Abstract
- l The German government has
transferred all seized Bitcoins to exchanges, with the
sell-off largely absorbed. Concurrently, Bitcoin spot ETFs saw
significant net inflows in July, indicating U.S. investors are
buying the dip. The Nasdaq continues to hit new highs, favoring
risk assets. We believe BTC will rebound once market sentiment
stabilizes.
- l Altcoins have undergone significant corrections, helping
deflate market bubbles and fostering healthier conditions for the
crypto market. Market concentration is increasing, suggesting
holding BTC and ETH may continue to outperform.
Market Sell-off Subsiding, Bottom Formation
Underway
German Government Sell-off Pressure
Absorbed
The Saxony police confiscated nearly 50,000 Bitcoins in January
and gradually began selling them from mid-June, totaling over $3
billion, triggering market declines. Currently, all these Bitcoins
have been transferred to exchanges, mitigating future sell-off
impacts.
Notably, from July 8th to 12th, the German government
transferred 40,000 Bitcoins to exchanges, resulting in a brief dip
followed by a rebound in BTC. This indicates strong demand,
suggesting the negative effect of Germany's sell-off has largely
dissipated.Bitcoin Spot ETFs Saw Positive
Inflows
Bitcoin spot ETFs experienced significant outflows in June,
correlating with BTC's downturn. However, July saw a shift to net
inflows nearing $1 billion, signaling optimism among U.S.
investors. With favorable factors like Fed rate cuts and the U.S.
elections, Bitcoin under $60,000 offers attractive investment
odds.
Nasdaq Continues Record Highs, Bitcoin Set to
Rebound
Amid favorable macro conditions, U.S. stocks have consistently
risen in 2024, with the Nasdaq hitting historic highs. BTC mirrored
this trend in the first half of the year but diverged since
mid-June due to German sell-offs, resulting in a nearly 30%
drop.
From a supply perspective, the impact of BTC sell-offs causing
market concern is not long-term but episodic. From a demand
perspective, the Nasdaq's continued highs indicate increasing
market appetite for risk assets. As panic subsides, BTC is poised
to rebound, aligning with Nasdaq's performance.
ETH Spot ETF Approval Imminent, Boosting Market
Sentiment
Approval for ETH spot ETFs is expected in July, approaching
rapidly. With ETHE trading at a discount of less than -1%, approval
is highly probable.
However, recent market declines have pushed ETH prices back to
levels before the ETH spot ETF announcement. Despite current market
pessimism, similar to BTC spot ETFs, ETH spot ETFs are likely to
attract billions into the crypto market long-term, buoying market
sentiment short-term.
Altcoins Deflate Bubble, Market Concentration
Rises
Altcoins Underwent Deep Corrections to Deflate Bubbles,
Promoting a Healthy Development of the Crypto Market
Altcoins have continued to plummet since June, deflating
overvalued coins. TOTAL3, excluding BTC and ETH, dropped to $573
billion, down $200 billion from March highs. Most altcoin prices
now sit below early-year levels, squeezing out speculative
bubbles.
Looking at open interest across the crypto market, it's declined
to May lows, significantly reducing leverage levels and clearing
out many long positions.
Even the meme coin $PEPE, exceptionally strong this year, lost
nearly half its peak value. No altcoin sector has shown resilience;
risk appetite and speculative sentiment have plummeted.
Unlike previous bull markets where altcoins rose alongside BTC
and ETH, many now decline. This is viewed as a healthy market
correction, clearing out altcoin bubbles and laying groundwork for
future bull runs.
Market Concentration Rises, BTC and ETH Likely to
Outperform
Since 2023, Bitcoin's market dominance has risen, now exceeding
54%. Compared to BTC and ETH, most altcoins struggle to attract
sustained inflows, unable to outperform the broader market. Market
concentration is increasing, with funds flowing from altcoins to
BTC and ETH.
Looking ahead, amid ongoing altcoin issuance, most struggle to
sustain market attention and risk being forgotten by investors.
Even in a new bull cycle, these altcoins face challenges in
significant price increases. Thus, holding BTC and ETH may continue
to outperform.
Conclusion
Following the July sell-off, the market appears to be bottoming
out, and investors should maintain patience and confidence. Looking
forward, holding BTC and ETH may continue to outperform the
market.
Tide Capital
Tide Capital is a research-driven digital asset investment and
trading firm. We study macro and fundamentals to capture beta and
alpha opportunities from crypto waves to financial tides. Driven by
value, we aim to invest in early-stage projects with significant
growth potential. Concurrently, we assess market cycles to inform
our investment decisions, trading in the public market to achieve
returns.
Disclaimer
The information and data presented in this article are obtained
from public sources, and Tide Capital makes no guarantees regarding
their accuracy and completeness. Any predictions, speculations, or
opinions contained in this article are statements about future
events and may differ significantly from actual results due to
limitations in data timeliness, assumption validity, uncertainty
factors, and unforeseeable risks. Any advice and opinions in this
article are for reference purposes only and do not constitute
recommendations to buy or sell any digital assets. They do not
constitute investment advice or solicitations. The strategies that
Tide Capital may adopt may be the same, different, or unrelated to
those inferred by readers based on this article. Investors should
carefully consider any decisions and seek appropriate legal and
financial advice when necessary. Any misunderstanding or misuse of
the content in this article does not constitute the responsibility
of the author or the publishing institution.
lia li
Tide Capital
liali at tidecap.com