Crypto market watch: key events to observe

Analyzing the biggest vectors impacting crypto price action: main intrigues of the US crypto regulation, the state of VC funding, and some macro and Bitcoin on-chain factors.

While not exactly conforming to the crypto’s decentralized ideals, institutions investing in crypto and offering all sorts of traditional financial derivatives have a huge say in its price action. They aggregate the funds of thousands of clients who may be unwilling to take on the task of investing themselves and create significant buying/selling pressure on the crypto markets.

We always follow their mood with great interest, and here’s what they have to say now.

What impacts investors’ decisions?

According to a recent survey by CoinShares, which questioned 51 leading asset managers, cryptoassets weighing in portfolios declined from 1.8% in April to 0.7 end-June. However, this trend is likely to reverse:  if in the first half of 2023, the firm noted some $400 million of outflows, it also registered $470 million of inflows in the last 3 weeks.

BlackRock’s newfound love for crypto certainly has to do with it, and its CEO Larry Fink recently claiming that Bitcoin will “transcend the dollar” only added to the institutional’ FOMO.

➡️  The main reason preventing from investing in crypto is regulatory uncertainty(23%), while the previously important “reputational risk” decreased from 25% to 14%.

Whether this is due to the FTX drama starting to fade away or a better understanding of the nature of crypto, this is a good trend. However, regulation is still the #1 issue.

➡️  The growth of blockchain technology was named as the main reason for adding crypto to a portfolio (37%, rising from the previous 27%), while the speculation motive decreased from 25% to 17%. This is a good trend that shows a healthier investment narrative.

Products and services that use blockchain are the main reason for its creation, and developing these apps and DApps takes time, effort, and money. The state of VC funding can give us clues as to the latter.

➡️  Bitcoin has the most compelling growth outlook among other cryptos (43% of respondents), with Ethereum coming second (39%). This marks a shift from the previous survey conducted in April, where over 50% preferred Ethereum.

This could be due to Ethereum successfully concluding all its upgrades (“buy the rumor, sell the news”), or the approaching Bitcoin halving.

Main intrigues of crypto regulation

The country with the biggest economic power is, ironically, also among those with the worst regulatory coverage of crypto, which leads to epic confrontations and price fluctuations.

Last week, the crypto space celebrated Ripple’s (partial) court victory over the US SEC. Ripple’s selling its coin $XRP on exchanges was pronounced as not violating the securities regulation, which visibly saddened SEC’s Chair Gary Gensler. The Court’s decision is not a binding precedent, but it carries enough weight to affect the whole crypto legislative process in the US.

As the SEC presents itself as the biggest regulatory threat to crypto now, it comes as no surprise that most key events to observe are related to this conflict:

👀 The SEC’s possible appeal of the Ripple case ruling.

👀  Grayscale’s lawsuit against the Commission, accusing the latter of unlawfully refusing its ETF. Grayscale’s attorney has recently said that the company expected a decision “by the fall at the latest”.

👀  BlackRock’s Bitcoin ETF (exchange-traded fund) application.

👀  SEC v Coinbase lawsuit developments.

⚖️  At the same time, numerous Congressmen are seizing the moment to present or remind about their own pieces of crypto legislation.

👀  Many Republicans, like Tom Emmer, Cynthia Lummis, Glenn Thompson, Patrick McHenry, or Warren Davidson have proposed bills that limit the authority of the SEC (or even call for its radical restructuring and firing Gensler), explicitly define that crypto is not a security, or propose the separation between cryptos which are securities and those that are commodities.

Crypto in politics

🗳️ Crypto, and Bitcoin in particular, is also mentioned in the US Presidential candidates’ agendas.

For the Presidential election 2024, crypto-friendly candidates are present on both sides of the aisle. The Republican Ron DeSantis has praised Bitcoin as a matter of civil liberties, while the Democrat Robert F. Kennedy Jr has recently promised to back the US dollar with “real finite assets”, such as gold, silver, platinum, and Bitcoin. The latter might not actually be able to fulfill his promise even if he wins, however, this type of narrative helps Bitcoin impose itself.

👀 As the elections approach, we may be hearing more about Bitcoin at political rallies.

Who could have imagined this even a couple of years ago 😅 ?

VC funding

Crypto funding is falling.

According to Crunchbase, only $3.6 billion was raised by crypto startups in the first half of 2023, vs almost $16 billion in the first half of 2022.

As AI steals the spotlight from crypto, VCs change their preferences accordingly.

However, the amount of news about crypto fundraisers seems to be on the rise recently. Despite the summer, we have seen Polychain Capital raising $200 million, CoinFund – $158 million, Futureverse (projects of the FLUF creators) – $54 million… and all this just last week.

👀  It’s too early to say that crypto fundraising reawakens, but the more such announcements we hear, the better the crypto market’s prospects.

Macroeconomic reasons are important here too. We’re unlikely to see the same situation as in 2021-22, when investors flush with post-covid money were rushing into virtually anything. With interest rates rising in most economies, the money is more expensive, and investors – more cautious.

👀 For both VCs and regular crypto investors, important macro events to observe include the Fed and the ECB rate hikes announcements. The next ones are scheduled for 25th and 27th of July, respectively, with a 0.25-point increase expected.

👀 Another macro factor to take into consideration is inflation, and more precisely – the US CPI data, the next one scheduled for August 10.

Bitcoin halving

The fourth halving in Bitcoin history will happen in April 2024.

The previous three halvings did not disappoint: $BTC becoming scarcer, its price surged after each one: 9,100% in 2012, 285% in 2016, and 550% in 2020.

Whether this time will be as enthusiastic, is difficult to say. The market is maturing, the market cap is increasing, and the change in supply itself becomes smaller: next year, the reward for mining a block will decrease from 6.25 to 3.125 BTC.

This could mean a smaller impact on the price; however, we are fairly certain that the halving will still have a positive effect on Bitcoin.

👀 In the meantime, it is worth noting that $BTC price has been range-bound for over a month, and technical trading analysts believe that this could lead to a sudden and strong price movement in the short term. The direction, as always, will be a surprise 🙃