In the first half of 2024, the cryptocurrency market experienced many major events, bringing new opportunities and challenges.
ETF Frenzy
Approval of BTC spot ETF: Bitcoin spot ETF has finally been approved, which is an important milestone in the crypto market.
ETH ETF is about to be approved: Ethereum's ETF is also in preparation, and the market is full of expectations for it.
SOL ETF Expectations: Now there are rumors about Solana’s ETF expectations, which will undoubtedly attract more investors’ attention.
Global Economy and Rate Cut Cycle
The global economy has begun to enter a cycle of interest rate cuts. Although it is not clear when the United States will cut interest rates, its inflation has been well controlled, which is a big boon to the crypto market.
The impact of regulatory policies
Governments around the world have different positions on cryptocurrencies, and regulatory adjustments remain a key factor affecting the crypto market. Policy changes will continue to be an important variable in determining market trends.
Market Dilemma
Despite some positive news, BTC fell 16% in the last quarter. The continuous outflow of institutional funds, coupled with the lack of breakthrough technological innovation, has brought certain difficulties to the entire cryptocurrency market. Currently, BTC continues to fluctuate and adjust in the range of 56,000 to 70,000 US dollars, and investors are generally on the sidelines.
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Is now the best time to buy the dip?
In this environment, many people began to ask: Is now the best time to buy the bottom? Will the cryptocurrency market usher in a new round of bull market in the second half of the year? These questions are worth our in-depth discussion.
Entering July, in addition to the above important project time nodes, the crypto market still needs to pay close attention to:
MT.Gox’s Bitcoin repayment plan in June triggered a market crash, and we need to continue to pay attention to this development in July;
Pay close attention to the approval process of the Ethereum spot ETF and the approval of the second half of the S-1 document;
Huge unlocking of WLD, SOL, ALT, XAI, ARB and other tokens;
FTX creditors will vote to decide whether to pay in cash or cryptocurrency;
In terms of mainstream public chains, Cardano will usher in the Chang mainnet hard fork; HNT has a new sub-network proposal; Arbitrum's ARB will launch a staking function;
Finally, Jupiter’s JUP will reduce its total supply by 30%, Gala Games’ G token will be rebranded 1:60, and Orion ORN will launch a Lumia brand upgrade.
Many tokens are facing large unlocking. The following figure shows the top 15 projects with unlocking volume in July:
$WLD has the highest unlocked value this month, exceeding $600 million, and the unlocked scale accounts for 53.36% of the current circulating supply.
$SOL is second with over $400 million unlocked. $400 million may seem like a lot, but due to $SOL’s high market cap, the unlocked amount only represents 0.5% of the current circulating supply.
$ALT has seen significant unlocking this month, with nearly 45% of the circulating supply currently unlocked.
$XAI also saw high unlocks this month, accounting for 71.59% of its current circulating supply.
Ethereum's second-layer $ARB, $OP, and $STRK will unlock 120 million, 110 million, and 70 million US dollars in July.
2. Macro data analysis
After entering July, the focus of the macro economy is still on when to cut interest rates. Federal Reserve Chairman Powell has long stated that the timing of interest rate cuts will be determined based on two key factors (4+2 indicators) - inflation and unemployment. In the context of major changes in the current international landscape and the profound impact of Sino-US industrial adjustments on the global economy, these changes will not show results in the short term.
The annual rate of core PCE in May in the United States released last Friday fell to 2.6%, the lowest in three years, providing confidence support for the interest rate cut in September. However, how the economic data in July and August will perform remains the focus of market attention. The decline in core PCE in May was mainly due to the decline in the prices of three major factors: housing prices, automobiles and crude oil. However, after entering July, the prices of these three factors have rebounded. The expectations for the core PCE data in June are not optimistic, so the smart money in the market has not bet in advance.
It is worth noting that after the release of the May core PCE data, the Chicago Mercantile Exchange (CME) Fed Watch tool showed that the market's expectations for the Fed to cut interest rates by 25 basis points in September rose to 61%, while the possibility of another rate cut in December was 44.7%. Although expectations for rate cuts have risen, the market remains cautious, especially before the release of June data. The market's attitude towards risky assets such as Bitcoin also reflects this cautious sentiment. Although Bitcoin faces downside risks, its downside is limited in the absence of major negative news.
In addition, changes in the international economic environment cannot be ignored. The industrial adjustments between China and the United States are having a profound impact on the global economic landscape, and this process may take a long time to fully manifest its results. This adjustment has had an important impact on the global supply chain, trade relations and investment flows, and the market needs to keep an eye on it.
Economic data in the coming months will have a key impact on market expectations and the Fed's policy decisions. Investors need to pay close attention to the upcoming data, while considering changes in the international economic environment and market sentiment to make more informed investment decisions.
