A Busy Week, Gold at ATHs, Trump Project Launching Soon & Stablecoins on the Rise

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This Week's Top Stories

“U.S. CPI rose 0.2% in August as annual inflation rate hits lowest since early 2021” – Wednesday, 11.9

• Inflation in August declined to its lowest level since February 2021, according to a Labor Department report Wednesday that also revealed a higher-than-expected core CPI, setting the stage for a 25-bps rate cut from the Federal Reserve.
• While the U.S. CPI data release did not bring any surprises and came in at the expected 0.2 percent m/m and at the expected 2.5 percent y/y, the PPI data rose by 0.2 percent last month, a little higher than expected. The target rate probabilities for the Fed meeting next week are somewhat split, with 59 percent expecting a 25-bps cut and 41 percent expecting a 50-bps cut next week. If the odds remain like this, chances are that the Fed will signal one or the other before the meeting. Something to keep in mind.

“Trump-Linked Crypto Project to Launch Monday, Sept. 16” – Thursday, 12.9

• Former U.S. President Donald Trump plans to deliver remarks next Monday about cryptocurrency and the launch of the company World Liberty Financial, a crypto platform controlled by the Republican nominee’s sons, Donald Jr. and Eric. Donald Trump announced in a video on X that he will host his address on the subject at 8 p.m. EDT on Monday from his Mar-a-Lago home.
• Even before his appearance at the Bitcoin Conference, Bitcoin and crypto have been a hotly discussed topics in the U.S. presidential election, and after his promise to make BTC a reserve currency for the U.S., things really took off. With his announcement of World Liberty Finance and the likely launch of it this coming Monday, the journey takes its next step. While his odds of winning the election are decreasing, one should consider what will happen to Bitcoin and crypto should he lose the election in November.

“Stablecoins are not just being used for crypto trading anymore” – Thursday, 12.9

• A survey conducted by Visa Crypto, and others found that of the $2.6 trillion worth of value settled in stablecoins so far this year, much had a real-world application.  The most popular non-trading use cases included currency conversion, paying for goods, remittances and paying or receiving a salary.
• As we all know, cryptocurrencies, and especially stablecoins, are a valuable alternative to the traditional financial system when it comes to international transactions. Cryptocurrencies offer 24/7/365 transactions and are faster and cheaper than international payments through banks or companies such as Western Union or MoneyGram. But the survey shows that people also use stablecoins to earn yield (in Turkey) or to save money in U.S. dollars (in Nigeria).

Chart of the Week

Last week, we were looking at Bitcoin’s price action in comparison to Gold. Given Gold just reached an all-time high, literally at the time of writing this, let us take a look at it. It is astonishing that while the whole world is talking about AI stocks, tech companies and cryptocurrencies, Gold has been on a tear and is quietly trading at record highs, up more than 40 percent since last October.

Did you notice anything when looking at the chart above? The chart shows Gold’s price action in the monthly time frame, while the chart below shows Bitcoin in the weekly time frame. We remember the sentiment towards Gold in the month of October 2022, when it traded just above $1’600 and had just reached a new multi-year low, breaking out of its range to the downside with seven red weekly candles. The sentiment was bad, and one or the other had probably lost hope and sold, right? Well, Gold has been trading ‘up only’ since then, being up 60 percent since its October 2022 lows.

The current situation with Bitcoin, especially when looking at the two charts and when comparing the market sentiment, reminds us somewhat of Gold in October 2022. The crypto market sentiment is low, participants are starting to lose hope, and we are currently trading at range lows, with a new multi-month low reached on August 5th. While it is only a ‘random’ comparison, it is still interesting to observe these similarities.

What’s Happening On-Chain?

Coinbase’s wrapped BTC (cbBTC) is live. cbBTC is an ERC20 token that is backed 1:1 by Bitcoin held by Coinbase. Coinbase Wrapped BTC is launched on Base and Ethereum but plans for future support by other blockchains were also announced. As you probably know, such wrapped Bitcoin products allow people to use their BTCs to be active on-chain. cbBTC allows users to tap into the world of DeFi, e.g., to provide their BTC as liquidity for DeFi protocols or to use Bitcoin as collateral to borrow other cryptocurrencies. cbBTC is already available on various DeFi platforms, such as Curve Finance, Aave, Maple or Aerodrome. While there was a lot of excitement for this, as Coinbase is one of the largest exchanges in the world, having onboarded millions to crypto over the last ten years, there is also some critique: Coinbase can freeze and blacklist addresses transacting with cbBTC directly via the smart contract.

