It's the last week of August, and crypto prices continue to be in red, with no reprieve seemingly in sight. In fact, based on Bitcoin's historical performance in September, prices may take a turn for the worse.
For now, Bitcoin is trading at $25,940 while Ether is exchanging hands at $1,636 at the time of writing. Meanwhile, the total crypto market cap is at $1.086 trillion.
As prices continue to show weakness, Bitcoin mining revenue — which is dollars earned per TH/s per day — has fallen to levels not seen since the BTC price tanked to $16,500 due to the collapse of FTX in November 2022. According to HashPriceIndex, revenue is currently just $0.060 per terahash per second per day, having halved since early May when the Bitcoin Ordinals inscription frenzy caused a heavy demand for block space.
Amidst this, the hash rate has reached new highs of 414 exahashes per second (EH/s), surging 54% from the beginning of 2023 and 80% over the past 12 months, according to Blockchain.com. This means that more efficient new rigs will keep being produced.
So far, Bitcoin miners have been relying on funds from stock sales in the last quarter to keep them afloat during the bear market. According to a recent Bloomberg report, 12 major publicly traded miners raised about $440 million through stock sales in Q2.
For miners to be profitable, crypto prices need to recover. However, this doesn't seem a possibility in the immediate future. But JPMorgan's latest research suggests that the cryptocurrency market's recent downtrend may still be coming to an end, with most long position liquidations having been completed.
Analysts for the banking giant estimate that the liquidations are “largely behind us,” based on the open interest in Bitcoin futures contracts on the Chicago Mercantile Exchange (CME), which is on a decline, indicating that the selling trend might soon decelerate and as a result, “we see limited downside for crypto markets over the near term.”
The ongoing downtrend started in recent weeks due to declining optimism around regulatory developments in the US as traders await spot Bitcoin ETF decisions and the SEC's appeal against Ripple brings renewed uncertainty, it noted. These scenarios contribute to a “new round of legal uncertainty” for crypto markets, according to JPMorgan's analysts, who say this makes crypto prices sensitive to future developments. External market conditions, including the rising US real yields and concerns about China's economic growth, also played a role in the crypto market's decline.
Talking about rates, last week, US Federal Reserve chair Jerome Powell doubled down on the potential for interest rates to stay higher for longer in his opening speech at the Jackson Hole Economic Symposium on Friday. Powell said that while the US economy has become more resilient, inflation still remains “too high.” As such, the central bank can still raise interest rates if needed. However, the Fed will “proceed carefully” before making any decision, he added.
The rates are currently between 5.25% and 5.50%, the highest level in 22 years. The CME FedWatch Tool predicts a 19.5% chance for a 0.25% rate hike at the Fed's next meeting in September.
Amidst all this, the Cryptocurrency Fear and Greed Index continues to remain in “Fear” territory since last week, currently having a reading of 39 out of 100. This indicates that the market might be far from oversold and is not yet attractive to buyers. Against this backdrop, let's see what the crypto market has in store for it.
Elon Musk's Super App & Crypto Connection
Tesla and SpaceX CEO Elon Musk, who is also the owner of X (previously Twitter), is known for his interest in crypto, having been holding Bitcoin on his automaker's balance sheet, promoting his “fave” meme coin Dogecoin, and allowing payments to be made in BTC and DOGE.
Over the past few years, Musk has caused wild swings in the price of Bitcoin, Dogecoin, and other major cryptocurrencies. Now, as per the latest reports, Musk might be planning to turn X into an “updated version of PayPal,” which recently launched its own stablecoin called PYUSD and helped kick off the last bull run after announcing support for crypto in late 2020.
The billionaire “continues to have conversations (with) top Wall Street executives on (the) future of X,” noted Fox Business News correspondent Charles Gasparino on X. “Seems to be settling, they tell me, on a new-fangled payment system, (an) updated version of PayPal. It will offer low transaction costs (as opposed to credit cards) and monetize user info.”
Musk has been pretty vocal about turning X into an ‘everything app.' According to a Wall Street Journal report, the plan has been to not just turn X into a ‘super app' but a behemoth financial institution. The best example of a super app is Tencent's WeChat, which boasts of having more than 1 billion monthly active users. The Chinese app, which Musk has called “great,” is used for messaging, broadcasting, video conferencing, gaming, location-finding, and making digital payments.
Earlier this month, Musk denied media reports that suggested X could add a trading platform built inside the app as part of a plan to turn it into a financial data giant while stating that X will never launch a cryptocurrency of its own, which means the platform will potentially integrate existing cryptocurrencies.
“Elon Musk and 𝕏 never launched a crypto token,” an X dogecoin fan account posted, to which Musk replied: “And we never will.”
Earlier this year, Musk also teased that dogecoin payments could be coming to X when he suggested that DOGE could be a payment option for the platform's premium service. Tesla already accepts dogecoin payments in its online store. Then, a few months later, Musk briefly added the dogecoin Ð symbol to his X account.
Token Unlock to Drive DYDX Lower?
