This week, our desk experienced high demand for meme coins, particularly dog-themed meme coins such as Dogecoin ($DOGE), Floki ($FLOKI), and Dogwifhat ($WIF).
Following the SEC's approval of ETH spot ETFs, which began trading on Tuesday, our desk saw strong market demand for ETH-related altcoins such as Ether.fi ($ETHFI) and Ethereum Name Service ($ENS).
Ether.fi ($ETHFI) is a non-custodial staking protocol that runs on the Ethereum blockchain. Following the approval and trading of ETH spot ETFs this week, the project's native token, ETHFI, was traded as a high beta token against ETH. The ETHFI price rose by 20%, from $2.29 to $2.76, before the ETH ETFs began trading on Tuesday. It has fallen 30% since, reversing all gains prior to the first day of ETH ETF trading, and is currently trading at $2.03.
On the other hand, Solana ($SOL) demonstrated resilience when the ETH price fell. Rumours on social media suggest that Solana ($SOL) may be the next cryptocurrency to receive SEC ETF approval. VanEck, a major ETF issuer, filed the ETF application for the VanEck Solana Trust in June 2024. With the bullish backdrop, SOL gained 8.4% in the last seven days, while ETH fell 7.7%.
Overall Market
The above chart shows the BTC price movement in the 1-day chart.
Bitcoin price rose from $63.5k to $68k this Monday, with the bullish sentiment fueled by the SEC's approval of ETH spot ETFs, which began trading on Tuesday.
However, the ETH price fell sharply on the first day of ETH spot ETF trading, as the market saw a significant outflow from Grayscale's converted Ethereum Trust ETF. The ETH price plunged below $3,100 in Thursday's US session as market concerns about the Grayscale outflow persisted.
A similar situation occurred in January when Bitcoin spot ETFs began trading. BTC fell by more than 20% in 12 days, following a 37% increase in three weeks.
Will the ETH price repeat the rhythm of BTC price moves after the spot ETFs begin trading?
Our desk believes it will, and the pace will accelerate. Given the differences in size between Grayscale Bitcoin Trust ETF and the Ethereum Trust ETF, as well as the outflow rates on both ETFs in the first few trading days, the data suggest that the outflow rate on Grayscale Ethereum Trust ETF has been much faster than that of its Bitcoin Trust ETF.
Now let's take a step back and look at the Bitcoin price chart. The BTC price is currently trading under a bull flag, which had a fake breakout in June. We should pay more attention to the potential upside breakout, which could propel the Bitcoin price to $85k in September, along with the Federal Reserve's first rate cut.
Once the outflow from the Grayscale ETH ETF finishes, the capital inflow from TradFi could likely drive the ETH price higher, as will the BTC price. If that happens, we have a good chance of breaking out from the bull flag highlighted in the above chart.
However, Mt. Gox's repayment and potential US government sales continue to pose significant risks to our bullish Bitcoin thesis. Both scenarios have the potential to significantly increase market supply while shifting market sentiment.
Options Market
The above chart is the 25-delta skew for BTC options with various tenors.
The chart shows that the skew of near-term BTC options has crossed the 0 line and has been rising over the last two weeks. It indicates that market sentiment is shifting from bearish to strongly bullish for near-term BTC price action.
Former US President Donald Trump's speech at the Bitcoin conference on Saturday could fuel such strong bullish sentiment in short-term price action. This election year, cryptocurrency has emerged as a political issue. Trump's stance on cryptocurrency represents a significant U-turn.
Wild rumours are swirling that Trump will announce the creation of a US Bitcoin strategic reserve during his much-anticipated appearance at the Bitcoin 2024 conference in Nashville.
Given the "buy the rumour, sell the news" market behaviour of recent months, our desk advises traders to manage their risk carefully and be prepared for both scenarios.
Macro at a glance
Last Thursday (24-07-18)
The European Central Bank (ECB) maintained its interest rate at 4.25%. President Christine Lagarde stated that the decision on a potential rate cut in September remains "wide open," while downplaying concerns about persistent price pressures. The ECB had previously implemented its first 25 basis point rate cut in June.
In the United States, initial jobless claims surged to 243,000 from the previous week's 223,000, exceeding the estimated 229,000. This indicates a shift towards a more balanced labour market over time.
In England, retail sales for June fell by 1.6% month-on-month, significantly worse than the expected 0.6% decline, following a 2.9% increase in the previous month. Core retail sales also dropped by 1.5%, deeper than the anticipated 0.5% retracement.
Last Friday (24-07-19)
Canada experienced an 0.8% month-on-month decline in retail sales in May, worse than the expected 0.5% drop. Core retail sales fell by 1.3%, worse than the estimated 0.5% decline, following a 1.7% increase in April.
On Monday (24-07-22)
China surprised markets by lowering a key short-term policy rate as well as benchmark lending rates in order to boost domestic growth. Both the one-year and five-year loan prime rates (LPRs) were reduced by 10 basis points to 3.35% and 3.85%, respectively.
On Wednesday (24-07-24)
The Bank of Canada cut its key policy rate by 25 basis points for the second consecutive month, bringing it down to 4.50%. The bank indicated that further cuts are likely if inflation continues to cool as forecasted, reiterating that inflation should sustainably return to its 2% target by the second half of 2025.
Business activity in the US private sector grew at a healthy rate in July, with the preliminary S&P Global Composite PMI rising to 55 from 54.8 in June. The S&P Global Manufacturing PMI fell to 49.5 from 51.6 during the same period, while the Services PMI increased to 56 from 55.3.
Convert Portal Volume Change
The above table shows the volume change on our Convert Portal by zone.
Over the weekend, President Biden announced that he had dropped out of the 2024 US presidential election in favour of his Vice President Kamala Harris. BTC initially surged to $68k before losing the majority of its gains due to the US equities correction led by big tech companies. Our desk observed a less active market over time.
Last week, our desk saw strong trading demand for Solana ($SOL) in the Layer 1/ Layer 2 zone, while Ripple ($XRP) volume retraced following the cancellation of a meeting that could lead to a private settlement between the SEC and Ripple Labs.
Floki ($FLOKI) has continued to attract market attention, and our desk saw an increase in volume for this dog-themed meme coin this week. However, the low trade demand for My Neighbor Alice ($ALICE) outweighed the volume gain from trading Floki ($FLOKI) in the Metaverse zone.
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