EarnBIT monthly: Crypto market insights from June 2024
Key takeaways
- Global growth expectations dominated crypto performance.
- BTC was affected by ETF outflows, miners’ selling, and liquidations by governments.
- Statistically, BTC and ETH have seen more green candles in July.
- Fears of Mt. Gox redemptions may be overblown.
- US spot ether ETFs may launch in mid-July or later.
- SEC closed its Ethereum investigation but did not explicitly confirm ether’s commodity status.
- VanEck and 21Shares applied for Solana ETFs.
- Crypto was not discussed at the US presidential debate, but Trump’s victory may spur a rally.
Macroeconomic background
Global growth expectations continued to dominate Bitcoin’s performance. The macro sentiment declined as economic data supported recession fears — manufacturing, consumer sentiment, and housing indicators all dipped again in June.
The ISM Manufacturing New Orders/Inventories ratio hit the lowest low since May 2023. However, US jobs data brought upside surprises, and Q1 GDP growth was revised from 1.3% to 1.4%. The latter is still a “stall speed” and well below 2023’s GDP growth rate of 2.5%.
The mood gradually improved. Jay Bryson, Wells Fargo’s chief economist and chair of the SIFMA Economist Roundtable, wrote, “Despite some challenges, such as inflation and monetary policy concerns, our findings suggest a path towards sustained growth and stability, with expectations of a ‘soft landing’ and gradual easing of policy in the near future.”
As reported by Advisor.ca, most economists anticipate two Fed rate cuts in 2024 and four in 2025. The next FOMC meeting is scheduled for July 31, but the cut probability on CME FedWatch is below 9%.
US inflation
Defying growth forecasts, the Consumer Price Index (CPI) barely budged in May. Household budgets welcomed this relief, partly explained by lower prices at the pump.
The June PCE (Personal Consumption Expenditures) data provided further evidence to Fed policymakers. The core indicator grew merely 2.6% YoY, aligned with the consensus forecasts — at the slowest pace since March 2021.
While encouraging, those reports do not open the door to the Fed rate cuts. The first 25-bp cut, projected in September, requires further incoming data, including labor market stats, to align with the FOMC’s vision.
US labor market
The US economy added 272,000 jobs in May — far above the predicted 190,000 and the 165,000 in April. The labor market stayed robust, although unemployment ticked up to 4% for the first time since January 2022.
The June payroll figures, due July 5, are projected to show a reversal to 189,000 new jobs, with unemployment steady at 4%. Evidence of a cooling labor market will firm up bets on interest rate cuts. Significant deviations may heighten volatility as many US traders will be away from their desks around July 4.
Crypto market in June: Key developments
June has historically been a bearish month for crypto, and this year is no different. The total market cap experienced a 14% drop, settling at around $2.4 trillion. We saw a resurgence of selling pressure, with tokens bouncing back from oversold levels and BTC retracting from $67.6K to $60,679.85.
Bitcoin miners dumped over 30K BTC worth around $2B. The fastest selling spree in a year resulted from margin tightening after the fourth halving. Miners’ BTC holdings sank to the lowest level in over 14 years.
ETP investors and whales were also bearish. According to Coinglass data, the Fear and Greed Index retreated from greed (72) to neutral (42).
BTC: Reversal to the bear
Initially at $67.5K, the BTC price declined through the month, culminating in a plunge to $59.5K on June 25 and a loss of nearly 7% overall. Spot Bitcoin ETFs saw consistent outflows, peaking at $226.2M on June 13. Their week-long streak of negative net flows reversed on June 25.
The coin reacted to the worsening macro outlook, miners’ capitulation, and selling by governments, including those of the United States and Germany. On June 26, the US government moved 3,940 BTC — seized from drug trafficker Banmeet Singh — to an exchange, fuelling speculation of a sell-off.
By late June, the dynamics reflected apprehension ahead of Mt. Gox creditor payments (see more below). On the upside, as noted by ETC Group, corrections toward the end of the month brought BTC closer to its fair value, boosting the coin’s appeal.
ETH: Month in the red
Ether fared worse than Bitcoin, losing 8.68% overall despite some positive developments. SEC Chair Gary Gensler told the Senate he expected a spot ETF launch by the summer’s end, and the regulator closed its investigation into Ethereum 2.0 (see below).
ETH started at $3.8K, a level it gave up on June 7. After dipping below $3.5K on June 11, the price fluctuated wildly, with a low of $3,259.49 on June 24. After a slight recovery, ETH closed June at barely over $3.4K.
💡 EarnBIT’s projections for July: BTC & ETH
Historically, July has been a green month for BTC (7 times out of 11 since 2013). Hence, traders may expect more green candles with a total gain of up to 10%. For ETH, which has shown amplified gains, as much as +20% is feasible.
Primary market drivers: June 2024 and beyond
Bitcoin miners’ selling
In June, Bitcoin miners collectively sold a record 30,000 BTC, valued at roughly $2B. While their inventories have shrunk to a 14-year low, the fiat value is close to the previous ATH of $135B.
The dumping was a repercussion of the Bitcoin halving, which slashed mining rewards to 3.125 BTC in April 2024. While the pressure on the margins is undeniable, BTC producers may hold fewer coins but have more USD value in their balance sheets.
