A $235B Dead-Cat Bounce? ⛹️♂️
A dramatic week for crypto. Where will the prices head from here? Stablecoins USDT and USDC combined supply up $3B. Bitcoin crash casts shadow over reserve plans. SEC’s crackdown on crypto VC funds?
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Bitcoin and Ether have rallied 21% and 19%, respectively, since their collapse at the start of the week.
The crypto market added back $235 billion over the same period, according to CoinGecko.
However, neither Bitcoin nor Ethereum have reclaimed their pre-crash prices.
Is this a dead-cat bounce?
Dead cat bounce? Prices rise after a large crash before continuing to fall again shortly after.
Experts weigh in.
Timo Lehes, co-founder of Swarm Markets, warns that more trouble may be ahead for the crypto market.
“Crypto investors should beware of the ‘dead cat bounce’ in markets here.”
Factors influencing the rebound
The Federal Reserve's interest rate cut in September is seen as bullish for risky assets like Bitcoin.
The unwinding of the yen carry trade, which forced levered traders to exit, has nearly finished, according to JPMorgan analysts.
Outlook for the remainder of 2024
Ran Yi, co-founder of crypto liquidity protocol Orderly, expects more volatility in the third quarter but is optimistic about a new high for crypto by the end of 2024.
“Moving into the fourth quarter, however, there are good grounds for optimism.”
Investors are betting on Bitcoin reaching $100,000 by the end of the year, with the most popular options trades paying out if this target is met.
Impact of US elections
The outcome of the US presidential election could have implications for the crypto industry, but Kamala Harris' campaign has signalled a desire to avoid alienating the crypto community.
Only a closely contested election would pose problems for the markets, according to experts.
Role of crypto ETFs
Cole Kennelly, founder and CEO of Volmex Labs, suggests that activity in crypto exchange-traded funds could outweigh macroeconomic uncertainties.
“BTC and ETH ETF inflows and broader institutional adoption, may be sufficient to mitigate macroeconomic uncertainties.”
Spot Bitcoin ETFs have earned almost $21 billion since their launch on January 11, while spot Ethereum ETFs have earned $760 million since their launch on July 23.
When will Bitcoin’s price bounce back?
Bitwise Matt Hougan: “Historically, whenever we’ve seen this kind of global economic panic, crypto has traded down initially but ended higher over the next year.”
BitMEX Arthur Hayes: “The Bitcoin price in this cycle is going to go very, very high. There’s so much debt that needs to be rolled over. We’re entering a period where the global monetary architecture is completely changing. We don’t know what it’s going to be, but the people who have made the most of the last 80 years are going to be very resistant to change.”
DeFi Report Michael Nadeau: “But seriously. You’re gonna tell me all that? And you want me to be bearish?
Read: Bitcoin could fall below $50K if Magnificent 7 stocks stage another $500B loss
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In The Numbers 🔢
$3 billion
The increase in supply of Tether (USDT) and Circle's (USDC) stablecoins in one week.
A rush among investors to buy cryptocurrencies following a recent market downturn.
Tether's USDT supply increased by $1.3 billion, with its market capitalisation surpassing $115 billion, marking a new record high.
Circle's USDC saw a growth of approximately $1.6 billion, raising its market cap to $34.5 billion, the highest level since March 2023.
Stablecoins serve as a bridge between traditional fiat money and blockchain markets, providing liquidity for trading and lending.
The increase in stablecoin supply is often seen as a positive sign for the broader cryptocurrency market, reflecting renewed investor confidence.
Ripple has initiated beta testing for its stablecoin, Ripple USD (RLUSD), on both the Ethereum mainnet and the XRP Ledger, following the conclusion of a legal battle with the SEC.
Read: $2B to $125M. Ripple Victory? ✌️
Bitcoin Crash Casts Shadow Over Reserve Plans
Several US politicians, including Donald Trump and Robert F. Kennedy Jr., have suggested creating a US strategic Bitcoin reserve.
Senator Cynthia Lummis introduced a bill to establish a strategic Bitcoin reserve, aiming for the US to hold 1 million BTC, but it has faced criticism and has low odds of becoming law.
In such an environment, a brutal price crash doesn’t do any favour to that idea.
Bitcoin price crashed below $50,000, triggering over $1 billion in liquidations.
Bitcoin's volatility, with a 27% drop from its March 2024 all-time high of $74,000, raises doubts.
Experts' question Bitcoin’s suitability as a reserve asset.
