The massive sale of bitcoins by the German government and fears of sell-offs due to Mt. Gox distributions have continued to weigh on the markets this week, especially in the first half. Germany transferred more than $300 million worth of seized Bitcoin on Tuesday, a day after moving over $900 million in BTC. According to Arkham Intelligence, the German government controls five wallets totaling $1.3 billion in Bitcoin. Tuesday’s transfers included $55 million sent to the U.S. crypto exchange Kraken and $6 million to Cumberland DRW, a Chicago-based liquidity provider. The majority of the funds, approximately $246 million, were transferred to a wallet believed to be an institutional deposit/OTC service.

Since last month, the German government has begun moving bitcoins to exchanges after seizing 50,000 bitcoins from the Movie2k film piracy site in January. On Monday, it transferred over 15,000 bitcoins ($866 million) to market makers and exchanges, but 3,623 bitcoins ($203.7 million) were returned to the government by Bitstamp, Coinbase, and Kraken. These returns are likely due to the inability to sell the bitcoins within a targeted price range. Currently, the government still holds 22,846 bitcoins, valued at around $1.3 billion, representing less than half of the initially seized bitcoins.

Bitstamp, one of the five crypto exchanges tasked with distributing the billions of dollars in Bitcoin owed to Mt. Gox creditors, announced that it plans to distribute funds to investors as soon as possible once received. Contrary to the 60-day period stipulated by the agreement with Mt. Gox’s trustees, Bitstamp is striving to expedite the process to quickly satisfy creditors. This statement sheds light on the complex and anxiously awaited process of distributing the 142,000 BTC recovered by Mt. Gox administrators, who went bankrupt in 2014 after a hack. Investors fear that the massive sale of these bitcoins could drive their price down. Last week, as Mt. Gox prepared to transfer its BTC, Bitcoin’s value dropped by nearly 10%. Coupled with recent sales of seized Bitcoin by the German government, Bitcoin’s price has fallen 19% over the past month.

However, Bitcoin rebounded after hitting $53,000, supported by significant inflows into U.S. spot ETFs, which recorded nearly $300 million in net deposits on July 8, marking their highest buying activity since early June. These inflows continued yesterday, totaling an additional $216 million. Massive inflows into ETFs, despite market volatility, suggest that institutional investors view the recent selling pressure as a buying opportunity. BlackRock’s IBIT fund recorded nearly $180 million in net inflows, followed by Fidelity’s FBTC. Even Grayscale’s GBTC, which averaged outflows of 5,092 BTC per day, saw over $25 million in purchases on Monday. However, research firm 10x Research warns of potential risks, citing a historical “summer lull” for Bitcoin. This analysis highlights that Bitcoin’s price tends to weaken during the summer before recovering in the fourth quarter.

As Bitcoin consolidates between $55,000 and $59,000, investors closely watch key resistance levels around $60,000. The significant 200-day moving average is currently at $58,900. The market is also awaiting the imminent approval of an Ethereum ETF, expected by the end of the summer, which could boost the overall cryptocurrency market.

According to Bitfinex analysts, Bitcoin’s price may have reached a local bottom and is beginning to stabilize. Although Bitcoin has maintained its value above $57,000 over the past 24 hours, derivatives market indicators show a decrease in price fluctuations, suggesting stabilization after significant variations over the past seven days. Last week, Bitcoin’s price dropped to $53,219 due to fears of massive sell-offs by the German government and Mt. Gox creditors. Since then, Bitcoin has rebounded, but with increased daily volatility. Bitfinex analysts note that the gap between implied and historical volatility has narrowed by nearly 90%, indicating that traders expect prices to stabilize. While short-term holder sales may be nearing exhaustion, long-term holders continue to realize significant profits. The spent output profit ratio (SOPR) for short-term holders being at 0.97 suggests they are selling at a loss, a phenomenon typically followed by price rebounds as selling pressure eases.

Australia is set to welcome its second spot Bitcoin ETF on the Australian Securities Exchange (ASX), thanks to DigitalX. This Perth-based fund has received regulatory approval to begin trading this week, joining VanEck’s ETF, listed since June 20. The new ETF, named BTXX, will provide ASX clients with direct access to Bitcoin via a regulated and liquid fund structure, according to DigitalX CEO Lisa Wade. Trading will commence on Thursday at 8:00 PM ET, with K2 Assessment Management acting as the responsible entity and issuer. DigitalX will collaborate with 3iQ to promote and distribute the ETF domestically and internationally. Unlike VanEck’s ETF, which is linked to the U.S.-listed VanEck Bitcoin Trust, DigitalX’s BTXX will be subject only to Australian regulations, protecting local investors from U.S. political developments. This launch marks a new chapter for Bitcoin ETFs in Australia, following predecessors like the Global X 21Shares Bitcoin ETF in 2022 and Monochrome Asset Management’s recent product in June 2024.

Currently, over 27% of the total Ethereum supply, or 32.6 million ETH, is staked to secure Ethereum’s proof-of-stake network. This increase in staking raises concerns about excessive centralization, as many centralized firms oversee large amounts of ETH. The upcoming U.S. spot Ethereum ETFs, while exciting for the market, will not be able to stake their holdings due to regulatory concerns. The SEC’s approval process for Ethereum ETFs has been slower than expected, but recent movements, such as amended filings by Bitwise and VanEck, suggest these products may soon be launched. Ethereum researcher Evan Van Ness noted that the current staking level is more than sufficient for the network’s economic security and warned against centralization risks if staking pools are managed by majority clients or cloud services. The inability of ETFs to stake is prompting traditional financial players to explore new approaches to offer staking rewards to their clients.

BlackRock’s tokenized fund, the BlackRock USD Institutional Digital Liquidity (BUIDL), has surpassed $500 million in market value, reaching $502.8 million in assets under management, according to Etherscan data. This fund, backed by U.S. Treasuries and launched on the Ethereum network in March, has overtaken Franklin Templeton’s FOBXX fund to become the largest blockchain-based tokenized fund by market value. Securitize Markets, the issuer of BUIDL, is pleased with this adoption and growth, aiming to make BUIDL a foundational layer for institutional crypto yields. BlackRock’s BUIDL fund now surpasses the Franklin OnChain U.S. Government Money Fund by $100 million, while Ondo Finance’s USD Yield (USDY) fund holds approximately $281 million in tokenized assets. BUIDL’s record growth is supported by its adoption by crypto industry players such as the DeFi protocols Mountain and Ondo, and its acceptance as collateral by Hidden Road and FalconX.

Despite Bitcoin’s price volatility and five-month lows, several key indicators suggest that the bulls may still have the upper hand, hinting at a potential BTC price rebound. The bullish divergence between falling prices and the rising relative strength index (RSI) indicates weakening selling pressure, often a sign of a trend reversal.

Two other classic technical indicators support this bullish reversal hypothesis. Bitcoin formed a bullish hammer candlestick on July 5, and the daily RSI is near its oversold threshold of 30, which often precedes a consolidation or recovery period. Wall Street traders see an increased probability of interest rate cuts in September, which would be favorable for Bitcoin. Additionally, inflows into U.S. spot Bitcoin ETFs have resumed after a decline, signaling renewed investor interest. The recent growth in the U.S. M2 money supply, increasing economic liquidity, and the capitulation of Bitcoin miners, reaching levels similar to those observed after the FTX crash in 2022, are other positive signs for a potential Bitcoin rebound.

The presented information is as of July 10th, 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.