Crypto Markets See Ethereum Surge Post ETF Approvals, Market Sentiment Remains Positive

You can now listen to a summary of this week's Weekly Wrap on Spotify and Apple Podcasts. It is a summary with the help of AI-voices. 

        

What Happened This Week

Looking back on the week of the Ether spot ETF approvals, we can see that Ethereum outperformed Bitcoin by a large margin, with ETH closing the week up more than 24%, compared to Bitcoin’s weekly close of +3.3%. Both crypto assets experienced their second consecutive green weekly candle, and the total crypto market cap closed the week up 6.7%. Digital asset investment products saw inflows totaling $1.05 billion and exhibited the third consecutive week with net inflows. The U.S.-based Bitcoin spot ETFs saw net inflows of more than $100 million per day for the whole week; on three days, the net inflows were higher than $200 million. The total weekly net inflow into the spot ETFs was more than $1 billion.

In the chart below the price action (as of Friday, May 31) of BTCUSD (blue), ETHUSD (orange) and ETHBTC (black) over the last couple of weeks is visible. One can see the moment where the rumors of an imminent Ether spot ETFs approval started in the chart, and we observe that Ethereum has since then outperformed Bitcoin by roughly 18%.

The Start of the Week: Ethereum Outperforming After Spot ETF Approval

While Ethereum is outperforming Bitcoin and the other crypto assets as well, Bloomberg Intelligence ETF analyst Eric Balchunas expects the interest in Ethereum spot ETFs to be a lot smaller than for the Bitcoin spot ETFs, he expects the Ether spot ETFs to be around 10-15% of the assets of the BTC ETFs. There is also other research indicating that market participants should not get their hopes up when it comes to inflows into the new Ether spot ETFs, once they are trading live. An often-discussed issue of the new products is the absence of a staking reward for investors of these new Ether spot ETFs. Nevertheless, they will likely be of interest to institutions that can only hold assets which are listed on regulated exchanges and from others that want the convenience of traditional custody given by the new spot ETFs.

While we, at the time of writing, still do not know the exact timeline for the Ether spot ETFs going forward, former U.S. SEC Chairman Jay Clayton said that the approval of trading would be inevitable, he expects the funds to start trading in July or August.

Positive Start Into The Week For Crypto

While the weekend did not bear any surprises, Monday started as a positive day for the crypto markets. The U.S. stock market was closed due to Memorial Day, and Bitcoin rose from $68’300 on Monday morning to $70’600 on Monday night. While things were looking bright on said evening, BTC put in the weekly high and started trading to the downside afterward. Tuesday was more of a sideways day for crypto, with Bitcoin ranging between $67’200 and $68’800.

Trump Continues To Talk About Crypto

Former U.S. president Donald Trump continued to talk about crypto over the weekend, and pledged on Saturday night at the Libertarian National Convention that he will commute Silk Road founder Ross Ulbricht’s life sentence to time served if he is re-elected as the President of the United States. He added that the U.S. must be the leader in the field of crypto and that there is no second place, highlighting how very positive and open-minded he is regarding cryptocurrency companies and all things related to this new industry. He even mentioned that he will support the right to self-custody for crypto assets.

Tuesday and Wednesday: U.S. Equities and Crypto Trading to The Downside

U.S. equities traded to the downside this week; the S&P 500 lost around 1% on Tuesday and Wednesday, and the Nasdaq was down 0.5% on the first two trading days of this week. The U.S. Dollar Index (DXY) started trading to the upside on Tuesday afternoon, reaching a weekly high above 105.1 on late Wednesday evening, while Gold traded more or less sideways this week with a slight trend to the upside. Bitcoin reached a current weekly low of around $67’000 on Wednesday evening after trading to the downside for the whole day on Wednesday. Ethereum was also not able to resist this downward pressure and reached a current weekly low of $3’700 on Thursday morning, down almost 7% since its Monday high of $3’970.

Mt. Gox Funds On The Move

The downward trend in Bitcoin and crypto on Tuesday was likely influenced by the news that Mt. Gox cold wallets moved over 140’000 BTC to an unknown wallet. The move precedes the exchange’s plan to return BTC to creditors by October. Mt. Gox owes around $10 billion worth of Bitcoin to its 127’000 creditors, who have been waiting for their BTCs for over ten years. The current final deadline for the repayment is 31 October 2024. This movement of coins from Mt. Gox wallets has been the first movement since 2019, indicating that the process is moving forward, potentially leading to additional sell pressure from creditors who get back their Bitcoin after ten years of forced holding. It remains to be seen how many of these creditors will actually sell their Bitcoin and how much of the sell pressure is already priced in by the market.

