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This Week’s Top Stories

“Nvidia gets DOJ Subpoena in Escalating Antitrust Investigation” – Tuesday, 3.9

• Bloomberg reported Tuesday that a subpoena was sent to Nvidia and other unnamed technology companies, citing unnamed people familiar with the investigation. Nvidia, on the other hand, claims it did not receive a U.S. Justice Department subpoena, according to a spokesperson on Wednesday.
• Nvidia shares closed down 9.5 percent on Tuesday at $108 and then further declined more than 1.5 percent during after-hours trading. Nvidia reported record-breaking earnings last week but failed to meet high expectations nonetheless, as the stock had already declined after the earnings call last week. Shares dropped another 1.7 percent on Wednesday and are now down more than 20 percent since their earnings call.

“Donald Trump-backed DeFi protocol reportedly based on Dough Finance code” – Wednesday, 4.9

• New details of the Donald Trump-connected crypto project World Liberty Financial have been unveiled in a new CoinDesk report published on Tuesday. According to a whitepaper the project will be built on Aave and Ethereum and will likely be centered around a “credit account system”. The former president’s sons — Donald Trump Jr., Eric and 18-year-old Barron — are all reportedly involved in planning the eventual rollout.
• What a crazy world we live in! After releasing his own NFT series, former President Trump is now likely about to launch his own token called WLFI. The project is not live yet, and there are still many fake projects out there, but the launch of World Liberty Financial will be monitored closely by many market participants. Most traders are probably expecting some sort of “money grab,” but what if the project is actually decent and has the potential to grow to be one of the bigger crypto projects out there? This is an interesting development.

“Why This Jobs Report Could Be the Most Pivotal One in Years” – Thursday, 5.9

• A fresh jobs report set for release on Friday (today 14:30 CEST) could mark a turning point for the American economy, making it one of the most important and closely watched pieces of data in years. The employment numbers will shed light on whether the recent jump in the unemployment rate was just an outlier or the start of a trend.
• Following the Fed’s pivot, job numbers are stealing the show when it comes to the speculation regarding the Fed’s upcoming interest rate decision. The job opening data from Wednesday fell to the lowest level in more than three years, keeping the Fed on track to lower interest rates later this month. The question is, how big of a cut will it be? Weak job data might push the Fed towards a 50-bps cut due to stronger recession fears. As Powell has mentioned previously, he seems to think the Fed is on track for a soft landing, although a tighter U.S. job market might change his opinion in this regard.

Chart(s) of the Week

This week, we want to highlight the performance of Bitcoin when compared to Gold since the beginning of the year. As we all know, Bitcoin is still up more than 20 percent since the start of the year, but we also know that Gold is on the brink of a new all-time high and is also up more than 20 percent since January 1, 2024.

Below, we can see the performance of Bitcoin versus Gold over the last nine months. In March, when Bitcoin was trading at its all-time high above $70’000 one could have bought almost 34 ounces of Gold with one bitcoin, while today one would only get 22 ounces. Bitcoin has corrected more than 33 percent to the downside since March when compared to Gold, and it outperforms Gold by less than 2 percent so far this year.

Maybe you have noticed it as well, everyone is talking about the seasonality of Bitcoin and the stock market, an interesting discussion that pops up every once in a while.  Since 2011, September has been the only month when Bitcoin has had a negative average return, with a median return of minus 6 percent. Since 2011, Bitcoin has lived through 9 September months with a negative return. Bitcoin’s negative average return in September is likely also influenced by the S&P 500’s average negative return for the month of September. Let’s take a look at the upcoming months. How has Bitcoin performed on average during Q4 and in the spring?

While September is s known as Bitcoin’s red month, the time period between October and April paints a brighter picture when it comes to average monthly returns for Bitcoin. Especially October (+22 percent), November (+46 percent), February (+15 percent), March, and April (both +13 percent) are the months with the highest average return for Bitcoin. Historically, this chart above indicates that buying during the months of August and September and then selling in the following spring has so far been a rather good strategy. While past performance is never a guarantee for future results, this is still something interesting to observe.

What’s Happening On-Chain?

