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As the author of these lines will be unable to publish this communication on Wednesday as usual, we are sharing our weekly review today.
While prices show strong stability over the month, it is interesting to note that over the past three weeks, institutional investors have injected half a billion dollars into digital asset investment products, mainly Bitcoin, thus reversing the downward trend affecting cryptocurrency funds since April. According to a recent CoinShares report, digital asset investment products recorded inflows of $136 million over the past seven days, bringing the total over three weeks to $470 million. Deposits on exchange platforms are at a cycle low of $2.3 billion, suggesting that institutions could be optimistic. Bitcoin remains the most sought-after asset, with $133 million in purchases made by institutions last week, representing 98% of institutional investments. Ethereum comes in second place, with a meager inflow of $2.9 million over the week and a net outflow of $63 million since the start of the year.
Former SEC Chairman Jay Clayton has said that the U.S. regulatory body could hardly resist approving a Bitcoin exchange-traded fund (ETF), provided such a product offers the same functions as a futures ETF. According to Clayton, the SEC would need to find that an application for a spot product provides a “similar efficiency to the futures market” to approve it. Despite his initial skepticism about Bitcoin trading, Clayton now finds it remarkable that major players in traditional finance wish to associate their name with spot ETF applications. He notes that if these applicants are right, namely that the spot market has similar efficiency to the futures market, it would be hard to refuse approval of a Bitcoin ETF. It should be noted that a Bitcoin spot ETF is currently a hot topic, as no such product yet exists in the United States.
Asset manager Vanguard Group has increased its exposure to Bitcoin mining companies, with investments of over half a billion dollars, as indicated in recent filings with the U.S. Securities and Exchange Commission. Vanguard has bought additional shares of Riot Platforms and Marathon Digital, bringing its total investment in these companies to $560 million. This comes as Vanguard Group, which manages $7.2 trillion in assets, stated two years ago that cryptocurrencies presented a “weak” long-term investment case. This development is part of a broader trend of increasing interest from institutions in cryptocurrencies, particularly Bitcoin.
The computing power of the Bitcoin network has reached a new historical high, making the world’s largest cryptocurrency more secure than ever. According to Bitinfocharts data, Bitcoin’s hash rate reached 465 EH/s over the weekend, making it even harder for an individual or group to control more than 50% of the total network computing power. An increase in the hash rate makes the network more robust and secure, creating significant barriers for those trying to compromise its integrity. However, a higher hash rate can lead to increased competition and the need to allocate more resources to mining hardware, which can also increase energy consumption. A Hash Rate Index report suggests that this increase could be due to Texas-based miners operating at full capacity.
Nearly 20% of the total supply of Ethereum, or about $45 billion, has been staked to secure the network, a milestone reached on Monday that demonstrates unprecedented active participation. About 24 million Ethereum are currently locked across 744,000 validators processing transactions. Ethereum uses a proof-of-stake consensus model, where validators stake at least 32 Ethereum for a chance to validate transactions and receive associated fees. Lido Finance is the most popular choice for staking Ethereum, representing nearly 32% of all staked Ethereum. Cryptocurrency exchanges such as Coinbase, Kraken, Binance, and OKX account for about 19% of all staked Ethereum. This major achievement underlines the success of Ethereum’s transition to a more environmentally friendly consensus model.
British multinational bank Standard Chartered has raised its Bitcoin price forecast to $120,000 by the end of 2024, a 300% increase from its current level. According to a report seen by Reuters, the bank predicts that Bitcoin’s increase will be largely driven by miners who accumulate their coins and reduce the supply available on the market. Geoff Kendrick, one of Standard Chartered’s leading FX analysts, wrote in the report that the increasing profitability of miners per Bitcoin mined means they can sell less while maintaining cash flows, thus reducing the net supply of Bitcoin and pushing Bitcoin prices higher. In addition, data from on-chain analytics firm Glassnode shows that a large portion of Bitcoin has moved from short-term holders to strong holders over the past few months, which is a “main component of all previous Bitcoin bull markets.” According to Kendrick, if the price of Bitcoin reaches $50,000 by the end of the year, the percentage of coins sold could decrease to just 20-30%, reducing the circulating supply and creating a bullish feedback loop.
Bitcoin price briefly exceeded $31,000 before closing on July 10. Similar to the rapid rise last week, BTC/USD managed to approach resistance before momentum weakened, then fell by over $800. Despite this, some continuation set in afterward, and at the time of writing, Bitcoin is trading around $30,500. Bitcoin remains within a familiar range in effect for several weeks. Analytics firm Glassnode suggests that this is characteristic of Bitcoin price cycles and that “reaccumulation” is the term that best describes the nature of the current BTC price action.
We are still watching the bull flag presented last week. Successfully finding support above $30,600 could provide the impetus for a bullish breakout.
Rivemont Investments, manager of the Rivemont Crypto Fund.
The presented information is as of July 11th, 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.
