Crypto market analysis reveals structural weakness, positive catalysts
The past few months have been difficult for crypto markets; after a rapid rise early in the year, they have been trading in a range, according to a report from Binance Research.
“June was especially brutal, with total crypto market capitalization down about 11.4% month-on-month,” the report said, adding: “While there has been some relief in the past couple of days with a market rebound, we are still down about 14.0% from the peak in March.”
A decline in crypto prices coincided with a “perfect storm” of market events in recent weeks, as three entities offloaded Bitcoin around the same time, contributing to selling pressure and stirring negative sentiment, the report said.
Mt. Gox: Repayments to creditors started on July 5. About $9 billion in Bitcoin will be distributed, with more than a third of the total already disbursed.
German government: About $3.2 billion in Bitcoin was transferred to centralised exchanges and market makers between June 19 and July 13.
US government: Around $248 million in Bitcoin was transferred to Coinbase Prime on June 26. The US government remains the biggest nation-state crypto holder, with about $12.8 billion.
The worst of these events is probably behind us and their negative impact appears to be limited, as there has been an uptick in market performance in the past week.
Still, the report noted deeper structural weaknesses in the crypto market by viewing it through a lens of capital, people, and technology, the basis of what Binance Research calls a “CPT” framework.
This framework reveals that the influx of new money into the crypto ecosystem has slowed.
In a stagnant market with no new capital flows, it becomes a zero-sum game: When one market participant profits, another must incur a loss; we seem to be in what is colloquially known as a player vs player market, the report said.
In spite of such structural challenges, the report expressed optimism towards the outlook for the rest of the year, as there are several catalysts that could propel the industry.
These include the macro environment: With inflation showing signs of tapering, traders are now pricing in an interest rate cut in September.
Spot Ethereum ETF Approvals: Several media outlets have cited sources estimating that this could happen soon, sometime around July 23.
The US presidential election: Polymarket is now assigning a 70% probability for Donald Trump to win the election in November. The Trump campaign accepted crypto donations in May and has become increasingly positive about digital assets.
Bitcoin Halving Impact: Though there are no guarantees, Bitcoin prices have tended to be higher six to 12 months after the halving.
Crypto market movers
- Bitcoin is up 0.27% today at $66,776.17.
- Ethereum is down 0.44% today at $3,488.45.
