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What Happened This Week

We Were In For a Quiet Weekend, Then Biden Was Like: Hey!

Just the weekend before, the markets were shaken up by the news surrounding the shooting attempt on Donald Trump, and last weekend, the U.S. presidential race took another turn with President Biden announcing that he would not run for re-election. Biden further expressed his support for Vice President Kamala Harris to become the Democratic nominee.

As we mentioned in last week’s Weekly Wrap, the chances of Biden dropping out were already indicating the event, and Kamala Harris’ chances of becoming the Democratic nominee were already above 60% before the announcement (they are now sitting at 94%). Her chances of winning against Donald Trump are currently traded at 36% on Polymarket, against 60% for Trump.

$1.35 billion of Inflows Into Digital Asset Investment Products Last Week

Digital asset investment products worldwide saw once again large inflows during the previous week, with over $1.35 billion flowing into the crypto space. Not surprisingly, the Bitcoin spot ETFs in the U.S. accounted once more for most of the inflows. Ethereum saw net inflows of $45 million, likely in anticipation of this week’s launch of the spot ETFs. Switzerland ranked second with $66 million of inflows, the U.S. is defending its first place by a large margin with $1.28 billion, and Canada follows in third place with $7.8 million.

Weekend Price Action and Large Inflows on Monday

Bitcoin and the crypto market reacted quite strongly to the news of President Biden’s announcement. The initial reaction was a sharp drop to the downside, but BTC corrected the move down fast and traded above $68’000 for a while on Sunday evening. Monday was accompanied by mixed price action, with Bitcoin losing some of its weekend gains in the morning but recovering back up towards the evening. The BTC spot ETFs saw net inflows of $486 million on Monday, making it the twelfth consecutive day with net inflows.

Ethereum Launch Day: Second Most Successful ETF Launch in More Than 5 Years

After the SEC had approved all S-1 filings on Monday, the light was green for the launch of the Ether spot ETFs, as it was rumored at the end of last week, which we also discussed in our Weekly Wrap. Tuesday was the big day. Of course, market participants could still remember what happened when the Bitcoin spot ETFs launched back in January. The situation now with the Ether spot ETFs is slightly different, especially when it comes to the build-up towards the launch. The Ether spot ETF approval was more of a surprise to many, while the approval of the Bitcoin spot ETFs was widely anticipated. Still, the expected outflows from Grayscale are a hotly discussed topic again.

On their first day, the Ether ETFs had a total inflow of $106 million and a total trading volume of over $1.1 billion. BlackRock’s ETHA saw inflows of over $266 million on day one, which is more than double the amount of its Bitcoin product IBIT on the first day ($111 million). Meanwhile, Grayscale’s ETHE saw outflows of $484 million on Tuesday, and the outflows continued. As of Thursday, the total amount flowing out of Grayscale was $1.15 billion, which amounts to 13% of their total ETH holdings. ETHE outflows appear to be accelerated when compared to the GBTC outflows, which after three days only amounted to 3% back in January.

While the Ether spot ETFs saw inflows on Tuesday, the Bitcoin spot ETFs saw $78 million of outflows on Tuesday, followed by two days with moderate inflows on Wednesday and Thursday. The ETH spot ETFs had two outflow days on Wednesday and Thursday, with $133 million and $152 million, respectively.

History does not repeat, but it often rhymes. If the story with the Ether spot ETFs follows along the lines of the Bitcoin ETFs in January, it will be key to observe the potential slowing down of the Grayscale outflows, which could coincide with the total net inflows starting to pick up over the coming days or weeks.

Kraken Distributes BTC and BCH Back To Creditors

On the same day as the Ether spot ETFs launched, the Kraken Exchange successfully distributed Bitcoin and Bitcoin Cash from the Mt. Gox estate back to creditors, as CEO Dave Ripley posted on X. Many Reddit users celebrated the return of their long-lost BTC. On Tuesday afternoon, Mt. Gox then transferred a large amount of Bitcoin to Bitstamp, and the exchange confirmed that they had received the Mt. Gox assets and are working to distribute them to their customers as soon as possible, likely during the next two weeks.

When taking a look at the trading volumes on Kraken this week, we can observe that the distribution of the Mt. Gox BTC is not really visible, indicating that not many creditors decided to sell their Bitcoin, or, as there were rumors on X, that there was some kind of OTC solution provided to creditors who wanted to sell their received holdings.

