StoneX Digital Asset Weekly Commentary - Trading Color and ETH Redux

By: Stonex Digital LLC, Stonex Digital LLC

Thu, 27 Jun 2024, 16:57

Market Trading Color & Ethereum Deep Dive Redux

David Kroger
Senior Vice President
StoneX Digital
david.kroger@stonex.com

Executive Summary

Market trading color: BTC price action, RSI levels, fear and greed, Solana ETF, and ETH longer-dated call interest
Theme of the week – StoneX Digital's Deep Dive Series explores Ethereum’s transformative impact, future projections, and key innovations
Sector commentary: Bitcoin rebounds as analysts dismiss Mt. Gox fears, Ethereum inflation continues, and Ripple discusses stablecoin

Market Trading Color (Nolan Aibel)
This past week saw the largest net selling day for $BTC in over a year after Mt. Gox announced repayments will begin in July 2024. As a result, the asset sank over 7.00% on Monday, breaking support around $60,500 and bottoming around $58,400. The asset has since recovered back above $61,000 at the time of writing, and support could be seen building back up around $60,200. If we fail to hold this level, we could test the next major support around $57,500. However, sentiment is positive as we head into the debate tonight. Liquidity in this nearby range looks thin with notable resistance out in the distance above around $65,000. Over $1.3B in liquidation leverage for $BTC lies near that price.

As price action bounced off lows, ETF flows turned positive. After 7 days of net outflows, the last two days saw inflows of $31M and 21M. On Monday’s leg down, $BTC RSI tapped 24, officially hitting the oversold range for the first time since August when $BTC was trading around $25,000. This has been a solid indicator in signaling market bottoms that then result in rallies as seen the past three times this metric was breached below. Nov ’22 resulted in a 60% rally, March ’23 +65%, and September ’23 +200%.

image-20240627123651-1

Source: Bloomberg

Another metric we keep an eye on is the Fear and Greed Index. The index ranges from 0 (Extreme Fear) to 100 (Extreme Greed) and reflects crypto market sentiment. A low value signals over-selling, while a high value warns of a potential market correction. Bitcoin hit 30 (fear) yesterday on this index. Many times, this range of fear has represented a local low before a next leg higher. While the X axis is a little misleading, it emphasizes the delta between market tops/bottoms of the fear and greed index alongside the sequential price action.

image-20240627123651-2

Source: Cryptocon

Solana was net even on the week heading into today, however $SOL is up over 10.00% on the day after VanEck announced that they filed for the first Solana ETF in the US. As to why they believe it is a commodity, VanEck’s Head of Digital Asset Research, Matthew Sigel, stated in a twitter post, “We believe the native token, $SOL, functions similarly to other digital commodities such as $BTC and $ETH. $SOL’s decentralized nature, high utility, and economic feasibility align with the characteristics of other established digital commodities, reinforcing our belief that SOL may be a valuable commodity with use cases for investors, builders, and entrepreneurs looking for alternatives to the duopoly app stores.”

Looking ahead, the ETH ETF continues to be in focus as many expect it to be approved before next week’s holiday. VanEck filed their form 8-A for their spot ETH ETF on Tuesday. It is worth noting they did so for their BTC ETF 7 days prior to launch. Given this, there were some large buyers of ETH upside in longer dated 4k strikes out in Sep and Dec.

image-20240627123651-3

Source: TheTie

StoneX Digital Deep Dive Series Introduction

On June 25th, we released our first StoneX Digital Deep Dive Series, covering Ethereum. Throughout this series, we will provide detailed analyses and future projections of top crypto and digital asset technologies, offering a comprehensive understanding of various protocols’ roles and potential. This first report focuses on Ethereum and its potential transformative impact on the digital economy.

Overview

Ethereum, often referred to as the digital oil of the future, is a blockchain platform that is revolutionizing the world of decentralized finance (“DeFi”) and beyond. It serves as the backbone for numerous applications and innovations, establishing itself as critical infrastructure in the digital economy.

Price Modeling and Future Projections

Our modeling of Ethereum's future price considers factors such as upcoming deflationary mechanisms, the impact of Ethereum staking, and growing institutional buy-and-hold behavior. We estimate that Ethereum's price could range between $2,142 and $12,621 over the next two years. These projections account for the stabilizing effects of the 2021 London Hard Fork and the plateauing impact of NFTs, offering a conservative view of Ethereum's potential growth amid evolving market dynamics.