Cerus Markets CEO Michael Brescia
“Bitcoin is a high-risk asset. If we’re not talking about putting other high-risk assets in the national reserve like… Apple [stock], why would we be talking about putting Bitcoin in there?
The [US] gold pile… is among the highest percentages of national reserves for any country in the world, and is one of the principal reasons—along with the strength of the US dollar—that the US remains a safe haven for investors.
One day, Bitcoin may well become bigger than gold, but today it is not even one-fifteenth the size. There is a long, long way to go before we should even contemplate including such a volatile asset in our national reserves.”
Lehman College professor Dr. Sean Stein Smith
“Adding Bitcoin to the Fed balance sheet might be harmful. This action [also] risks politicising Bitcoin even further.”
Down south, the International Monetary Fund (IMF) has called for increased transparency in El Salvador's Bitcoin experiment.
Read: Bitcoin 'Risks Have Not Yet Materialised' in El Salvador, Says IMF
Block That Quote 🎙️
Head of Digital Assets Research at VanEck, Matthew Sigel
“Brazil's approval of a SOL ETF signals that a US counterpart isn't just a possibility -it's as inevitable as the next block in the chain.”
Sigel, reckons that Brazil has been a pioneer in digital assets. With digital sandbox initiatives and early approval of a spot Bitcoin ETF.
“That said, it appears US. regulation needs a soft fork before it can launch and the White House controls the keys.”
The Brazilian Securities and Exchange Commission (CVM) granted approval for a Solana ETF managed by QR Asset and operated by Vortx.
Currently in the pre-operational phase pending final approval from the Brazilian stock exchange, B3.
This ETF will track the CME CF Solana Dollar Reference Rate, marking a significant step for crypto investments in Brazil.
Markus Thielen from 10x Research, notes that the SEC's cautious stance on cryptocurrencies classified as securities could delay approvals.
"The path to approval is complex. The SEC's regulatory stance on cryptocurrencies like Solana, which could be classified as securities, introduces additional challenges. Furthermore, the absence of a robust Solana futures market, which played a key role in the approval of Bitcoin and Ethereum ETFs, may further complicate and delay the approval process.”
Market context: Solana has experienced significant price volatility. Dropping from a high of $260 in 2021 to lows of around $8 in late 2022, before recovering to approximately $153.
US ETF prospects: Prominent asset managers like VanEck and 21Shares have submitted applications to the US SEC, but regulatory hurdles remain.
SEC’s Crackdown on Crypto VC Funds?
The US Securities and Exchange Commission (SEC) has subpoenaed at least three venture capital firms involved in cryptocurrency, reports DL news.
Documentation requested: The subpoenas require these firms to provide all contracts related to token deals, indicating a serious investigation into potential violations of federal securities laws.
Focus of Investigation: The SEC is examining whether these VCs are acting as "statutory underwriters," distributing unregistered securities to the public.
Undisclosed Targets: Specific firms targeted by the SEC have not been named, but speculation includes prominent investors like Andreessen Horowitz and Paradigm.
Legal Perspective: Legal experts suggest this focus on venture capital firms is a natural extension of the SEC's enforcement efforts in the wake of recent market turmoil.
Venture capitalists are slowing down investments in the crypto industry.
Instead? Hold Bitcoin and Ethereum, according to Adam Cochran of Cinneamhain Ventures.
This shift allows VCs to avoid early-stage risks while still outperforming index funds.
The strong returns of BTC and ETH provide a more favourable risk-reward ratio compared to traditional investments.
The Surfer 🏄
OneMedNet (ONMD) raised $4.6 million in a private placement, using $1.8 million to buy bitcoin (BTC) as part of its treasury strategy, backed by Off The Chain Capital, and CEO Brian Dixon backing importance of public companies investing in bitcoin to enhance shareholder value.
The IRS has updated Form 1099-DA for crypto brokers, set to report digital asset transactions starting in 2025, removing requests for wallet addresses and transaction IDs to address privacy concerns. The public can submit comments on the draft for 30 days following its release.
Turkey sees a surge in crypto firm license applications, with 47 companies, including major exchanges Binance, Bitfinex, and OKX, for regulatory approval under new laws, signalling strong interest in the country's digital asset market.
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I wonder if Kamala Harris's campaign will start accepting donations in bitcoin. Imagine the debates 'my opponent is funded by wall street,while I'm funded by block chain' 😂😂
Wow, 'dead cat bounce' sounds like a crypto investor's version of a horror movie! 🎥
Who's playing the cat and how do I buy tickets?