Crypto rebounds amid market cautiousness

26 Temmuz 2024

Crypto rebounds amid market cautiousness, mixed performance of new Ethereum ETFs

Today’s market analysis on behalf of Samer Hasn Market Analyst and part of the Research Team at XS.com

Bitcoin continues its recovery for the second day in a row, rising more than 1% after the downward path it took earlier this week, and is trying to regain the $67,000 level. Naturally, this recovery for Bitcoin has also contributed to the rise of altcoins, most notably Ethereum, which is growing by more than 2%.

The gains in crypto come amid caution in financial markets, especially the stock market, in light of the mixed earnings season. The S&P 500 had reached its lowest levels in more than a month in light of the worrying results of a wide range of sectors.

Cryptocurrencies usually do not move in parallel with the daily movements of the stock market, but the general mood is shared between the two markets. While the recent movements in the stock market do not seem to indicate that the sentiment is high, the same is true for cryptocurrencies. The Capriole Investments Speculation Index is at just 6%, which is close to the lowest levels this year at 4% and far from the 60% we saw in January.

Bulls were also under pressure yesterday with the early morning sharp declines, which helped trigger the largest wave of liquidations of long positions of crypto futures in 20 days. The liquidations amounted to more than $276 million, with more than $71 million in Bitcoin and $107 million in Ethereum, according to CoinGlass.

Altcoins also saw a new historical milestone this week with the start of trading in Ethereum spot ETFs. Overall, the performance of these funds was mixed, with outflows from the Grayscale Ethereum Trust exceeding $1 billion after just three days of trading as investors who bought the fund before it was converted to an ETF took profits. The rest of the new ETFs attracted about $980 million in inflows during the same period, most notably the BlackRock iShares Ethereum Trust, which took in $355 million, according to SoSo Value.

The Bitcoin spot ETFs did not perform much better than Ethereum when they were launched, for the same reason; outflows from the Grayscale Bitcoin Trust. Ethereum funds also entered the market at a difficult time. Therefore, the coming weeks and months will tell us how much Wall Street embraces Ethereum as a trustworthy investment asset.

As Bitcoin gains its status as a store of value and long-term investment, Ethereum’s wider adoption and use among all other coins gives it its utmost importance in the market. Bitcoin for investment and Ethereum for almost everything else in the crypto world, given that there are more than a thousand protocols built on the Ethereum main network, which holds more than $58 billion in user funds (total locked value).

The rapid developments in the presidential race, including Joe Biden’s withdrawal and Kamala Harris’s nomination as the Democratic Party’s alternative candidate, have created significant uncertainty. Before Biden’s withdrawal, the markets were optimistic about the possibility of Donald Trump returning to the White House, given his promise to support cryptocurrencies as part of his election campaign, which had contributed to higher prices. With Harris’s emergence, the election results have become less predictable, leading to uncertainty in the markets regarding political developments. We do not know exactly what the regulatory environment governing cryptocurrencies will be like if Harris wins.

Zaid Barem / YMM