IBIT Takes Over The No. 1 Spot From GBTC

On Tuesday, BlackRock’s IBIT took over the number one spot from GBTC when it comes to assets under management. We have talked about this eventual takeover in previous Weekly Wraps and this week the day has come. The chart below showcases this change in dynamics with IBIT in the number one spot, followed by GBTC and FBTC and ARKB.

When it comes to the flows of the Bitcoin spot ETFs, we have experienced another week with inflows of a total of over $100 million.

U.S. President Biden Joins The Crypto Race During the Election Campaign

According to TheBlock, President Biden’s re-election campaign has also begun reaching out to opinion leaders in the crypto sector over the past two weeks, seeking guidance on “crypto community and policy,”. The new outreach efforts come shortly after the Biden administration faced backlash for signaling it would veto the repeal of an alleged anti-crypto legislative measure. The change in tone also follows the Trump campaign’s May 21 announcement that it would accept cryptocurrency donations, along with former President Donald Trump’s recent pro-crypto and anti-CBDC (Central Bank Digital Currency) remarks at the 2024 Libertarian national convention.

Updates On The Ethereum Spot ETFs

On Wednesday, BlackRock filed an amended registration statement for its proposed Ethereum spot ETF, marking the latest move as firms work to list and trade their Ethereum spot ETF, which will be listed and traded under the ticket symbol ETHA. Bloomberg ETF analyst Eric Balchunas tweeted that he expects the other issuers to follow BlackRock in this regard and file their amended S-1 applications; by now, BlackRock and VanEck have both already submitted theirs. The SEC requires the other spot ETF issuers to submit the first round of S-1 draft forms by today, and then the SEC will provide the first round of comments and make further modifications. It is expected that at least two rounds of draft submissions will be required. Balchunas believes that a launch at the end of June is a legit possibility, but he sticks to his date of July 4, 2024.

Terraform, Do Kwon Agree in Principle to Settle Fraud Case With SEC: Court Filing

On Thursday, Do Kwon and Terraform Labs agreed to a “settlement in principle” with the SEC in a civil case alleging fraud, according to a court filing. Do Kwon is currently on bail in Montenegro, awaiting extradition to either the U.S. or South Korea. He also faces criminal charges in New York as well as in South Korea.

Overview: U.S. Equities Down, Crypto Sideways

When looking at the overall weekly performance this week, U.S. equities have been trading to the downside, with the S&P 500 closing at 5’235 on Thursday, down 1.5% for the week, and the Nasdaq closing Thursday’s trading session at 18’538, down 1.7% for the week. Bitcoin has been trading sideways in a range between $70’600 and $67’000, although also slightly down for the week, while the Bitcoin dominance seems to have found a temporary bottom on Tuesday, currently trading at 54%. ETHBTC is trading in a range as well since the approval of the spot ETFs, while ETH is still up more than 20% since the rumors started at the beginning of last week. ETHBTC has been slightly down since Monday, currently trading at 0.054.

When looking at the monthly performance of May, we see that the crypto markets have once again outperformed U.S. equities by a large margin, with ETH being up roughly 25%, BTC up roughly 13%, the total market cap up 14% and the S&P 500 up 4% on the month.

Market Sentiment: Crypto in Greed, stocks on the Verge of Fear

The Fear & Greed Index for Crypto is continuing to stay in Greed territory (73) and has been doing so for the last two weeks, while the index for stocks is on the verge of Fear. At the moment, the stock Fear & Greed Index is at 45 in Neutral territory, but very close to entering Fear once again after its visit to Fear territory back in April. Interestingly, the AAII Investor Sentiment Survey shows that many of last week’s bullish members have already lost their positive market view for the coming six months, with 39% being bullish and 34.2% being neutral. The bullish members shifted back to neutral, while the 26.7% bearish members are at around the same level as last week.

When looking at the funding rate heatmap, we can observe, that the funding rates continue to stay in healthy territory while the Bitcoin price is at the same levels as in early March, when the funding rates were already elevated. We have been in low funding rate territory for almost two months now, with the Bitcoin price more or less ranging between $72’000 and $58’000. Interestingly, PEPE showed first signs of increasing funding rates on May 20, the exact day when Bitcoin reached its recent high of almost $72’000.

Our Take

This week has been marked by significant volatility due to the above-mentioned events. We anticipate that this volatility will escalate as market reactions unfold. It remains uncertain whether prices will continue to trend upward or if the traditional Wall Street wisdom, "sell in May and go away," will prevail. However, numerous catalysts are expected over the summer, including new financial policies, the launch of new crypto projects, and the U.S. presidential election. In the short term, there is no compelling evidence suggesting that the market could deviate from its current positive trend.

The Week Ahead

Tuesday, June 4, 2024

• CH CPI Publication

Thursday, June 6, 2024

• ECB Interest Rate Decision
• US Initial Jobless Claims