Communications
Crypto Bulletin – Week 340
Bitcoin has fallen below $65,000 yesterday, reaching its lowest level in a month. Continuous BTC sales by miners to finance their operations and disappointed expectations of rate cuts by the U.S. Federal Reserve have contributed to this downward trend. However, a note from Wintermute suggests that this bearish sentiment could be short-lived due to rate cuts initiated by the Bank of Canada and the European Central Bank, indicating possible global monetary easing.
U.S. spot Bitcoin exchange-traded funds (ETFs) recorded net outflows of $152.42 million on Tuesday, marking the fourth consecutive day of net outflows. Fidelity’s FBTC saw the largest outflow with $83 million, followed by Grayscale’s GBTC with $62 million, and Bitwise’s BITB with $7 million. The other eight ETFs recorded zero flows that day. Together, the 11 spot Bitcoin ETFs had cumulative net inflows of $14.81 billion on Tuesday, down from their peak of $15.69 billion on June 7. The total trading volume for these ETFs amounted to $1.7 billion on Tuesday, compared to $1.24 billion on Monday. This trend of outflows is partly due to the Federal Open Market Committee (FOMC) meeting, which maintained interest rates between 5.25% and 5.50%, disappointing investors who hoped for several rate cuts in 2024. The more “hawkish” meeting has led investors to reduce their exposure to fixed-supply assets. Bitcoin’s price, which was around $72,000 before the release of U.S. economic numbers, has gradually fallen below $65,000.
The U.S. Securities and Exchange Commission (SEC) has decided to close its investigation into whether Ether (ETH) is a security. Consensys, an Ethereum developer, announced on June 19 that the SEC’s enforcement division had informed them of the closure of the Ethereum 2.0 investigation. This means the SEC will not bring charges alleging that ETH sales are securities transactions, which Consensys hailed as a major victory for Ethereum developers and industry participants. This decision came after Consensys sent a letter to the SEC on June 7 requesting the end of the investigation, especially after the approval of spot Ethereum ETFs in May, which are based on ETH being a commodity. Despite the end of this investigation, Consensys clarified that their lawsuit against the SEC is still ongoing, following previous actions by the SEC attempting to classify ETH as a security since early 2023.
After three years of effort, global investment firm VanEck announced it has received regulatory approval to launch a Bitcoin exchange-traded fund (ETF) on the Australian Securities Exchange (ASX) starting June 20. This provides Australian investors with a regulated way to invest in Bitcoin. VanEck has been working on this project since early 2021 and was the first company to formally file for a Bitcoin ETF, renewing its application in February this year. Despite regulatory challenges and obstacles related to the Australian exchange framework, VanEck is committed to pioneering this product for ASX investors. This announcement follows the approval of Monochrome Asset Management’s Bitcoin ETF by the smaller Cboe Australia exchange. These launches in Australia follow the growing popularity of Bitcoin ETFs in the United States, approved by the SEC in January, contributing to broader acceptance of the cryptocurrency by institutional and retail investors.
According to Eric Balchunas, a Bloomberg ETF analyst, spot Ethereum exchange-traded funds (ETFs) could start trading in the United States before July 2. In a June 15 post on X, Balchunas noted that the Securities and Exchange Commission (SEC) staff comments on the spot Ethereum ETF applications were “pretty light” and asked for feedback within the week. Balchunas also mentioned that there was a good chance the SEC would declare these ETFs effective the following week to finalize before the U.S. Independence Day holiday on July 4. This prediction follows the approval on May 23 of eight spot Ethereum ETF listing applications on various U.S. exchanges, although they cannot start trading without the required S-1 registration statement approvals. SEC Chair Gary Gensler provided a broader timeframe for the potential start of trading, indicating it could happen by the end of September.
MicroStrategy clearly has no intention of stopping its Bitcoin purchases. The company recently announced an increase in its convertible notes offering from $500 million to $700 million. This initiative aims to acquire more Bitcoin, consolidating its position as the largest institutional holder of the cryptocurrency. The company already holds 214,400 BTC, worth approximately $14.3 billion, representing more than 1% of Bitcoin’s total supply, capped at 21 million BTC. The notes will bear an annual interest rate of 2.25%, payable semiannually, and will mature in June 2032. MicroStrategy could raise up to $786 million if initial buyers exercise their additional purchase option. Despite Bitcoin price fluctuations, which have caused significant variations in MSTR stock price, MicroStrategy has benefited from the recent Bitcoin surge, seeing its stock value multiply fivefold over the past year.
The Bitcoin network’s hashrate, which measures the total computational power used for mining, could decrease during the summer months in North America as miners reduce their operations in response to heatwaves. This reduced competition could provide a reprieve to miners whose profit margins have already been halved due to the halving event. Mining machines, which are very powerful and generate a lot of heat, pose a major cooling challenge in the summer, forcing some miners to suspend operations. Additionally, high residential energy consumption activates demand response clauses in miners’ energy purchase agreements. This seasonal hashrate reduction, observed over the past two summers, could lead to a decrease in mining difficulty. Since its peak in March, the hashrate has already fallen by 10%. For some miners, this decrease could be beneficial by reducing competition and allowing them to earn additional income by reducing their energy consumption.