Bitcoin Conference in Nashville

As the world’s biggest Bitcoin Conference takes place in Nashville, market participants are eagerly awaiting Donald Trump’s speech at the conference tomorrow. Let’s see what he has in store. There are many possibilities, up to possibly announcing Bitcoin as a strategic reserve currency for the U.S. if he is elected president. Wyoming Senator Lummis has similar plans, according to Fox Business she plans to announce legislation for a Strategic Bitcoin Reserve at the Nashville conference. The legislation would require the Federal Reserve to hold some Bitcoin as a strategic reserve asset. It will be interesting to observe the speeches at the conference. According to her tweet from earlier this week, she seems to be on track to announce something of importance this week.

Mayor of Jersey City: Jersey City Pension Funds Wants Bitcoin

U.S. Jersey City Mayor Steven Fulop announced that Jersey City's pension fund is in the process of updating paperwork to the SEC to invest part of the city's pension fund in a Bitcoin ETF, similar to the Wisconsin Pension Fund (2%). The process is expected to be completed by the end of the summer.

How Did U.S. Equities Trade This Week?

The S&P 500 and Nasdaq continued their downward price action this week, with the S&P being down almost 5% from its recent high on July 16, and the Nasdaq being down 9% from its high on July 10. The Russell 2000 is currently up 1.3% for the week, stagnating around the 220 level. In the chart below, we are looking at the monthly performance of the three indices.

When it comes to economic data, market participants are awaiting the release of the U.S. PCE price index this afternoon and next week, the FOMC will announce its interest rate decision, with 93% of participants expecting the Fed to keep the target rate unchanged. While there are some contrarians who believe the first rate cut could come as soon as next week, the probabilities are in favor of keeping the rate unchanged.

And Crypto?

When it comes to crypto, Ethereum has taken a beating this week, currently down more than 8% for the week, with Bitcoin and Solana both outperforming. Memecoins like PEPE or DOGE are also down for the week but are holding up better than ETH at the time of writing. The total market cap of all cryptocurrencies is currently sitting at $2.33 trillion, has recovered more than 22% since early July, and is now down 14% from its yearly high in March. In the chart below, the total market cap is visible in the weekly timeframe, showcasing the current trading range we are in, consolidating below the 2021 all-time high of roughly $3 trillion.

One last chart worth looking at is ETHBTC which has almost completely retraced its ETF approval announcement pump from the end of May. ETHBTC is currently trading below its 2022 low of 0.049, and it will be interesting to see here whether ETH will make a new multi-year low against BTC or manage to hold the current prices and start to reverse its downward price action, which has been ongoing since the end of September 2022. Let’s keep an eye on it!

Market Sentiment: Crypto as Usual, Equities Back in Fear

While the crypto markets are still in Greed territory (68), the stock market is back in Fear territory on the CNN Fear & Greed Index. Remember the last two updates regarding the investor sentiment of the AAII members? They started to get very bullish during the week of July 15th, when the S&P 500 traded at new all-time highs, and we raised the question of whether the participants were starting to feel the FOMO right before a deeper correction. Well, now that we have corrected almost 5% to the downside, AII members are starting to feel more bearish (31.7%, up from 23.4% last week) and less bullish (43.2%, down from 52.7%). As of now, the majority is still leaning towards the bullish side, let’s see how it is next week.

Our Take

The Ethereum spot ETFs are live! Excitement? Not really, ETH is down more than 8%, and the rest of the crypto market is trading sideways with a slight downward trend. The stock market also continued its downward trend, with the rotation into smaller stocks continuing to unfold. While investor sentiment in the stock market is in Fear territory again, crypto market participants are likely waiting for the Mt. Gox repayments to end, for the Grayscale ETHE outflows to slow down, and for a potential new narrative to unfold. Who knows, maybe Donald Trump will bring some excitement with his speech at the Bitcoin Conference! While 93% of market participants are expecting the Federal Reserve to keep its interest rates unchanged next week, there is a small chance for a surprise rate cut looming on the horizon.

The Week Ahead

Tuesday, 30 July 2024

• EUR – GDP
• U.S. – JOLTs Job Openings

Wednesday, 31 July 2024

• EUR – CPI, core CPI
• U.S. – Fed Interest Rate Decision, FOMC Press Conference

Thursday, 1 August 2024

• CH – Swiss National Day
• U.S. – Initial Jobless Claims

Friday, 2 August 2024

• CH – CPI
• U.S. – Nonfarm Payrolls
• U.S. – Unemployment Rate