Title: Unveiling the Hidden Factors in the Recent Crypto Market and Predicting Upcoming Developments
Introduction:
In the past two months, the crypto market has been trapped in a perplexing state of stagnation, with hints of a bearish trend and the occasional glimpse of bullish activity. This article aims to uncover some of the underlying events that have unfolded in the market during this period and provide insights into the positive factors that may have been overlooked. Additionally, we will explore the potential main storylines that could shape the market in the next six months.
01
BTC Spot ETF Witnesses a Turnaround in Inflows
The market tends to overestimate the short-term effects of new developments while underestimating their long-term impact. Regarding the Bitcoin spot ETF, which has been launched for almost six months now, a recent signal is worth noting:
According to SoSoValue data, the Bitcoin spot ETF has experienced a new wave of capital inflows since mid-May, lasting for almost a month. On June 4th, it reached a historical high of $886 million, second only to the $1.05 billion on March 12th.
Despite the recent downturn in the market, the overall situation has significantly improved compared to the months of April and May. As of June 21st, the total net asset value of the Bitcoin spot ETF was $56.24 billion, with a net asset ratio (market value as a percentage of the total Bitcoin market value) of 4.39%. The cumulative net inflow reached $14.67 billion.
02
Shift in Cryptocurrency Regulation and Acceleration of Ethereum Spot ETF
With the backdrop of the 2024 presidential election year, both regulatory and financial aspects have shown positive signs, setting the stage for a new wave of optimism (recommended reading: “Trump and Biden Compete to Embrace Bitcoin: Is US Cryptocurrency Regulation Shifting Gears?”).
Firstly, on May 22nd, the “Financial Innovation and Technology Act of the 21st Century” (FIT21 Act) was passed by a vote of 279 to 136 in the House of Representatives. Subsequently, on May 24th, the U.S. Securities and Exchange Commission (SEC) officially approved the 19b-4 forms of eight Ethereum spot ETFs.
This indicates a shift in the stance of U.S. regulatory agencies towards a more lenient approach. Particularly noteworthy is the accelerated approval process for the Ethereum ETF, which seems to be on the verge of completion. Interestingly, it appears that there were signs of this regulatory shift and approval speed even before it became evident:
As early as when Ethereum was around $3,000, influential figures such as Justin Sun had begun accumulating ETH chips and firmly taking a bullish position on the ETH/BTC exchange rate. This suggests that individuals and institutions with keen market insights had already positioned themselves in advance.
Directly reflecting this, ETH’s performance in the secondary market has improved significantly. The most notable change is in the ETH/BTC exchange rate, which has been on a downward trend since October last year, falling from above 0.064 to below 0.045.
Since mid-May, the ETH/BTC exchange rate has started to reverse this downward trend, breaking through the key levels of 0.05 and 0.055 in the past month. It reached a recent high of 0.058, indicating overall strength.
03
Traditional Web2 Players Accelerate their Presence in Web3
On June 6th, Robinhood announced its acquisition of the cryptocurrency trading platform Bitstamp for $200 million, signaling its expansion beyond the United States. The acquisition has been agreed upon by both parties, pending regulatory approval. Compared to the $400 million acquisition of NXC’s subsidiary NXMH in 2018, it can be seen as a significant opportunity.
Robinhood is widely known as one of the most popular stock and cryptocurrency exchanges among U.S. users, with 11 million monthly active users. Its popularity in the cryptocurrency trading domain even surpasses that of Coinbase. In the first quarter of this year, Robinhood’s trading-based revenue increased by 59% year-on-year, reaching $329 million, with cryptocurrency revenue accounting for $126 million, a 232% increase.
Established in 2011, Bitstamp is one of the longest-running cryptocurrency exchanges globally and is known for its high compliance standards. It operates in Luxembourg, the UK, Slovenia, Singapore, and the United States, holding valid licenses and registrations in over 50 countries/regions worldwide. This acquisition will provide a significant boost to Robinhood’s expansion into Europe, as Bitstamp’s four million users are predominantly located in Europe.
It is worth noting that just a month ago, Robinhood received a Wells notice from the U.S. Securities and Exchange Commission (SEC) regarding its cryptocurrency listing, custody, and platform operations. Therefore, the acquisition of Bitstamp will enhance Robinhood’s global presence and mitigate the impact of strict SEC regulations, ensuring its continued participation in the market.
Moreover, Fortune magazine predicts that this acquisition will not only add approximately four million new cryptocurrency customers to Robinhood but also enable the company to offer a wider range of cryptocurrency products to institutional clients. Currently, Robinhood provides 15 tokens in the U.S. market and over 30 in Europe. With Bitstamp’s inclusion of more than 85 tokens, Robinhood’s diversified services, including staking, stablecoins, trading, custody, and prime brokerage, will attract more institutional clients and potentially accelerate its expansion in the European market.
04
Loose Monetary Environment Signals
Despite the multiple instances of higher-than-expected CPI, PPI, and non-farm data in the United States over the past six months, causing Federal Reserve officials to adopt a more “hawkish” stance and adjust market expectations for interest rate cuts, inflation is nearing its end. The market remains cautiously optimistic about the Federal Reserve’s interest rate cuts in the second half of the year.
John Williams, a permanent voting member of the Federal Open Market Committee (FOMC), the third-ranking official at the Federal Reserve, and President of the New York Fed, emphasized this week that any decision regarding the timing or extent of interest rate cuts this year will depend on forthcoming economic data. Additionally, median projections from Fed officials suggest that there will only be one interest rate cut.
However, the Bank of Canada and the European Central Bank, considered pioneers of the Federal Reserve, have already begun signaling a shift towards looser monetary policy:
On June 5th, the Bank of Canada lowered its interest rate from 0.5% to 0.475%, marking the first rate cut in four years.
On June 6th, the European Central Bank reduced its interest rate from 0.4% to 0.375%, the first cut in five years.
In summary, the global trend of interest rate cuts is accelerating, accumulating favorable macroeconomic factors.
05
Major Payment and Financial Institutions Return
Furthermore, recently, BN allowed Mastercard users to purchase cryptocurrencies on its platform, and BN-branded Visa cards have also resumed usage on the trading platform. BN announced that the withdrawal service using Mastercard will be restored later.
As early as March, MetaMask partnered with Mastercard to conduct a test of the first blockchain payment card. Marketing materials indicate that the MetaMask/Mastercard payment card, issued by Baanx, will be the “first truly decentralized Web3 payment solution.” It allows users to use cryptocurrencies for daily transactions wherever bank cards are accepted.
This undoubtedly helps overcome the barriers for new users and facilitates seamless deposits and withdrawals (instant fiat-to-stablecoin conversion). It abstracts the user experience to resemble Web2 payment experiences, making it easier for users to adopt cryptocurrencies. Moreover, it bridges the gap between cryptocurrency assets and offline consumption, facilitating the establishment of anchors between cryptocurrency assets and a broader asset pool.
06
Conclusion
Overall, despite the fluctuating market conditions, there are still numerous positive factors slowly fermenting. By keenly observing and actively participating, one can maintain cautious optimism in the current market atmosphere. Although the bearish sentiment seems faintly discernible and the bullish trend is uncertain, staying vigilant and actively engaging may be the only viable approach in this market environment.
