Crypto Market Forecast: Week of July 17th 2023

The price of Bitcoin (BTC) has remained flat versus last week and presently trades for ~US$30.4K. Ether (ETH) rose by ~3.8% to ~US$1.9K. Binance-coin (BNB) rose by 5.9% to ~US$249.

Digital Assets appear to be inching toward more regulatory certainty in the United States.. In the last week, a district court judge ruled against the Securities and Exchange Commission (SEC) in a case against Ripple Labs, the issuer of the XRP (XRP) digital asset.

The US securities regulator alleged that Ripple “and two of its senior leaders, Bradley Garlinghouse and Christian A. Larsen,” engaged in the unlawful offer and sale of securities” through sales of the XRP token. These alleged securities were said to be ‘investment contracts’. But as the ruling concluded: “XRP, as a digital token, is not in and of itself a ‘contract, transaction[,] or scheme’ that embodies the Howey requirements of an investment contract”.

An interpretation of the ruling would be that while XRP sales to individuals were not securities, sales to institutions were.

The SEC’s court battles with Ripple reflect what might be characterized as an overall war on crypto, emboldened by its Chair Gary Gensler, and by a March 2022 executive order by President Biden.

In the case of Gensler, many expected a certain level of “crypto-friendliness” when he took command of the SEC given he had previously taught a course on blockchain while he was a professor at MIT. In the case of Biden, many expected a similar “friendliness” – despite the content of the executive order referring more to the research and development of a CBDC than anything else.

While XRP was the subject matter of the legal case, the ruling will provide legal precedence for other assets – smashing the narrative that all alt-coins are unregistered securities. This could set the more positive tone of discussion for potential “crypto” legislation over the coming months – even if the SEC appeals the ruling.

A just-released report by Standard Chartered Bank assesses the miner profitability variable on Bitcoin’s price. The report estimates that, at present, miners are having to sell 100% of newly-mined BTC in order to pay their costs. At the $50K price level, miners would sell only ~20-30% instead (a net reduction in selling of ~250K BTC/year). From this, the authors estimate that Bitcoin’s price should hit ~$100K by the end of 2024.

Of course, forecasts by nature leave room for error, and this one could turn out to be no exception.

Miners have to sell a certain number of their BTC in order to pay costs (overhead, new equipment, taxes, etc.). When miners are stressed (due to low BTC prices), they have to sell off more of their newly-mined BTC. The bigger the selloff, the further downward the push on the Bitcoin price. But as BTC’s price rises, they can sell fewer BTC than they would at lower prices. The fewer they sell, the fewer that hit the market for sale, and thus, less downward pressure on price.

Crypto news for the weeks ahead

July 26

The FOMC will be meeting. Futures markets are strongly leaning towards a prediction of another 25 bps hike, thus bringing the interest rate target to 5.25 – 5.5%.

July 28

The US Bureau of Economic Analysis’ (BEA’s) release of June’s Personal Consumption Expenditures (PCE) numbers will be released. This is one of the primary indicators used by the FOMC when considering interest rate levels.

August 2

Litecoin’s (LTC’s) block reward will halve, dropping from 12.5 LTC per successfully-mined block to 6.25.

August 10

The Consumer Price Index data for July will be released – one of the indicators the Federal Open Market Committee (FOMC) watches when considering interest rate hikes.

Top 10 Crypto Summary

It was a relatively calm week for Bitcoin (BTC) and (ETH) this past week, but XRP’s price skyrocketed (up 64%) following Ripple’s win in court. A number of alt-coins similarly benefited: including Solana (SOL) and Cardano (ADA): up 31% and 12% respectively. XRP was itself the biggest winner of the week.

Bitcoin Price Chart

GLASSNODE’s detailed report this week looked at the present market cycle in Bitcoin compared to previous cycles. With Bitcoin’s current price at ~$30K, we find ourselves in a consolidation of just below the 2021-2022 cycle midpoint, which GLASSNODE calls “synonymous with the ‘re-accumulation period’ seen in past cycles, characterized as several months with little macro direction”. GLASSNODE notes relatively slow onchain activity (attributing this to a decline in ordinal activity but not mentioning the simultaneous increased use of Lightning – transactions that happen off-chain), yet monetary transfer volumes continue to increase.