Since March, altcoins have been adjusting for more than three months, and Bitcoin has also taken a clear M-top pattern. The election debate on June 27, the PCE data on June 28, and the launch of the Ethereum spot ETF on July 2, which we had high hopes for, did not bring the expected benefits to the market. Although the PCE indicator is beneficial to US stocks and risk markets, the market's digestion and interpretation of these data have been affected by the US election and have become more hesitant. The rapid rise and fall in the short term further highlights the market's disagreement and uncertainty about the future direction.
3. Key factors of the macro market
The cryptocurrency market has been facing the influence of many key factors. The correlation between the US stock market and cryptocurrencies in the past cycle is self-evident. In the context of the global economy entering a cycle of interest rate cuts, the overall performance of risky assets will also be key. At the same time, the strong US dollar, which has remained near its highest level in the past 30 years, will also put some pressure on the crypto market. A strong dollar will make cryptocurrencies denominated in US dollars relatively more expensive, and will also reduce investors' risk appetite to a certain extent. When faced with high interest rates, investors are more likely to choose to deposit funds in banks to earn interest, which will affect market liquidity.
In addition, the approval and listing of the most popular Ethereum spot ETF will inject new momentum into Ethereum and the entire crypto ecosystem. There is also the US election in the second half of the year, and the impact of political factors on market sentiment is also very important. The interweaving of various factors will jointly determine the direction of the crypto market in the second half of 2024.
On Tuesday morning, Eastern Time, Federal Reserve Chairman Powell said at a central bank forum hosted by the European Central Bank that the Fed has made considerable progress in controlling inflation, but hopes to see more progress before having the confidence to start cutting interest rates. The forum also attracted the participation of European Central Bank President Lagarde and the President of the Central Bank of Brazil.
Powell expressed satisfaction with the inflation control results over the past year: "We have made considerable progress in bringing inflation back to target levels. The latest inflation data show that we are back on track to cool inflation." But he stressed that too fast policy adjustments could undermine the inflation control results, while too slow could hinder economic recovery and expansion. Powell pointed out that the Fed needs to find a delicate balance between controlling inflation and avoiding a deterioration in the labor market.
When talking about the labor market, Powell said that the U.S. unemployment rate remains at a low level of 4% and the labor market is gradually cooling down. Powell expects inflation to be in the lower middle of the 2%-3% range in the next year, but he expressed concern about higher service industry inflation, especially the part related to wages.
Although market expectations for a rate cut in September have risen, Powell refused to give a specific time. When asked whether a rate cut in September is possible, Powell said: "I won't set any specific date now." This statement shows that the Fed remains cautious on the issue of rate cuts and future policies will continue to be data-driven.
Powell also mentioned that fiscal policy is the responsibility of politicians and that debt sustainability should be the focus in the future. Boosted by Powell's speech, the Nasdaq index turned positive, the S&P 500 index erased early losses, U.S. Treasury yields extended their declines, and the dollar index fell back to intraday lows. Traders in the swap market continue to expect the Federal Reserve to cut interest rates nearly twice this year.
Potential impact of the election on US markets
The main factor that may trigger political and economic fluctuations in the United States is still the election. As voters' expectations of the election of Trump and Biden change, the market is also betting on the different impacts and expectations brought about by the election of different candidates. If the market stirs up a storm of "Trump market", and it is expected that he will implement large-scale loose policies and inject a large amount of funds into the stock market after his election, then capital will flow into the risk market in advance, triggering a sharp rise.
Market participants are concerned about the uncertainty brought about by the election, not only because of the huge differences in policies among different candidates, but also because of their potential impact on the economy. Trump's policies tend to be large-scale fiscal stimulus and tax cuts, which may be seen as positive for the stock market. In contrast, Biden is more focused on infrastructure investment and social welfare, which are also likely to promote economic growth, but the market remains cautious about his possible tax policies.
If expectations of Trump's victory increase, the market may reflect this expectation in advance, with funds quickly flowing into stocks and other risky assets, pushing up market prices. However, this situation also brings potential risks, including uncertainty in policy implementation and long-term economic impact. The market will continue to closely monitor the development of the election and assess the possibility of each candidate's victory and the impact of their policies on the economy.
In general, the US election is not only a political game, but also a major event that affects the global market. Investors need to remain vigilant and adjust their strategies in a timely manner to cope with possible drastic fluctuations and changes in the market.
