EarnBIT monthly: Market insights from April 2024
Key takeaways
- Fed’s interest rates remain unchanged, with a dwindling probability of a cut in September.
- BTC and ETH had their worst month since November 2022 as macro worries affected the sentiment.
- Positive May scenarios include BTC at $75K-$90K.
- Bitcoin halving went as planned, with a new transaction fee ATH due to the launch of Runes.
- Hong Kong’s spot crypto ETFs had a decent debut when adjusted for market size.
- SEC is likely to deny applications for spot ether ETFs in late May.
- Ex-Binance CEO was sentenced to four months in prison for facilitating money laundering.
Macroeconomic background
Uncertainty regarding the Fed’s interest rates weighed heavily on stocks and crypto. On May 1, policymakers agreed to keep the rates unchanged at 5.25–5.5%. This FOMC decision followed a spate of economic reports with a stagflationary feel, which alarmed investors.
Data for Q1 2024 revealed a weaker GDP and persistent inflation — two signs of stagflation, the worst-case scenario for risk assets. However, Fed Chair Jerome Powell has discounted those concerns, noting that, by some measures, economic growth is at 3% and inflation below 3%.
Powell also effectively ruled out a hike at the next FOMC meeting in June, temporarily lifting stock prices. On CME FedWatch, the likelihood of a cut in September has dipped to 42.6% vs. 46.2% for no cut. In contrast, most Polymarket bettors expect no cuts this year.
Meanwhile, Janet Yellen’s strategy may supply fresh liquidity for risk assets. The Treasury General Account (TGA) balance has approached $1T, with drainage expected based on past data. Combined with $400B from the Reverse Repurchase Program, it may inject up to $1.4T into the US financial system.
US inflation
In Q1 2024, GDP came in at a 1.6% annualized growth rate, less than half of the previous 3.4%. Yet the headline PCE (Personal Consumption Expenditures) price index nearly doubled, jumping from 1.8% to 3.4%.
The Fed adheres to its 2% inflation target. In March, core PCE — the Fed’s key inflation gauge — exceeded expectations, repeating the February result (2.8% YoY vs. 2.6% forecasted). Core CPI (Consumer Price Index) was also stuck at 3.8%, above the predicted 3.7%.
US labor market
Continued gains in hiring may also stave off monetary easing. The April jobs report, due on May 3, could reflect continued growth despite a slowdown in nonfarm payroll figures.
Analysts expect 233,000 added jobs vs. 303,000 in March, when hiring soared far above expectations. Meanwhile, unemployment may linger at 3.8%. This combo would still convey economic strength and resistance to the Fed’s hawkish efforts.
Non-cyclical sectors like healthcare, government, and education are predicted to dominate. Strong hiring gains may stem from elevated immigration levels, which underpin Goldman Sachs’ above-consensus estimate of 275,000 new jobs.
Crypto market in April: Key developments
Following BTC’s ATH of $73K in March, the market entered broad net distribution, with rallies fueled by liquidity and demand. As of May 1, the sentiment (as gauged by the Fear and Greed Index) is back to neutral after varying degrees of greed observed since February.
BTC: Worst month since November 2022
April became BTC’s worst month since November 2022, when it lost 16.23% on the FTX fiasco. Slipping from $70K, the coin sank mid-April on Iran-Israel tensions. Later, on April 30, it plunged deeper on US economic data that fueled stagflation fears.
The debut of spot crypto ETFs in Hong Kong was also perceived as underwhelming — although some experts disagree, citing a smaller market size. Inflows into spot Bitcoin ETFs in the US slowed after weeks of hyped-up buying. A resurgence is possible: institutions worldwide have started due diligence procedures required for BTC allocations via the funds.
According to Glassnode, the coin initially consolidated in the mid-$60K range, staying within the euphoria phase. BTC was robust despite a correction — until its momentum abruptly faded. At press time, it is at $57,782.07, with a 30-day loss of 12.5%.
EarnBIT’s projections for BTC in May
Positive (and likely) scenario: BTC rises to $75K-$82K, possibly $90K.
Negative scenario: BTC returns to $56K or $53K.
ETH: Joining the plunge
Bitcoin’s weakness heaps more pressure on all altcoins. Ether underperformed the pioneer, mirroring its decline. A bear formation set in motion in mid-April foreshadows further drops.
The highest price — $3,715.79 — came on April 9. On April 12, ETH sank below $3.5K. As of this writing, it is changing hands at $2,954.18, down 11.7% over 30 days.
The anticipated rejection of spot ether ETFs also affected the April sentiment — more on this below.
Primary market drivers: April 2024 and beyond
Bitcoin halving
On April 20, the Bitcoin blockchain underwent its fourth halving event. With the block reward slashed to 3.125 BTC, transaction fees constitute a larger share of mining revenues.
