Weekly Rollup - August 14, 2024

Market Highlights

• Crypto prices recovered in the second half of the week after a sharp sell-off.
• Bitcoin and Ethereum are up 8.4% and 10.8%, respectively, on the week.
• BitGo is diversifying its custodial jurisdictions for its Wrapped Bitcoin product to include Singapore and Hong Kong.
• Grayscale introduced two new crypto investment products: Grayscale Bittensor Trust and Grayscale Sui Trust.

Markets Overview

Macro Market Updates:

There were fewer shocks in macroeconomic updates this week, with many data releases coming in at or slightly better than the forecast.

• The Reserve Bank of Australia left the cash rate on hold at 4.35%.
• The US Institute for Supply Chain Management (ISM) Services PMI came in at 51.4, slightly higher than the forecast 51.1.
• Both New Zealand and Canada had better-than-expected unemployment rate updates, coming in at 4.6% and 6.4%, respectively.
• Unemployment claims in the US came in lower than forecast at 233,000.

A steep sell-off at the start of the week saw Bitcoin, Ethereum and most altcoins in the red as key levels broke to the downside. The sell-off, a reaction to weak US jobs data and the Bank of Japan raising interest rates and causing the USD/JPY “carry trade” to come undone as the Japanese Yen strengthened, has since settled. Moving further into the week, Bitcoin, Ethereum, many altcoins and traditional finance markets regained some of their earlier losses.

Crypto Market Sectors:

Across crypto market sectors, Data Availability and Decentralised Physical Infrastructure Networks (DePIN) experienced the strongest growth. This week’s growth in DePIN follows increasing investor interest in this sector in recent weeks. Helium (HNT) was one of the biggest DePIN gainers of the week, as the network embarks on its expansion from a wireless network to a DePIN protocol (more below).

On the other end were generation 1 smart contract platforms, centralised exchanges, and staking services. Centralised exchanges presumably had lower trading volume after the sell-offs to start the week, while investors may be waiting for a more definitive recovery before leveraging their assets through staking services.

Bitcoin

Heavily hit by the sell-off to start the week, bitcoin was trading below US$50,000 on Monday, 5 August. In the days since, bitcoin’s price has regained some of the losses, but price struggled to break back above the key level at US$60,870.

Bitcoin investment products saw net inflows of US$13 million. Show bitcoin exchange-traded products (ETPs) had the largest outflows since May 2023. The outflows totalled US$16 million, which equates to 23% of assets under management (AuM).

On Friday, 9 August, BitGo’s CEO, Mike Belshe, announced that the company is diversifying its custodial jurisdictions for their underlying bitcoin holdings. These holdings were previously located in the US but will now be expanded to Singapore and Hong Kong. Belsche explained further in a post on X that the Tron Network and its founder Justin Sun will be involved, but Sun will not “have the ability to move funds”. The clarification was made due to the ongoing lawsuit filed by the United States Securities and Exchange Commission (SEC) against Sun, the Tron Foundation, the BitTorrent Foundation and Rainberry. Over the next 60 days, BitGo will diversify its custodial locations, making it the first “multi-jurisdictional and multi-institutional custody” in the world.

Bitcoin is currently trading at US$59,074 an increase of over 8% on the week.

Past performance is not indicative of future results.

Ethereum

Ethereum’s price recovered slightly following the sharp sell-offs at the beginning of the week. Price broke the key level at US$2,950 before finding support at US$2,320. From this key area, price gained over 17% before declining again. Some experts believe that Ethereum’s investors aren’t as loyal as those holding bitcoin or Solana, so when the market experiences a sell-off, Ethereum will decline further.

This week saw investors taking advantage of the recent correction, as Ethereum ETPs saw inflows of US$155 million. Year-to-date inflows for Ethereum are now at US$862 million — the highest since 2021, and presumably due to the recent approval of spot-based ETFs.

Also this week, Ethereum’s burn rate fell to its lowest level in the year to date. Gas fees have also declined, currently sitting around 1 to 2 gwei at the time of writing. On Saturday, 10 August, 210 ETH were burned. Compared with the burn of 5,000 tokens amid the sell-off on Monday, 5 August, the low gas fees and burn rates represent an inflationary trend for Ethereum. The net ETH emission on Saturday, 10 August, was 2,000. Gas fees correlate with network activity. When fees are higher, more ETH is burned, which reduces the supply. Analysts attribute the lowered gas fees to increased activity on Layer 2 solutions, plus the introduction of “blob transactions” as part of the Dencun upgrade in March. This upgrade helped reduce the cost of transacting on Layer 2 networks.