The chart below shows the percentage of the BTC and ETH supply that has been active within a one-year period. The number of BTCs that have been active within a one-year period increased from 29 percent at the beginning of the year to 34 percent today. Interestingly, for ETH, it was the other way around, with the number slightly decreasing from 39 percent on January 1, 2024, to 38 percent today. This difference could be explained by the price action. While Bitcoin has reached a new all-time high this spring, which could have been an occasion for holders to take profit, Ethereum is still trading well below its previous all-time high, and investors are still holding on to their coins at the moment. An interesting chart to observe.

Digital Asset Fund Flows

Last week, digital asset investment products saw a total net outflow of $305 million. Bitcoin saw outflows of $319 million. Ethereum saw outflows of $5.7 million, with trading volume stagnating. Solana saw inflows of $7.6 million and blockchain stocks saw inflows of $11 million. Switzerland was among the only countries recording a net inflow, with $5.5 million flowing into investment products last week.

This week is pointing to a similar picture, with total outflows out of the Bitcoin spot ETFs already totaling more than $500 million so far. The Ethereum spot ETFs have also recorded three outflow days this week, totaling around $100 million.

These numbers reflect the current market sentiment for cryptocurrencies at the moment, so let us take a look at the sentiment below.

Market Sentiment

Some traders and crypto Twitter personalities might think the crypto fear and greed index is outdated and is not providing us with any alpha whatsoever, but we beg to differ. In combination with other metrics, it is actually a valuable tool. Ask yourself, how is the average crypto market participant feeling right now? We believe the chart below gives an accurate representation of exactly that sentiment. Despair, we are back in “Extreme Fear” territory after a couple of weeks at “Fear” levels.

Last week, we pointed towards the positive sentiment in the stock market and how the CNN fear and greed index was starting to show signs of greed. The index was at a level last seen in the middle of July, before the market started trading to the downside. The S&P 500 closed last week just shy of a new all-time high, and market participants were feeling euphoric. This euphoric feeling was also visible in the AAII investor sentiment survey, as mentioned last week. The number of bullish AAII members has since dropped from 51.2 percent to 45.3 percent, and the CNN fear and greed index is also back in neutral territory.

The crypto market sentiment remains very negative. K33 Research mentioned this week that we are currently in the deepest funding rate environment since bitcoin’s low in November 2022, another indicator of rather cautious market participants. A bad market sentiment does not mean that prices will go up, but it is an indication of potential sell-side exhaustion in the near future.

Other Relevant News

• The U.S. SEC announced a $225’000 civil penalty against Galois Capital Management LLC. – Link
• Polymarket CEO Shayne Coplan announced that Bloomberg Terminal has officially integrated the Polymarket platform. – Link
• BoJ Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if the economy and prices perform as expected by the BOJ. – Link
• Uniswap Labs settles with the US CFTC for $175’000 on charges related to derivatives trading. – Link

Looking Ahead

While this week might be one to forget in terms of price action for the crypto markets, Bitcoin is trading at $55’600 at the time of writing, it is important to look at the bigger picture. August and September are among the worst months for Bitcoin in terms of average monthly returns, followed by a much more positive period between October and April. It has historically been a good strategy to hold through the negative summer months or even increase exposure to Bitcoin, considering the high monthly average returns in the fall and spring months.

When it comes to the upcoming interest rate decision by the Fed, remember to keep an eye on today’s employment numbers and next week's U.S. inflation data releases, planned for Wednesday, September 11.

In terms of sentiment, the crypto markets are in “Extreme Fear” territory, coupled with low funding rates and rather high outflows from the Bitcoin spot ETFs this week. Many market participants are slowly but surely losing their hope and are starting to sell their crypto assets for stablecoins, as the USDT change in exchange balances is indicating at the moment.

Below, you can find some of the key data releases to watch out for next week.

Sunday, 8 September 2024

• Japan GDP
• China CPI, PPI

Tuesday, 10 September 2024

• GameStop (GME) Earnings

Wednesday, 11 September 2024

• U.S. CPI and Core CPI
• Japan PPI

Thursday, 12 September 2024

• U.S. PPI, Core PPI