Coinbase, in its weekly market commentary, noted that the Q3 started on a sour note with supply overhangs generated by indiscriminate Bitcoin selling from sources like the German government. While the size of the Bitcoin sales hasn’t been large relative to daily BTC spot volumes, it has put pressure on Bitcoin prices. However, today, the German Government has emptied all its Bitcoin holdings, suggesting that some market distortions should dissipate soon.
Uncertainty More Damaging Than Actual Selling
The Mt. Gox repayments that started on July 5 have also been relevant for markets but it’s not clear how much of the repaid BTC is being sold. Coinbase noted that the uncertainty is more damaging to markets than any actual selling as the largest creditors are likely hedged. Further, about the rest of the quarter, it noted that there have been reports citing concerns that the US could fall into a recession later this year or in early 2025.
Coinbase acknowledged that the macro data has given a lot of evidence that the US economy has slowed down. It stated that it’s very likely that the economy peaked in 2Q24, one of the reasons they think that the Fed will cut interest rates starting September 18. The CPI print from June was released this week (-0.1% MoM or 3.0% YoY) which came under the median forecasts supporting a more dovish Fed bias.
Rate Cuts May Not Be Bullish!
Importantly, it highlighted the concerns that cuts may not be bullish for markets if there’s a fear of a bigger slowdown. Retail investors will be hesitant to enter new stock or crypto positions if the US economy falls into recession. On the other hand, if the economy is still doing relatively well, and the Fed cuts, then it could unlock more liquidity and invite more retail participation. The November US elections bring a strong possibility of fiscal expansion which is a strong incentive to buy bitcoin as an alternative to the traditional financial system.
Going further, It expects the price action to remain choppy in3Q24 as crypto markets still lack strong narratives, for instance, the market can’t decide whether potential spot ETH ETF will be bullish or bearish while they think that may not necessarily be a bad thing from a positioning perspective. It could leave room for surprise outperformance.
Key Takeaways from EthCC
The 7th Ethereum Community Conference focused on key technical themes including layer-2 (L2) scaling and differentiation, ETH staking issuance, cross-chain interoperability, and more. Conference panels and discussions including Buterin’s keynote talk, reaffirmed Ethereum’s roadmap as a maximally decentralized and secure settlement layer-1 (L1) for various L2s.
Also Read: Crypto Market Analysis: Is the Bear Run Finally Over?