Crypto Market Forecast: Week of July 11th 2022

Bitcoin (BTC) had recovered upward by almost 10% since last week — with its price sitting around US$21K. Ether (ETH) and Binance-coin (BNB), the second and third largest (non-stablecoin) assets by market cap, similarly improved by ~11% and ~9% versus the previous week, putting them at ~US$1,170 and ~US$235 respectively.

The US Securities and Exchange Commission (SEC) has issued disapprovals to two recent spot exchange-traded funds (ETF) applicants: Grayscale Investments and Bitwise Asset Management. Grayscale quickly filed a lawsuit against the SEC in retaliation. The SEC cites market manipulation as its reason for the rejection.

Australia and Canada have already greenlighted Bitcoin spot ETFs, but none have been approved in the US to date. Bitcoin futures ETFs, however, have been approved in the US.

The lack of an approved Bitcoin spot ETF means that investors interested in gaining exposure to digital assets but who are uncomfortable with the process of buying actual Bitcoin have fewer options available to them.

In the meantime, the digital asset sector struggles to find safer means for investors to participate. While proposed financial products like those from Grayscale and Bitwise which presumably had sound financial planning behind them are rejected by regulators, and several major crypto lending platforms have collapsed, US investors are likely hoping the Biden administration will follow Europe’s lead, in passing clear legislation for the sector.

Turning to the correlation between Bitcoin and NASDAQ tech stocks. As usually happens after a large influx in the supply of money, asset prices, including the stock market (at least at first), spike upward. But eventually, a correction (downward) is in order, just as we have seen.

Something to be watching now is a decoupling of digital asset prices from the NASDAQ as the economy normalizes from the “easy money” era following COVID. One chart to watch for this is the Pearson correlation coefficient. With this measurement, a non-zero positive score until 1 indicates a positive correlation; 0 means no correlation, and a non-zero negative score until -1 indicates a negative correlation.

In May this year, we saw the correlation between Bitcoin and the NASDAQ composite as high as 0.96 (highly correlated) after being as low as 0.36 in March. As of the time of this writing, the correlation sits at 0.81. So, no decoupling yet, but something to keep an eye on.

Crypto news for the weeks ahead

16 July
The Monero network will undergo an upgrade, allowing for greater anonymity, faster transactions, reduced wallet sync times, as well as various other improvements.

19-21 July
The Ethereum community will launch a major event in Paris in July: the Ethereum Community Conference. It will host “more than 100 speakers… from all over the world, multiple side events, meetups, panels and parties”.

End-of-month in July
The smart contract platform Cardano (ADA) has delayed the “Vasil hard fork” of its blockchain. The upgrade will increase the block size limit (allowing for more transactions per block) and hopes to achieve lower transaction fees. The previous deadline was scheduled for June 29th but is now set for the final week of July.

Top 10 Crypto Summary

Asset prices in Brave New Coin’s top ten list have recovered moderately since last week with Solana (SOL), Ether (ETH) and Bitcoin (BTC) leading that recovery. As for Bitcoin, last week’s (lower) prices reached historically low levels when measured by the Mayer Multiple indicator, which compares the present price of Bitcoin versus its 200-day moving average. If history is to repeat itself, this week’s prices may indicate some departure from a bottom formation following the collapse of Terra/LUNA and the domino effect currently sweeping the “crypto lending” space.

Bitcoin Price Chart

Glassnode’s special report this week noted that since the Terra/LUNA event in May, the number of on-chain transactions has dropped (suggesting less activity overall), and exchanges are seeing net outflows of Bitcoins (meaning more withdrawals than deposits). Glassnode concludes that this uptick in exchange withdrawals is likely due to the industry’s emphasis on self-custody: the importance of which became all the more apparent following the recent collapse of Terra/LUNA and crypto lending platforms. We are also currently seeing the largest movement of bitcoins from exchanges into “illiquid wallets” (wallets with no history), which suggests that people are loading up, weathering the storm until the next run.