The New York Attorney General’s office announced that it had recovered approximately $50 million from the cryptocurrency platform Gemini on behalf of more than 230,000 investors who participated in the company’s Earn program. According to Attorney General Letitia James, these funds will allow for the full reimbursement of defrauded investors. Gemini has been accused of misleading investors into believing that the Earn program would help them grow their money, while in reality, investors found themselves locked out and unable to access their accounts. This announcement follows a $2 billion settlement obtained last month from Genesis, Gemini’s partner in the Earn program, intended to compensate Gemini Earn users. With this additional $50 million, investors will be reimbursed in-kind, coin-for-coin. The settlements allege that Gemini misled investors about the risks associated with the Earn program, which collapsed in November 2022, rendering withdrawals impossible. In addition to this reimbursement, Genesis is banned from operating in New York. Gemini must also cooperate with ongoing litigation against Digital Currency Group and its executives. The digital assets will be returned to investors within seven days of the agreement, and Gemini can no longer offer crypto lending products in New York.
Tether has unveiled a new stablecoin, aUSDT, designed to track the price of the U.S. dollar but backed by over-collateralized gold reserves rather than government debt. According to Tether, aUSDT combines the popularity of the dollar with the safe-haven value of gold, used for 5,000 years. The aUSDT stablecoin is backed by Tether Gold (XAUT), an existing stablecoin backed by one troy ounce of gold, with a market capitalization of $574 million. Over-collateralization means that the value of gold reserves exceeds the number of tokens in circulation, providing protection against gold price declines. Unlike USDT, which is backed by cash reserves and short-term U.S. Treasury bills, aUSDT uses the historical strength of gold-backed currencies to maintain its stability. This represents an alternative to traditional stablecoins, often backed by government debt, and demonstrates the diversity of approaches to ensuring stablecoin stability.
According to Bitfinex analysts, Bitcoin is entering a consolidation phase marked by gradual selling by long-term holders. These sales are observed both on exchanges and through over-the-counter transactions. Historically, these holders tend to sell gradually during bull markets and consolidation phases, as seen currently. Bitfinex’s “Hodler Net Position Change” metric, which tracks whale holdings, has shown negative values for nine consecutive days. Additionally, the ratio of whale deposits on exchanges continues to rise, exerting pressure on the market. Bitcoin’s price has decreased by approximately 1% over the past 24 hours, trading at $65,150. In contrast, U.S. equity markets remain robust despite renewed caution from the Federal Reserve regarding rate cuts this year. The S&P 500 has reached its 30th record high of the year, mainly driven by strong performances in the tech sector. Nigel Green, CEO of deVere Group, notes that this positive trend extends to Asian and European markets, supported by strong investor confidence and solid fundamentals of tech companies. Presently, Bitcoin’s correlation is much stronger with gold than with the traditional stock market.
Long-term optimism remains high. Investment firm Bernstein estimates that the price of Bitcoin will reach $200,000 by 2025, revising its previous target of $150,000 set in March. According to a research note, unprecedented demand for spot Bitcoin ETFs and limited supply are key factors supporting this optimistic forecast. Despite recent market weaknesses, Bernstein analysts predict that spot Bitcoin ETFs will manage $190 billion in assets by the end of 2025, up from $53 billion currently. The firm also highlights MicroStrategy as an active and heavily leveraged bet on Bitcoin, distinct from passive ETFs. With 214,400 Bitcoins valued at approximately $14.3 billion, MicroStrategy uses capital markets to buy Bitcoin, a strategy Bernstein views as promising with low liquidation risk. MicroStrategy’s stock has increased by 116% this year, reflecting optimism around Bitcoin’s potential rise. Bernstein predicts that Bitcoin’s historical four-year cycle, renewed by the recent halving, lays the foundation for a breakthrough phase, followed by a “hype” phase where investors set unrealistic price targets. Beyond 2025, analysts envision Bitcoin reaching $500,000 by the end of 2029 and surpassing $1,000,000 by 2033.
The presented information is as of June 19th, 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.
Interested in this newsletter?
Download it in PDF format to keep it.
Stay up to date!
Receive the Crypto bulletin by email:
Similar letters
Crypto Bulletin – Week 359
It’s now official! Bitcoin’s price has surpassed $70,000 (and over 100,000 CAD$!), a level it hadn’t reached since last June. This surge allows the asset to break out of its months-long consolidation channel. This spike can be attributed to renewed investor interest, especially in light of the upcoming U.S. elections.
Read more >Crypto Bulletin – Week 358
The price of Bitcoin dropped after approaching $70,000, triggering a wave of liquidations for long position traders. The price hit the top of its long consolidation channel, and it’s no surprise that profit-taking occurred at this level. However, breaking through this level could set off fireworks!
Read more >Make an appointment today
Make an appointment today with our portfolio manager.
We will be happy to contact you within the next 48 hours. For any questions, do not hesitate to contact us directly.
Subscribe to our financial letter!
On a quarterly basis, we mail out a financial letter to all of our current and potential clients.
In order to be added to the mailing list, please enter your full name and email address below.