4. Focus on the sector
ETH Ecosystem
Focus on the target: ETH, ENS, LDO, SSV, ETHFI
The ETF Store predicts that the Ethereum spot ETF may be launched the week of July 15. Once the ETH spot ETF is approved and launched by the SEC, it will definitely have a significant recovery in market sentiment. The approval of the Ethereum ETF, like the Bitcoin ETF, means that more institutional investors can enter the market more conveniently and push up currency prices. By then, the Ethereum ecosystem will also follow the overall rise, and you can focus on Ethereum's biological son ENS, as well as the leading staking project LDO, and the leading re-staking project ETHFI. In the second half of the year, we can also look forward to the technological innovations brought by parallel EVM: continue to pay attention to the new developments of Fuel, Monad, Berachain, and the application of Sei on the game chain.
SOL Ecosystem
Key targets: SOL, JUP, HNT
On June 28, asset management giant VanEck submitted an application for Solana ETF (VanEck SolanaTrust) to the SEC. Subsequently, 21 Shares also submitted the S-1 document for Solana ETF, which attracted great attention from the market. Solana has also recently launched the powerful Blinks, which converts various interactive operations on Solana into a button on Twitter, such as Mint, Swap, etc. By linking social media accounts, you can follow the trading of popular assets on the chain with one click, opening up the imagination space for a variety of application scenarios. The high-speed information requirements of early Meme tokens may be met by Blinks, further opening up the Meme market. At present, a series of protocols such as two wallets Phantom and Backpack, DEX Jupiter, and NFT platform Tensor already support Blinks.
This month Helium will also announce a new sub-network proposal, so you can keep an eye on the HNT trend. In addition, Solana's ecosystem re-staking LST liquidity aggregation protocol Sanctum is also about to airdrop. It has previously announced the token economy of its token $CLOUD, 10% of which will be used for airdrops. Currently, the TVL exceeds $800 million, making it the fifth largest project in the Solana ecosystem in terms of TVL, and it is worth paying attention to.
AI Section
Key targets: RNDR, AKT
The continued large-scale investment of capital has promoted the development of AI technology and also driven the encryption sector of AI concepts. It is expected that the market's continued preference for artificial intelligence will continue to benefit the decentralized GPU market such as Render and Akash. In July, there will be new progress in the merger of AGIX, FET, and OCEAN.
MEME Section
Key targets: PEPE, BONK, WIF, TRUMP
MEME manufacturer Pump.fun has surpassed Ethereum in terms of daily revenue. In the market where the market failed and the altcoins plummeted, investors found solace in MEME. We can choose projects that have entered the public eye and have a strong community consensus as investment targets, such as PEPE, to avoid a large and rapid withdrawal of assets. MEME is a product driven by emotions, and any exciting news will become a catalyst for the rise. A large, active and actively involved community will always be the backing of MEME. WIF and BONK communities have done a good job in this regard. If you want to choose an investment target in Solana ecosystem MEME, I believe WIF and BONK will be the first choice for many people. In the US election that has not yet ended in the second half of the year, TRUMP also has many opportunities for swings. In general, the risks and randomness of participating in MEME projects are too high, and investment should be cautious.
GameFi and SocialFi sections
Focus on: TON, RON
TON has been very resilient in this round of correction, and its monthly return rate is still positive, which is a very impressive performance. In July, Telegram's mini-program games Hamster and Catizen will also issue tokens, so you can focus on their trends and performance. In addition, the game public chain Ronin will upgrade to Goda this month. After the hard fork, validators can get rewards by generating blocks every day, and the upgradeability of smart contracts has been introduced. REP-0014 proposes to implement Ethereum's EIP-1559 and transfer the gas fee to the Ronin treasury. You can pay attention to whether the treasury funds will be used to repurchase RON.
V. Conclusion
BTC fell below 58,000 again, and the market was very pessimistic. At present, the BTC hashrate has dropped to the lowest level since December 2022. Multiple indicators: miner reserves, exchange reserves, miner position index (MPI), etc. also show that the market may have bottomed out, miners are more willing to hold positions, and cash-out behavior has been reduced. At this stage, miners are less likely to sell BTC. All of these mean to a certain extent that market sentiment and expectations are improving, and Bitcoin is looking for new upward momentum to lay the foundation for a subsequent rebound. This momentum may come from the official interest rate cut in the United States, the emergence of new breakthrough technologies in the market, or the dust has settled on the election, and crypto advocate Trump has introduced more market-friendly policies. By then, long-term wait-and-see investors will enter the market again and re-drive capital inflows.
In general, the crypto market still has strong rebound momentum in the second half of 2024. We should pay real-time attention to the multiple changes in policies, fundamentals, innovations and market sentiment. This article does not serve as any investment advice. Risk control is also the most important thing we always talk about. "If a losing position makes you feel bad, it's simple: exit quickly, because you will always have the opportunity to enter the market again (Paul Tudor Jones)". When the market is not good, it is best for us not to linger, exit and wait and see, patiently wait for the next opportunity, and avoid excessive trading caused by emotions.