubble of the late 90s and early 2000s, noting the resilience of crypto technology and the economies it can generate for businesses. Finally, the study presents a crypto adoption index, revealing the countries with the highest adoption rates, with Singapore leading, closely followed by Switzerland and the United Arab Emirates, largely thanks to their favorable tax policies for cryptocurrency enthusiasts.
The daily Bitcoin chart is about to show a “death cross,” a predominantly bearish technical pattern, for the first time since January 2022. This formation occurs when a 50-day simple moving average of an asset falls below its 200-day simple moving average, signaling a potential long-term bearish reversal. However, historical data suggests that the “death cross” is an unreliable indicator when used alone, as only two out of the nine previous occurrences led to negative returns over periods of three, six, and twelve months. Meanwhile, the Dollar Index (DXY), which tracks the value of the US dollar against a basket of major global currencies, seems to be on the verge of realizing a “golden crossover,” a potentially bullish sign, indicating the opposite of the “death cross.” Since the price of bitcoin has often been inversely correlated with the strength of the US dollar, it will be interesting to see the consequences of this technical indicator. Nonetheless, with an enticing fundamental portrait with high chances of accepting a spot ETF in the coming months and the approach of the next halving, any temporary setback suggests an opportunity for accumulation rather than a suggestion to withdraw from the market.
Rivemont Investments, manager of the Rivemont Crypto Fund.
The presented information is as of Septmber 7th, 2023, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
