The cryptocurrency market has been pretty calm for the past few days, with Bitcoin staying around $26K. At the time of writing, BTC has been trading at $26,090 while Ether is exchanging hands at $1,570. The total crypto market cap is also keeping at $1.077 trillion.
As crypto prices maintain stability, all the attention is on the upcoming Bitcoin halving, expected to occur in mid-2024. Because if history rhymes, the event will mark the start of yet another bull run, much like the last three times.
Amidst this, supply held by long-term holders (LTHs) is inching closer to its all-time high (ATH), which in previous cycles was a signal that the market is moving near its bottom, which follows an early phase of a new cycle.
Historically, a good measure of the health of the crypto market, this metric has negatively correlated with the long-term price action of Bitcoin. This is because long-term BTC holders keep their assets unmoved during market bottoms. Also, the largest supply increase in LTH's assets occurs during violent bear markets because they're reluctant to sell and focus on accumulation with the price plunging. During this time, they hold on to their coins because they believe that the market will bounce back in the future and their investment will prove profitable.
Long-time holders are more likely to sell their BTC when the crypto asset prices rally for a profit, resulting in a dramatic drop in supply held by LTHs during bull markets. At this time, the coins move from LTHs to short-term holders (STHs), who have held their coins for 155 days or less and join the market at the later stage of the bull market. Currently, STHs are controlling less of the available BTC supply than at any point in over a decade.
It is notable that halvings do not have an immediate impact on the asset's price, and there may still be about a year-long sideways price action ahead for the largest cryptocurrency by market cap. If history is any indication, we might not see the raging bull market until the end of next year or in 2025.
Once Bitcoin starts trending up, other altcoins then start following. For now, altcoin king Ethereum, the second-largest crypto, has been looking bearish, with co-founder Vitalik Buterin continuing to move ETH to centralized exchanges, which are usually for selling.
On Monday, blockchain sleuth Lookonchain reported that Buterin had deposited 400 ETH valued at around $632,000 on Coinbase. In addition to this, ETH whales with balances greater than 10,000 have been declining this month along with ETH prices.
JPMorgan also noted in a research report last week that Ethereum's Shanghai upgrade, implemented in April, does not appear to have increased activity as many had hoped for. “The ether supply is shrinking, and staking rose sharply, the increase in network activity has been rather disappointing,” analysts led by Nikolaos Panigirtzoglou wrote.
The report noted that the blockchain's daily transactions count has fallen 12% since the Shanghai upgrade, daily active addresses by nearly 20%, and the total value locked (TVL) by almost 8%. This fall in network activity suggests that the “bearish forces,” including the collapse of FTX, the US regulatory crackdown, and a contracting stablecoin supply, have potentially outweighed the positive impact from the Shanghai upgrade, the bank said.
It further raised questions about centralization with the share of liquid staking protocols like Lido remaining “uncomfortably high,” though JPMorgan noted that a jump of 50% in staking since the upgrade does help to improve network security. Moreover, with the upcoming EIP-4844 upgrade or Protodanksharding, which is planned for the next quarter of 2024, hope remains for the crypto asset, though “continued bearish crypto forces remain a headwind.”
Macroeconomic Event in Focus This Week
Not just Bitcoin but Wall Street's benchmark equity index, the S&P 500, also appears on track to end the third quarter lower, with the case for owning bonds over risk assets strongest since 2009 due to high-interest rates.
Compared to Bitcoin's 14% decline for Q3, the S&P 500 is down nearly 3% during this period. Meanwhile, the equity risk premium, which is the gap between the S&P 500's earnings yield and the yield on the US 10-year Treasury note, has plunged to -0.58, the lowest since 2009 when it averaged roughly 3.5 points. The difference between the S&P 500's dividend yield and the 10-year Treasury yield has also declined to -2.87, the lowest since July 2007.
Being backed by the US government, treasury securities are regarded as risk-free, given that the government has never defaulted on its debts. With the 10-year yield currently at 4.48%, it is far more profitable to invest in government bonds than non-yield-bearing Bitcoin, which is down 62.2% from its peak of $69,000 two years ago.
This is because of the Federal Reserve's quantitative tightening, with the US Central Bank Chair Jerome Powell saying last week that more rate increases aren't out of the picture yet for this year after keeping them unchanged at 5.25%-5.5%.
This week, on Thursday, Powell and Governor Lisa Cook will hold a town hall meeting for educators. However, the event isn't expected to have much impact on digital asset markets.
The next day, a new data report for US building permits and new home sales will be released. The numbers have been forecast to dip a little, which again should not impact crypto markets.
However, earlier in the week, on Tuesday, the US consumer confidence index figures will be released, which are reflective of the broader economy. They are expected to remain subdued at August levels, suggesting the economy remains sluggish, meaning less appetite for risky assets, hence, a bearish event for crypto. The second quarterly final GDP (gross domestic product) estimates are also expected to be released on September 28.