Digital Asset Fund Flows

As we indicated already in the last edition of the Weekly Wrap, digital asset investment products saw total outflows of $721 million last week. Bitcoin was accounting for most of these outflows, with $643 million of outflows, while Ethereum products saw outflows totaling $98 million. 

In a sea of red outflows, Switzerland once again was among the only countries with total net inflows last week, with $3.2 million of total inflows, behind Germany and Brazil with net inflows of $16.3 million and $3.9 million, respectively. 

The $721 million of total outflows match the largest recorded outflow set in March this year. The large outflows and negative sentiment towards digital asset investment products were likely influenced by the stronger-than-expected macroeconomic data from the previous week.

This current week started off with two positive days for the Bitcoin spot ETFs, and overall, the net flows are just above $100 million in the positive for BTC so far this week, while the Ether spot ETFs are slightly in the negative, largely due to outflows from Grayscale’s ETHE.

Market Sentiment

The crypto market sentiment is still lingering in ‘fear’ territory, even though it is not as bad anymore as last week, at least according to the crypto fear and greed index. The index has been stable around the ’30 – fear’ mark for over a month now, with a short spike into more neutral levels on August 24. The stock market has also been staying in ‘fear’ for the last couple of days, even though it was today returned to ‘neutral’, as the U.S. equities closed up in the positive yesterday.

The AAII members have done a great job again in showing us, when not to turn overly bullish or bearish. As you probably remember, members were very bullish on the stock market at the end of August, when we were trading close to all-time highs. In the chart below, we are showcasing the only two times in the last few months when more than 50 percent of the AAII members answered that they are bullish on the stock market and the two times when less than 40 percent of members were bullish on the stock market. Interesting, right?

Other Relevant News

• Caroline Ellison Is Finally Getting Sentenced Over FTX’s Collapse. – Link
• Harris’ winning odds on Polymarket rise to tie with Trump after debate. – Link
• UK Introduces Bill to Clarify Crypto's Legal Status – Link
• EToro Reaches $1.5M SEC Settlement, Agrees to Stop Trading Most Cryptocurrencies. – Link
• NFT marketplace Magic Eden’s daily volume has recently surged. – Link
• Friend.Tech team renounces control of smart contracts following stagnant growth. – Link
• Americans lost $5.6 billion last year in cryptocurrency fraud scams. – Link
• PayPal, Venmo integrate Ethereum Name Service for crypto payments. – Link

Looking Ahead

With the U.S. interest rate decision coming up on Wednesday next week, market participants are likely mainly focused on hints from the Fed on whether it will be a 25-bps or 50-bps cut, as there is still a lot of uncertainty and participants are not sure how the Fed will move. The probability for a 25-bps cut is higher at the moment and Nick Timiraos from the WSJ also said that he also does not expect a 50-bps cut. 

Bitcoin is trading just above $58’000 at the time of writing, up 10 percent from its recent bottom around $52’400. The Bitcoin dominance has been stagnating around 57 percent for more than a month now. 

The U.S. Dollar Index is trading to the downside, sitting just above 100 right now, with Gold trading at new all-time highs. While the BTC dominance is consolidating, Ethereum is almost trading at a new low against Bitcoin (0.040) and is, in USD terms, down more than 40 percent from its recent high in March this year.

We are living in interesting times with a lot of things going on that we have to keep track of. The U.S. elections are around the corner and are of special interest to the crypto market this time. CZ is set to be released from prison in the coming weeks; Caroline Ellison will be sentenced in September; we are seeing huge growth in stablecoin usage; first apps such as Polymarket are experiencing mainstream adoption; and we are on the brink of interest rate cuts in the United States.

Good thing we are keeping track of it here. Have a good weekend and a good next week. Stay tuned!

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

Monday, 16 September 2024

• Switzerland PPI

Monday-Sunday, 16-22 September 2024

• Ethereum Singapore 2024

Wednesday, 18 September 2024

• U.S. Fed Interest Rate Decision
• Euro Zone CPI, Core CPI

Wednesday & Thursday, 18-19 September 2024

• TOKEN2049 Singapore

Thursday, 19 September 2024

• Japan BoJ Interest Rate Decision
• United Kingdom BoE Interest Rate Decision

Friday & Saturday, 20-21 September 2024

• Solana Breakpoint 2024

Sunday, 8 September 2024

• Japan GDP
• China CPI, PPI