“Leveraged Funds as a whole haven't flipped net long yet, but their structural short is clearly fading. This likely includes both carry-trade unwinds and shifts in directional positioning.”
Adding deeper insight to the shift in sentiment and institutional investor positioning, BlackRock Head of Digital Assets Robert Mitchnick
told Bloomberg,
“We’ve seen sentiment turn, in a noticeable, but subtle way. The last month or so you’ve seen Bitcoin decouple from equities starting earlier in the year. For a while, that was hurting Bitcoin because equities, particularly AI, were roaring and Bitcoin was kinda flat to down, then in July when AI had the huge pullback, Bitcoin outperformed significantly. That decoupling is healthy because it is part of the thesis for a lot of people around Bitcoin as a diversifier and potentially a hedge against some of the left tail risks that exist elsewhere in the portfolio.”
Earlier in the week, CoinMarketCap
reported that Fidelity Investments had filed an amended registration with the SEC to add staking to its $898 million Fidelity Ethereum Fund (FETH). If approved, Fidelity could stake up to 100% of the fund and distribute a percentage of the staking rewards to shareholders.
Major US banks also increased their crypto-linked ETF exposure, according to Q2 13F filings. Morgan Stanley and JPMorgan boosted their crypto holdings. Morgan Stanley increased its BlackRock Bitcoin ETF (IBIT) position to 16.5 million shares from 13.4 million in Q1. The bank also added to its Ether (
ETH) and Solana (
SOL) ETF positions. The 13F filing shows JPMorgan’s IBIT holdings rose to 10.4 million shares, from 8.3 million at the end of March, and the bank opened fresh positions in XRP ETPs and a SOL staking ETF.
Slumping Trading Volumes Put a Lid on BTC Price Discovery
Market sentiment metrics and institutional investor positioning may be improving, but multi-year-low trading volumes have put a lid on the duration of rallies.
Glassnode data shows Bitcoin spot volume at its lowest level since 2019, reinforcing a price ceiling at $68,700 and the risk of a revisit to $58,500.
Bitcoin spot volume falls to seven-year low. Source: Glassnode
According to Glassnode analyst Frederik Theissen,
“Spot Exchange Volume, measured in coins rather than dollars, has fallen to its lowest level since the series began in early 2019, and even with Binance excluded it now scrapes its 2023 bear-market lows. Fewer bitcoin are changing hands than at any point in seven years, as clear a measure of apathy as the market offers.”
Although the current price action and multi-year low trading volumes are disconcerting, negative news events appear to have a diminished impact on Bitcoin’s price action. It has maintained an average daily price near $64,000 for almost two months.
Since February, recurring sell-offs to the $63,000 to $58,000 zone have been absorbed by bidders and Bitcoin continues to perform asymmetrically during extreme market events.
Bitcoin dip buyers defend the $62,000 support. Source: Ray Salmond / X
CPI Result Aligns With Market Expectations
The Aug. 12 Consumer Price Index print came in line with
market expectations, leading analysts to lower their expectations for a US Federal Reserve interest rate hike in September. Annual inflation stands at 3.4%, down 0.1 percentage point from June.
Combined with a July jobs report showing a cooling employment market, the CPI print reinforced analysts’ view that the Fed has more time to hold rates steady. Bitcoin surged to $64,400 following the CPI release, but the upcoming Sept. 10 US Producer Price Index (PPI) report could show economic conditions beginning to fragment. The PPI will provide deeper insight into whether service-sector inflation is rising.
BTC’s historical CPI response. Source: CoinMarketCap / X
CLARITY Stuck in the Mud: CFTC and SEC Announce Plans to Move Forward
Resolving the issues
preventing the CLARITY Act from reaching a Senate floor vote will have to wait until September, but that hasn’t stopped the CFTC and SEC from moving forward on crypto-supportive initiatives.
According to
Paul Hastings LLP, CFTC Chair Michael Selig said the regulator will proceed with an assortment of crypto initiatives even if the CLARITY Act fails to become law.
“CFTC Chairman Michael Selig said the agency has digital asset rule proposals prepared and will proceed with rulemaking whether or not the Clarity Act is enacted, with the goal of finalizing rules before the end of the current administration.”
Referencing the Bloomberg Terminal on Aug. 11, Bloomberg Senior ETF Analyst Eric Balchunas said, “the SEC poised to roll out a pair of major initiatives in the coming days that could further turbocharge the US crypto industry as a landmark digital asset bill stalls in Congress.”
The SEC subsequently postponed an Aug. 14 meeting where commissioners had planned to consider proposed crypto exemptions, citing a scheduling issue.
SEC plans to announce new crypto plans. Source: Eric Balchunas / X
What’s on the Radar?
- July FOMC minutes post on Aug. 19. Will the tone and content of the minutes alter the market’s read on the most recent jobs report and CPI? Will the minutes reframe analysts’ expectations ahead of Jackson Hole?
- Analysts cite Bitcoin’s record-low volatility and the current status of the Bollinger Bands indicator as proof that a volatile move is brewing. Will Bitcoin embark on a new price trend this week, and will the catalyst be crypto-specific or macro-driven?
- The CFTC intends to hold its first Innovation Advisory meeting on Aug. 20, titled, “Crypto’s Regulatory Evolution: From Uncertainty to Clarity.” Will additional rulemaking and clarity from the CFTC and SEC have a positive impact on crypto pricing?
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