Meanwhile, on Friday, the Bureau of Economic Analysis (BEA) will increase the new figures for the Personal Consumption Expenditures (PCE) index. Also known as consumer spending, it is a measure of the spending on goods and services and is used as the Fed's preferred inflation gauge. The Fed targets a 2% annual rate of PCE inflation. The Core PCE, which excludes food and energy, is expected to have increased by 0.2% month-on-month in August. The annual meanwhile is expected to be around 4%, lower than July's 4.2%.
This will be used by traders to judge whether the Fed will follow through on its projections of another rate hike this year. While Powell has said that inflation has moderated, the process of getting it down to 2% has a long way to go. The central bank actually does not see both headline and core inflation back at 2.0% until 2026.
Any upsides in either or both personal consumption and core PCE would boost the odds of one final hike, pushing up Treasury yields and the US dollar while sending stock and crypto markets down. The latest spike in oil prices has already started to push headline inflation back up.
Another concern for investors is a possible government shutdown as time is running out for Congress before the midnight deadline on September 30 to agree to a stopgap spending bill.
Elsewhere, the Tokyo CPI readings will also be watched later this week for any signs that inflation in Japan isn't about to drop to 2% in a quick manner. Additionally, retail sales and preliminary industrial production figures for August are on Japan's agenda on Friday.
Token Unlocks in Focus This Week
In the crypto market, several tokens will be unlocked and released into the market, which could negatively impact the price of the respective cryptocurrencies. Besides Pendle's weekly release, this time 56.72k in liquidity incentives on Wednesday, the day will see other projects having token unlocks.
1.26% of GAL's circulating supply will be unlocked this week. 586.67k GAL tokens worth $774K belong to Galxe's treasury. The $61.5 mln market cap coin recorded almost $8 mln in trading volume in the past 24 hours while its price trades at $1.33, up 20.5% in the past week but down about 52% over the past year. The token is down 92.76% from its ATH.
On the same day, Yield Guild Games will be releasing 12.42 million YGG tokens worth $2.56 mln into the market. These tokens make up 6.71% of the YGG's circulating supply and are allocated to the community, investors, founders, and treasury, according to TokenUnlocks. YGG is a $38.2 mln market cap coin trading at $0.20 and managing $16.7 mln in 24-hour trading volume. It is up 11% in the past week but in red by 46% over the past year and a whopping 98% off its peak.
Then, on Thursday, SingularityNET will unlock 9.68 million AGIX tokens worth $1.73 mln as part of the AGIX-ADA utility. AGIX had a good past year, with its price up over 264% during this period, thanks to the artificial intelligence (AI) craze. Currently trading at $0.1786, its price is still down 81% from its ATH.
For community-selected markets, Euler will be releasing 153K EUL tokens, which are worth about $411.6K, with EUL currently trading at $2.69. The $50.3 mln market cap coin recorded less than $300k in trading volume in the past 24 hours. The token is up 15% in the past month but down 67% over the past year and has lost 79% of its value since ATH.
Over the weekend, SUI will release 1 million tokens as part of stake subsidies. This relatively new token has less than 792 million of its supply circulating in the market out of the total 10 billion, as per Coingecko. With a market cap of $348 mn, SUI is among the top 100 cryptocurrencies, and although it is currently trading at $0.439, it has plummeted about 80% from its peak that it hit in May this year.
A total of 24.16 million OP tokens worth $30.44 mln will be released into the market on Saturday. 12.75 million of these tokens belong to core contributors, while the remaining to investors. The $1 bln market cap token has been seeing $50 mln in trading volume while its price recorded a positive performance of 35% over the past year while being down 61% from its high hit this year in Feb.
Last week, the Ethereum layer-2 scaling solution disclosed its plans to sell 116 million OP tokens to seven private buyers for treasury management purposes, and they will be subject to a two-year lockup period. According to the project, this sale is accounted for in its “original working budget of 30% of the initial token supply.” This comes just days after 19.4 million OP tokens were allocated to over 31,000 addresses that took part in delegation activities relating to the network's DAO Optimism Collective.
STEPN's GMT will mark the last-day release of the week with 2.66 million tokens, which is part of the project's private sales, advisors, team, and ecosystem/treasury. The native token of the Web3 lifestyle app STEPN, GMT, has a market cap of $180 mln and records $16.7 mln in volume. Trading at $0.150, the token has seen its value plunge by 76.4% over the past year and is down by 96.3% from its peak.
On the same day, Acala will unlock 27.43 million ACA tokens worth $1.35 mln. Out of the total unlock amount, which is 3.43% of the circulating supply, 11.25 million of which belongs to the team and the rest to strategic partners. ACL price has gone down 77% over the past year to now trade at $0.0489, which is a staggering 98.24% away from its peak. The $40 mln market cap token is currently managing $4.2 mln in volume.
DEX 1inch will also be unlocked 15k 1INCH tokens that day, which belong to team/investors/VC. The value of 1INCH rose 12% over the last two weeks but lost 58.4% over the past year. Trading at $0.257, 1INCH is down 97% from its ATH. The DEX is currently working on an update called “Token Plugins” for the DeFi sector.
So, as we saw, some disturbances can be seen in the market caused by forces both inside and outside the crypto space this week.