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Source: Grayscale; Compilation: Baishui, bitchain vision
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In June, continued and expected selling pressure from various sources had a wider impact on the Bitcoin and cryptocurrency markets.However, in Grayscale Research’s view, the fundamentals of this asset class have little change.
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The spot Ethereum Exchange Trading Products (ETP) appear to have made more progress.Although the timing is still uncertain, for market analysis purposes, Grayscale Research assumes that these products will begin trading in the third quarter of 2024.
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If the macroeconomic outlook does not undergo a significant shift, Grayscale Research expects cryptocurrency valuations to recover in the coming months.
In June 2024, the cryptocurrency market saw a pullback as pressure to sell some bitcoin has triggered a general decline in risk appetite among investors, but Grayscale Research remained optimistic about the asset class.
In June, returns on traditional assets rose and fell as the market absorbed various new risks (Figure 1).Several segments have performed poorly due to these risks, including U.S. homebuilders (there are signs that the real estate market has cooled), Chinese stocks and certain industrial metals (the Chinese economy is weaker again), and French stocks (the government may change).By contrast, risk-adjusted returns for global bonds, emerging market stocks outside of China and the S&P 500 are relatively solid, as are the Swiss francs — often a barometer of rising international tail risks.Both Bitcoin and r fell about 10% [1], making it one of the risk-adjusted segments.
Figure 1: Traditional assets rose and fell in June, but cryptocurrency valuations fell
Grayscale Research believes thatActual and expected selling pressure from multiple sources has caused Bitcoin to fall this month.Bitcoin’s weakness, in turn, appears to have spread to other cryptocurrencies.The main new sources of selling pressure include:
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Mt Gox Legacy:The trustee of the Mt Gox bankruptcy estate announced on June 24 that the repayment of Bitcoin and Bitcoin Cash will “start from early July 2024.”[2] At the time of writing, the estate holds $8.9 billion worth of Bitcoin.[3] It is not yet certain whether creditors will convert their earnings into fiat currencies and in what time frames.
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German Government:German government agencies have begun liquidating Bitcoin confiscated in 2013.[4] Wallets associated with the German government sent nearly 4,000 bitcoins (worth about $220 million) to the exchange in June, according to data provider Arkham Intelligence.[5]
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US Government:On June 26, the U.S. government sent 3,940 bitcoins ($240 million) to Coinbase Prime Deposit, seized from the wallet of a convicted drug dealer.Previously, the U.S. government’s most recent confirmation of the sale was in March 2023, when 9,861 BTC were sold, worth $216 million.
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US Spot Bitcoin ETP:In the second half of June, these products had a net outflow of $581 million, while in May and early June, net inflows occurred.[6]
In addition to these new sources of selling pressure, Bitcoin miners continue to reduce their holdings: According to Glassnode data,Miners have sold about 1560 bitcoins (about $100 million) in the past 30 days.[7] On the other hand, it is reported thatPublicly listed company Microstrategy bought nearly 12,000 bitcoins (worth $786 million) in mid-June, possibly supporting the price of bitcoin.[8]
While these short-term flows may temporarily put pressure on Bitcoin’s price, we have not seen significant changes in the fundamentals of the asset.For example, despite a moderate strengthening of the U.S. dollar, the market has digested expectations of further rate cuts this year and next year as consumer price inflation will further ease.[9] In addition, some adoption indicators of smart contract platforms show continued growth.For example, as shown in Figure 2, the daily active users of the 10 largest components (by market capitalization) in our smart contract platform cryptocurrency sector have continued to increase in recent months.
Figure 2: Daily active users growth of major smart contract platforms
In addition, spot Ethereum ETP appears to have made further progress in its listing in the US market.At the end of May, the Securities and Exchange Commission (SEC) approved Form 19b-4 applications from several issuers, allowing these products to be listed on U.S. exchanges.On June 13, SEC Chairman Gensler said regulators could approve the remaining applications “sometimes this summer.”While the timing is still uncertain, for market analysis, Grayscale Research assumes that these products will begin trading in the third quarter of 2024.Like the spot Bitcoin ETP launched in January 2024, the Grayscale Research team expects new Ethereum products to generate meaningful net inflows (although less than Bitcoin ETP), potentially supporting Ethereum and its in-ecosystem tokens.Valuation (for more details, please refer to our report “The current situation of Ethereum》).
Although both Bitcoin and Ethereum declined last month, they both outperformed the broader crypto market, measured by the FTSE Grayscale Crypto Industry Index Series (Chart 3).Our Crypto Industry Market Index (CSMI), which measures the performance of the entire digital asset market, fell 19% in June.The worst-performing market segment this month was the consumer and cultural crypto industry, due to the weakness of memecoin, a token that is primarily used for entertainment value and is associated with internet culture.The currency crypto industry and financial crypto industry, including Bitcoin, performed relatively well.
Figure 3: Cryptocurrency sector generally declines
Although most token prices fell in June, a notable exception is Toncoin (TON), the third largest asset in the cryptocurrency space of our smart contract platform (by market capitalization).[12] TON blockchain is integrated into Telegram’s secure messaging applications and has the potential to take advantage of Telegram’s distribution of 900 million monthly active users, making it an attractive platform for application developers.Partly due to its Open League token incentive program and Telegram games growing in popularity [13], the network has grown significantly from an average of 27,000 active users per day in January to over 400,000 active users per day in June.[14] In addition, Tether’s USDT stablecoin was launched on the TON network in April 2024 and has been quickly adopted.In March, the Financial Times reported that Telegram was considering an IPO, [15] In our opinion, this could have an impact on the value of public blockchain tokens integrated with applications.
Despite setbacks in crypto markets in June, Grayscale Research remains optimistic about the valuation outlook for the rest of the year.We believe that the macro background remains generally supportive of crypto asset classes—economic growth, the possible rate cuts of the Federal Reserve and the active stock market.While the U.S. recession may put pressure on the crypto market, a slower but positive growth period seems to be the main prospect of the economy.In addition, the approval of Ethereum ETP has the potential to allow more investors to understand the concepts of smart contracts and decentralized applications—and thus make it possible for public blockchains to change digital commerce.
References
[1] As of June 28.
[2] Source: Mt Gox Estate.
[3] Source: Arkham Intelligence.Data as of June 28, 2024.
[4] Source: Bitcoin Magazine.
[5] Source: Arkham Intelligence.Data as of June 28, 2024.The dollar value is based on the price of Bitcoin at $60,000.
[6] Source: Bloomberg, Grayscale Investments.Data as of June 28, 2024.
[7] Source: Glassnode.Data as of July 1, 2024.The US dollar value is calculated by using the price on the day of the transfer of Bitcoin.
[8] Source: CoinDesk.
[9] Source: Bloomberg, Grayscale Investments.The Fed’s interest rate cut is based on SOFR futures contracts on December 24 and 25.As of June 28, 2024.
[10] Source: Bloomberg.
[11] Source: CryptoSlate.
[12] Grayscale Research Top 20 represents diversified assets in the cryptocurrency sector, and we believe that due to (i) direct catalysts or trend themes, (ii) favorable protocol-specific adoption trends and (iii) low or medium token supply inflationThese assets have high potential in the next quarter, etc.Several assets in our Top 20 list have high price volatility and should be considered high risk.This content does not constitute advice and does not consider the specific investment objectives, financial situation or needs of investors.
[13] Source: Decrypt.
[14] Source: Artemis.Data as of June 28, 2024.
[15] Source: Financial Times.
