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It was a quiet week in the cryptocurrency market, with Bitcoin continuing to trade within an increasingly narrow consolidation channel. Bitcoin briefly surpassed $61,000 during early European trading hours on Monday, despite volatility remaining high, reaching a yearly peak of 3.25% on August 10. Currently, volatility is at 3.07%. This increase comes amidst ongoing uncertainty among traders, exacerbated by recession fears and a generally fragile global economic environment. While potential interest rate cuts by the Federal Reserve may offer some relief, the overall market sentiment remains cautious.
Despite this uncertainty, some positive signs are emerging, particularly with improvements in global liquidity, as the Bank of Japan and the People’s Bank of China inject $400 billion and $97 billion into the economy, respectively. This environment could allow Bitcoin to outperform other assets unless a major geopolitical event occurs.
Meanwhile, economists at Goldman Sachs have lowered the probability of a recession in the United States over the next year to 20%, thanks to recent economic data on retail sales and unemployment. If the August jobs report, to be released on September 6, shows favorable results, Goldman could further reduce this probability to 15%. They also foresee a possible interest rate cut by the Federal Reserve in September, which could be welcomed by Bitcoin traders. However, some analysts warn that this rate cut could also signal an impending recession, potentially leading to a Bitcoin correction, similar to what happened in 2019 following similar rate cuts. Other economists, such as those at JPMorgan, remain more cautious, highlighting signs of weakness in the labor market and a loss of momentum in global manufacturing, while maintaining a 45% probability of a recession by the end of 2025.
In the same vein, U.S. leading economic indicators continue to show an economic slowdown but no longer signal an imminent recession, according to data from the Conference Board. While these indicators, which include elements such as weekly manufacturing hours and new orders, fell by 0.6% in July, the annualized six-month decline slowed from -3.1% in June to -2.1% in July, indicating that recession risks are diminishing. This news could reassure investors in risk assets, including cryptocurrencies, which suffered a decline in early August due to U.S. recession fears.
U.S. Bitcoin ETFs saw net inflows of $88.06 million on Tuesday, marking their fourth consecutive day of positive flows. BlackRock’s ETF led these inflows with $55.43 million, followed by Ark Invest and 21Shares’ ARKB fund with $51.91 million. However, Grayscale’s GBTC saw net outflows of $12.81 million, as did Bitwise’s BITB with $6.47 million in outflows. Meanwhile, Ether ETFs continued to experience net outflows, totaling $6.49 million, marking their fourth consecutive day of negative flows. Grayscale’s ETF recorded significant outflows of $36.99 million, partially offset by inflows into BlackRock and Bitwise funds.
Despite recent Bitcoin volatility, institutional investors are showing strong resilience and notable commitment to their Bitcoin ETF holdings. According to André Dragosch of Bitwise, institutional investors have mostly either maintained or increased their shares in Bitcoin ETFs during the second quarter of 2024, despite a more than 20% drop in Bitcoin’s price. Approximately 60% of leading global hedge funds now hold Bitcoin through ETFs, highlighting growing interest in this asset. This stability demonstrates growing acceptance and interest in Bitcoin as an investment asset among financial institutions.
South Korea’s National Pension Service (NPS) recently made significant investments in cryptocurrency-related companies, notably purchasing $34 million worth of shares in MicroStrategy, a company well known for its substantial Bitcoin reserves. The NPS acquired 24,500 shares of MicroStrategy in the second quarter of 2023, prior to the company’s 10-for-1 stock split in August. In addition to this investment, the pension fund also holds 229,807 shares of Coinbase, valued at over $45 million. These investments are part of a broader trend of institutional investors seeking exposure to the cryptocurrency market through publicly traded companies.
Franklin Templeton, a giant in asset management, recently filed to launch a new exchange-traded fund (ETF) called the Franklin Crypto Index ETF, under the ticker “EZPZ.” If approved by the Securities and Exchange Commission (SEC), this fund will allow investors to gain exposure to a basket of digital assets, primarily Bitcoin and Ethereum, through an index provided by CF Benchmarks. Coinbase, the largest cryptocurrency exchange in the U.S., will act as the custodian for the proposed fund. This filing is part of the growing interest from major Wall Street firms in digital assets, following the successful launch of other Bitcoin and Ethereum ETFs earlier this year.
Bitwise, a U.S.-based crypto asset manager, expanded its operations into Europe by acquiring ETC Group, a London-based company specializing in digital asset financial products. This acquisition allows Bitwise to broaden its product offerings in Europe, particularly exchange-traded products (ETPs) that provide access to Bitcoin, Ethereum, and Solana. With this transaction, Bitwise now manages $4.5 billion in assets. The acquisition is part of Bitwise’s strategy to strengthen its global presence following the success of its crypto ETFs in the U.S.
According to a recent analysis, Bitcoin’s price is not expected to see a significant breakout until the last quarter of the year. Despite apparent market stabilization and a modest recovery of Bitcoin above $60,000, QCP Capital analysts warn that the conditions necessary for a genuine rebound are not yet in place. Although positive signs, such as consistent ETF flows and opportunistic purchases by BlackRock, are supporting the market, no major catalyst seems to be on the horizon to trigger a substantial rise before the fourth quarter. Additionally, 10x Research emphasizes the importance of stablecoin inflows in sustaining any significant Bitcoin rally. They note that while the recent issuance of stablecoins by Tether and Circle indicates a gradual return of institutional capital, this momentum already shows signs of waning. For Bitcoin to sustainably break through the $60,000 to $61,000 resistance zone, stronger support, particularly through stablecoin inflows, is needed.
Despite some indecision in the cryptocurrency market, other analysts and trading desks remain optimistic for the end of 2024. Although Bitcoin fell back below $59,000 after briefly surpassing $60,000, experts such as those at QCP Capital maintain a positive outlook, highlighting the market’s resilience to recent “supply shocks.” Ryan McMillin of Merkle Tree Capital notes that this indecision is more related to market concerns about Mt. Gox distributions than macroeconomic factors. He predicts that after a consolidation period, Bitcoin could experience a strong rally in early 2025.
The most optimistic analysts estimate that Bitcoin could see a breakout in September, with a potential target around $86,000. This forecast is based on the analysis of historical post-halving patterns, where Bitcoin tends to enter a parabolic phase approximately 160 days after the halving. If this pattern repeats, such a scenario could materialize by late September. In addition to favorable macroeconomic conditions, including increased global liquidity via the M2 money supply and positive flows into Bitcoin ETFs, some analysts highlight a technical pattern called a “megaphone” that supports this perspective. The megaphone pattern, characterized by higher highs and lower lows, is usually observed in highly volatile markets and can indicate a macroeconomic top or bottom.
However, before reaching this potential, Bitcoin must first overcome significant resistance at $60,000. A breakout above this level could trigger the liquidation of leveraged short positions, accelerating the climb toward $86,000. However, in the event of a short-term downturn, a retracement to the support levels at $54,000 or $50,000 remains possible.
The presented information is as of August 21st, 2024, 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.