The halving day coincided with the launch of Runes, an NFT protocol whose popularity pushed the fees to a new ATH of $128. Bitcoin-linked stocks, including those of MicroStrategy and Coinbase, also surged in the aftermath.
Meanwhile, the Bitcoin Electrical Cost — which has acted as BTC’s price floor — shot to $77.4K post-halving, contrasting with the price of $66K. As noted by Charles Edwards, founder of Capriole Investments, such divergence typically lasts “just a couple days every four years.”
The Bitcoin Electrical Cost reflects the daily electricity cost to mine 1 BTC. Meanwhile, as transaction fees ballooned, the Bitcoin Miner Price (the block reward plus fees per coin mined) hit $244K on the halving day.
These statistics fuel suggestions about BTC trading “at a deep discount.” However, the transaction fees have since returned to their pre-halving levels, leaving two possibilities out of the three described by Edwards: a price rally and a shutdown of ~15% of miners.
💡 For a deep dive into Bitcoin’s post-halving behavior, check out our ultimate guide to the 2024 Bitcoin halving.
Hong Kong ETFs
On April 30, Hong Kong launched the first spot crypto ETFs in Asia — six funds linked to Bitcoin and ether. The first day seemed underwhelming compared to the $4.6B trading volume during the debut of US spot Bitcoin ETFs.
Collectively, the local ETFs, including those from China Asset Management, Harvest Global, and Bosera, attracted an equivalent of $12M. This amount was still significant if adjusted for market size. Over $123M flowed into ChinaAMC’s fund on its first trading day, propelling it into the top 20% of the largest ETFs.
The Hong Kong funds may help offset the outflows from their US counterparts. Local brokerages and fund managers offer fee exemptions to attract investors to the products.
Sentencing of CZ
On April 30, a Seattle federal court sentenced Changpeng Zhao, the former CEO of Binance, to four months in prison. CZ had pleaded guilty to charges involving the facilitation of money laundering on the CEX.
This sentence was considerably less than the three years demanded by federal prosecutors. CZ’s wealth is also unlikely to be seriously affected. He has already paid a $50M criminal fine and another $50M to the US CFTC.
As part of his prior settlement with US authorities, CZ stepped down as CEO, with Richard Teng taking over. His situation differs from that of Sam Bankman-Fried, the disgraced CEO of FTX. After his empire collapsed, SBF’s wealth was effectively reduced to zero.
While CZ was not accused of defrauding customers — only failing to implement the necessary compliance structure — his case shows that willingness to accept responsibility pays off. CZ’s guilty plea has enabled Binance to avoid further enforcement action, aside from the enormous $4.3B penalty. On the other hand, the US authorities have demonstrated that they can pull anyone back into their jurisdiction if needed.
News to watch in May 2024
Anticipated rejection of spot ether ETFs
Nine asset managers, including VanEck and Ark Investment Management, have filed applications for spot ether ETFs, with a decision due in late May. Based on discouraging, one-sided meetings with the issuers, the US Securities and Exchange Commission (SEC) is expected to deny them.
It took the SEC over a decade to change its mind about spot Bitcoin ETFs. The regulator, led by crypto critic Gary Gensler, only approved them after Grayscale’s historic legal victory. That decision may have set a precedent for ether products, but the SEC staff are seemingly uninterested.
The top concern is staking — locking up ETH as collateral to support the operation and security of the blockchain. Last year, the regulator cracked down on staking, fining the Kraken CEX $30M and forcing it to shut down its staking-as-a-service business.
Furthermore, ether may eventually be classified as a security, unlike Bitcoin. Rejection would set the industry back, as ETFs are crucial for pushing crypto into the investment mainstream. The SEC has already extended the original deadline once (from March to May).
According to a report by Standard Chartered Bank, the news is priced in. On Polymarket, the probability of approval has sunk to just 11%.
Launch of ASI token
In April, AI cryptos were supported by the news of a historic token merger between SingularityNET, Fetch.ai, and Ocean Protocol and its final community approval on April 16. The three leaders in decentralized AI have formed an alternative to Big Tech.
The Artificial Superintelligence Alliance is
“the largest open-sourced, decentralized network focused on accelerating the development of decentralized Artificial General Intelligence (AGI) and, subsequently, Artificial Superintelligence (ASI) in the interest of humanity and other sentient beings.”
The alliance token, ASI, is expected to launch in May. It could enter the top 20 by market cap with a combined value of $7.5B.
AGIX, FET, and OCEAN first rallied on the news in late March, dropping sharply on April 14. Following the voting results, there was a slight uptick, and investors remain optimistic.
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