In the currently down market, which is marked by low liquidity, token unlocks can have a substantial effect on a crypto asset's price. This week, DYDX, the native token of the decentralized exchange, will be seeing the release of 6.52 million tokens worth about $14 million on August 29. This unlock comprises community treasury (2.49 mln), liquidity provider rewards (1.15 mln), and trading rewards (2.88 mln). Tokens unlocked for these categories are distributed on a 28-day epoch basis.
The previous unlock of an equal amount was on August 1, which saw DYDX's price initially rising by about 6.5% and then falling more than 11% over the period of the next three days.
According to analytics firm The Tie's research, on average, crypto prices decline leading up to the event, but in cases where the liquidity freed up was over 100% of the average daily volume, token prices rebound quickly but then drop all over again over a period of two weeks.
Besides DYDX, this week, SWEAT, PENDLE, OP, EUL, SUI, NYM, 1Inch, HBAR, GMT, ACA, and JOE will experience token unlocks, too, as per TokenUnlocks.
Interestingly, only 25% of DYDX supply is circulating in the market, with the biggest unlock for this token taking place on Dec. 2023, when $503 million worth of DYDX will be released in the market. These tokens have been allocated to future employees & consultants, current employees, and investors.
At the beginning of this year, 150 million tokens were supposed to be unlocked, which led to a drop in DYDX's price. This has the team announcing that the tokens wouldn't be locked until December. As a result, in three months, we'll see a total of 425.65 million tokens in circulation, up from the current 173.46 million. Then, by December 31, 2024, this number will be increased to above 766 million.
Antonio Juliano, the founder of the dYdX DEX, meanwhile commented on the current regulatory landscape, stating that crypto builders should focus on serving markets outside the US for now and focus on “finding 10x stronger product market fit.”
Juliano argued that early-stage crypto projects could scale faster in “plenty big overseas markets” as lobbying for friendlier crypto regulation takes time, and for now, crypto doesn't have the “world-scale usage/product market fit.” The process could be expedited if we built products with massive usage, he added.
“Crypto is aligned with American values. What could be more American & capitalist than a financial system of the people, by the people, and for the people? That is literally what we're building here. America will realize that eventually,” said Juliano.
In response to this, Brian Armstrong, the CEO of Coinbase, who has been making several efforts to help drive crypto policy in the US, said, “it will be better in a much shorter time. Probably by next year if I had to guess,” adding that the country “always gets it right, after exhausting every other option.”
All Eyes Back on Grayscale vs. SEC Verdict
The ongoing SEC-Grayscale saga continues on as the US Court of Appeals postponed, once again, a ruling on the digital asset manager's bid to transform its popular $16.19 bln Bitcoin Trust into a standard spot Bitcoin ETF.
Grayscale chief legal officer Craig Salm took to X to share that the anticipated legal proceedings involving the firm remain pending, and no rulings have been issued across any cases, including those unrelated to Grayscale. Consequently, uncertainty lingers regarding the future of the spot Bitcoin ETF.
The DC Circuit Court of Appeals was expected to give a ruling on Grayscale's Spot Bitcoin ETF lawsuit against the United States Securities and Exchange Commission (SEC) on August 22 after failing to do so on August 18 and before that on August 15. But given that the court has once again failed to make a decision, now the crypto community has to wait and see if it finally happens this week.
On August 17, Grayscale said that its ETF team is expanding, tweeting, “Our ETF team is hiring.” Positions for a product specialist and senior associate to assist the ETF team have been posted on LinkedIn.
Grayscale sued the SEC last year when the company reportedly tried to persuade the Commission to convert GBTC to a Spot Bitcoin ETF, which the SEC rejected. In its lawsuit, Grayscale argued that the regulator had acted indiscriminately by not giving its request the same treatment it does to similar investment funds.
According to the crypto company, Spot Bitcoin ETFs should be approved like Bitcoin futures ETFs. In its final oral argument in March, Grayscale argued that by denying a Spot Bitcoin ETF while approving a Bitcoin futures ETF, the SEC has been inconsistent, and its disapproval order against the company was contradictory.
The company further argued that both futures and spot bitcoin markets pose the same risk of fraud and manipulation, and the pricing of both investment vehicles is “99.9% correlated.” Hence, with the SEC finding the CME's surveillance sharing agreement sufficient enough to protect against the risks in the futures market, it should also be able to deem it sufficient to approve Spot Bitcoin ETFs.
Grayscale is one of several financial firms, including BlackRock, ARK, and Fidelity, that have applied to the SEC to offer a Spot Bitcoin ETF. But so far, the SEC hasn't approved a single application. The first ETF application was filed in as early as 2013 by the Winklevoss Bitcoin Trust.
A verdict in favor of Grayscale could potentially force the hands of the agency to finally approve a Spot Bitcoin ETF, which would be a big boost for the crypto industry as it would make way for institutional investors to have direct access to the largest cryptocurrency. A green light from the SEC, as per Grayscale and ARK CEO Cathie Wood, would likely see the Commission approving multiple applications simultaneously.