Miners have had to shut down older equipment that is no longer cost-effective. As their activity declined, they started selling BTC in OTC markets to cover the operation costs. In particular, Marathon Digital offloaded 1,400 BTC by mid-June, far above 390 in May.
As of June 30, the quantity and number of coins leaving miners’ wallets have decreased, which means the market is digesting the sell-off and absorbing those volumes.
Miners’ revenue declined slightly in June — by $570K — to $963.67M. Over $101M of the total came from on-chain fees, a notable increase since May ($64.85M from $964.24M).
Anticipation of Mt. Gox payouts
In early July, Mt. Gox, a bankrupt Tokyo-based exchange, will start paying back thousands of creditors. The total 142K BTC, worth around $9B, may create significant selling pressure.
In 2014, hacks cost Mt. Gox — once the biggest spot Bitcoin exchange handling roughly 80% of USD trades — up to 950,000 BTC. Around 20,000 creditors are due to receive distributions in Bitcoin and Bitcoin Cash.
As the users will be reimbursed in kind, the value of their coins has soared over 10,000% in the last decade. According to John Glover, Ledn CIO, “Some will clearly choose to take the money and run.”
The looming unloading pushed BTC to $59,000 on July 1 — the second-worst weekly dip this year.
Solana ETF applications
On June 28, VanEck announced it had submitted an SEC filing for a Solana ETF (VanEck Solana Trust). Matthew Sigel, Head Of Digital Assets Research, wrote, “We think this combination of high throughput, low fees, robust security, and a strong community vibe makes Solana an attractive option for an exchange-traded fund, offering investors exposure to a versatile and innovative open-source ecosystem.”
This passive investment vehicle will track the SOL token price minus operational expenses. The issuer expects a listing on the Cboe BZX Exchange with shares valued daily using a dedicated MarketVector index.
Solana offers high-speed, low-cost transactions and a robust platform for smart contracts and dApps. Its superior throughput is ensured by Proof of History (PoH), a unique transaction ordering method that makes it a go-to platform for launching memecoins and airdrops.
The VanEck Solana Trust will provide straightforward exposure without direct ownership or trading on crypto exchanges. Its approval will make SOL more accessible to a broader pool of investors with conventional brokerage accounts, enhancing the stability and liquidity of the SOL market.
On July 1, 21Shares unveiled its own plans for Solana ETFs, with the S-1 form already filed.
Closing of SEC’s Ethereum investigation
On June 19, Consensys, the company behind the MetaMask wallet, revealed that the SEC had closed its probe into Ethereum 2.0. That decision followed a letter asking the SEC to confirm its ether ETF approvals “were premised on ETH being a commodity” and explain how that would affect the investigation.
“This means that the SEC will not bring charges alleging that sales of ETH are securities transactions,” Consensys wrote on X. However, the regulator’s official response states it “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.”
The SEC started investigating crypto companies for potential securities violations in March, with Consensys suing it for overreach a month later. In April, the company received a Wells Notice from the SEC stating its intent to pursue enforcement action.
ETH rebounded on the news, climbing from $3.4K above $3.6K on June 20. However, the boost was short-lived, as the coin slipped to $3,259.49 on June 24, the lowest low that month.
News to watch in July 2024
Mt. Gox redemptions
According to an official statement, Mt. Gox’s rehabilitation trustee Nobuaki Kobayashi has been preparing to make repayments “from the beginning of July 2024.”
Some trading experts doubt most creditors will dump the coins once made whole. First, those who wanted to sell had a decade to do so by selling their bankruptcy claims. Secondly, the cost basis of just $700 per bitcoin may prompt many creditors to hold.
Launch of spot ether ETFs
Bloomberg Intelligence analyst Eric Balchunas initially expected the SEC to give the final green light to spot ether ETFs before July 4. Now, industry watchers have moved the target, as there is no confidence the batch will be approved this week.
The first reason is amendments — the issuers have been asked to address comments in their applications and resend them by July 8. Secondly, the week ahead of Independence Day is characterized by little movement among regulators.
On the Polymarket betting site, the likelihood of a trading launch by July 4 has sunk to 4% from 77% a week prior.
US presidential race
Donald Trump and Joe Biden did not discuss crypto at the first presidential debate on June 27, despite millions raised by crypto lobbyists for this election cycle. Three super political action committees (PACs) — Fairstake, Protect Progress, and Defend American Jobs — have raised over $202M from large industry backers, including Coinbase, Ripple, and Andreessen Horowitz founders.
Having spent $93.6M to influence the elections, the PACs failed to make crypto a topic, although Trump has become its vocal supporter in recent weeks, vowing to end Biden’s “war on crypto.” According to Gallup polls, crypto is not top of mind for US voters, unlike economy or immigration issues.
The second debate is scheduled for September 10. Another pro-crypto candidate, Robert F. Kennedy Jr., who appeared in his own debate on X, claimed CNN had “rigged the rules,” preventing him from participating.
Experts suggest Trump’s victory may power a crypto rally supported by institutional adoption and improved regulations. In this scenario, crypto would become the primary “Trump Trade” — like the US stocks, dollar, and Treasury yields, which rose after his previous win. On the other hand, Trump’s reversal to crypto skepticism would have the opposite effect on digital assets.
In June, Trump met with leaders of Bitcoin miners at Mar-A-Lago and expressed support for cryptocurrencies. He also stated he wants all remaining bitcoins to be mined in the USA.
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