Ethereum is currently trading at US$2,705, an increase of over 10% on the week.

Past performance is not indicative of future results.

Altcoins

Grayscale’s expanded crypto offerings

• Sui (SUI) gained 73.8%, taking its market cap to US$2.4 billion. Price for the Layer 1 smart contract platform surged when it was announced that the crypto asset manager, Grayscale, is launching the Grayscale Sui Trust. The trust will give investors exposure to the Sui network through traditional channels, similar to the bitcoin and Ethereum ETF products in the market. Sui was created in 2023 by a team of ex-Meta engineers and aims to make digital asset ownership fast, private, secure and accessible.
• Bittensor (TAO) gained 53.3%, taking its market cap to US$2 billion. The decentralised machine learning protocol made headlines this week when Grayscale announced the launch of the Grayscale Bittensor Trust. The Trust will solely invest in TAO, the token that underpins the Bittensor protocol.

Get real (world assets)

• TokenFi (TOKEN) grew by 73%, which takes its market cap to US$113.1 million. Price for the crypto and real world asset (RWA) tokenisation platform presumably grew due to $TOKEN being listed on decentralised exchange, DEX. A liquidity pool is also live on the BNB chain for voting and staking.
• SuperRare (RARE) gained 58%, which takes its market cap to US$66.8 million. The blockchain built on the Ethereum network, which allows people to gain exposure to rare art through tokenisation, has experienced recent growth due to its consistent flow of new art available on its network and growing investor interest in RWA.

Computing power

• Helium (HNT) gained 64.2%, taking its market cap to US$1 billion. The recent grains are presumably due to the project’s expansion from a wireless protocol to a DePin platform. Also this week, the Helium team announced that two large US carriers started testing to offload their web traffic to Helium’s mobile network, demonstrating the network’s capability to support the traditional telecommunications market.

DeFi gains

• Kamino (KMNO) grew by 63.6%. This takes its market cap to US$40 million. The gains on the decentralised finance (DeFi) platform running on the Solana network are presumably due to the introduction of “JLP Multiply”. It allows users to increase their JLP exposure up to 3x, with a maximum annual percentage yield (APY) of 280%.

In Other News

Digital asset investment flows rebounded this week after last week’s outflows. These products saw net inflows of US$176 million. Total AuM in digital investment products now stands at US$85 billion. This week also marked an uptick in trading volume for ETPs. Total trading activity for the week came in at US$19 billion, compared to the weekly average of US$14 billion in the year to date, signalling that last week’s market jitters have settled and the sell-off has opened up good buying opportunities.

• Canto, the Layer 1 blockchain based on the Cosmos network experienced an outage that lasted two days. The outage is due to the “Callisto” upgrade that was meant to be completed on Saturday. The upgrade took down the mainnet, and the blockchain hasn’t been able to process new transactions. The Canto team said another update would take place at midnight UTC on Monday to address the outage, but this update had unforeseen effects and didn’t fix the issues. At the time of writing, the network continues to be halted.
• A report from Pitchbook revealed that crypto startups attracted US$685 million in venture capital in the second quarter. This takes total venture capital funding for crypto projects to US$2.7 billion. While the amount of capital raised by crypto projects grew in the second quarter, there was a 12.5% decline in the number of deals from the first quarter. Infrastructure projects received US$395 million of funding, while two “mega-rounds” for decentralised social media projects attracted US$290 million. The growing amount of venture capital funding in crypto projects in recent years could generate interest from institutional investors as the sector matures, providing that enough of the VC-funded projects are successful.

Regulatory

• Ripple Labs’ four-year legal battle with the US SEC has come to an end. Like many other cases brought by the US SEC against crypto companies, the SEC was arguing that Ripple’s XRP token was a security. The judge handed down a US$125 million penalty, far lower than the original demand of a US$2 billion penalty by the SEC. Industry experts don’t expect the SEC to appeal the judge's decision, indicating that the case could set a precedent. The significantly reduced penalty, plus the ruling that XRP isn’t a security for trading purposes, provides clarity for investors and the wider crypto market.
• Thailand’s Securities and Exchange Commission has launched a sandbox to test crypto services in a “real-life context”. The sandbox, available to crypto exchanges, brokers, custodians and fund managers, opened up applications this week. The announcement follows a series of pro-crypto decisions by Thai authorities this year. First, the Ministry of Finance expanded its value-added tax exemption on cryptocurrency trading. And in March, the Thai SEC changed its regulations to allow professional investors to access US spot bitcoin ETFs.