Stablecoins and Cross-Border Payments

Stablecoins built on Ethereum, such as USDT, USDC, and DAI, are transforming cross-border payments. These digital assets offer speed, cost-effectiveness, and accessibility, especially in regions facing economic challenges or restrictions. Over the past year, Ethereum's network facilitated $5.5 trillion in adjusted on-chain volume for stablecoins. Stablecoins allow for quick and inexpensive global transactions compared to traditional banking systems, which can take several days and incur high fees. The widespread adoption of stablecoins reinforces the US dollar's status as a reserve currency and integrates digital currencies into the traditional financial system.

Ethereum Roadmap and Upgrades

Ethereum is undergoing significant upgrades through five parallel phases aimed at enhancing its functionality, security, and performance. Additional features include Danksharding for massive scaling, Single Slot Finality for rapid transaction finality, Proposer-Builder Separation for enhanced block creation, Secret Leader Election to protect proposers from DOS attacks, Account Abstraction for improved security and user experience, and Verkle Trees and Statelessness to reduce storage requirements and enable true decentralization.

*** StoneX Digital currently supports spot trading in BTC & ETH. With the upcoming launch of ETH ETFs, the ability to trade spot ETH, alongside spot BTC, on a 24/7 basis will become even more important for global asset and risk managers. StoneX Digital plans to expand its support beyond BTC and ETH in the coming months as we aim to service the entire digital asset investment ecosystem. ***

Sector Commentary

Layer One / Altcoins
- Bitcoin ($BTC): What technical analysis says on where bitcoin goes from here (link)
- Bitcoin ($BTC): Bitcoin Rebounds 5% as Analysts Argue Mt. Gox Fears Are Overblown (link)
- Bitcoin ($BTC): Bitcoin Price Rebound Sees Shorts Liquidated as Crypto Market Recovers (link)
- Bitcoin ($BTC): Bitcoin price drop below traders’ cost basis warns of deeper sell-off (link)
- Bitcoin ($BTC): Bitcoin price must end June above $56.5K to defend uptrend — Analysis (link)
- Bitcoin ($BTC); Ethereum ($ETH): Renewed Bullishness Expected After Bitcoin, Ether's $10B Options Expiry on Friday (link)
- Ethereum ($ETH): Ethereum’s supply has been inflating for 73 days straight (link)
- Ripple ($XRP): Ripple's upcoming stablecoin will 'complement' XRP, says Ripple President Monica Long (link)
- Solana ($SOL): Solana Adds 'Blinks' and 'Actions' so Users Can Trade Crypto on Their Favorite Social Apps (link)
- Altcoins: Most profitable crypto sectors in first half of 2024 revealed (link)
DeFi
- Blast Token Debuts at $3B Value as 17% of Supply Airdropped to Early Adopters (link)
- What is a Bitcoin-backed loan, and how to get one? (link)
- Op-Ed: The future of finance? TradFi plus DeFi (link)
- Hong Kong targets DeFi, metaverse for fintech expansion (link)
- Nubank brings Bitcoin Lightning to its 100M Latin American customers (link)
Web3 / AI / NFTs
- Protocol Village: Algorand Foundation Positions New 'LiquidAuth' as Decentralized WalletConnect (link)
- EigenLayer AVS Ava Protocol acquires blockchain data startup Openstory (link)
- Ora, Aiming to 'Unlock Design Space for AI Dapps,' Raises $20M (link)
- Solana-Focused Startup Accelerator Colosseum Raises $60M to Invest in Early-Stage Projects (link)
- Digital collectibles market sees 45% decline in Q2 (link)
RWA / Tokenization / Metaverse / Gaming
- McKinsey Report: Tokenization at a Tipping Point, Poised to Transform Financial Markets (link)
- AI Depin Project Grass to Implement Rewards Distribution Using Solana (link)
- Investcorp and Securitize Launch Fund Tokenization Partnership (link)
Digital Infrastructure: Capital Markets / Exchanges / DAOs / Mining
- MicroStrategy Bought 11,931 More Bitcoin for $786 Million (link)
- Animoca Looks to Go Public in Hong Kong or Middle East in 2025: Report (link)
- Op-Ed: Crypto for Advisors: Crypto Trends (link)
- US spot bitcoin ETFs score $31 million in net inflows after outflow streak (link)
- SEC Chair Gensler Says Ethereum ETF Approval is Going Smoothly (link)
- Bitwise: Ether Spot ETFs to Attract $15B of Net Inflows in First 18 Months (link)
- VanEck files Form 8-A as path towards a spot Ethereum ETF presses on (link)
- VanEck plans to waive fees for potential spot Ethereum ETF at the outset (link)
- Marathon Uses Bitcoin Mining To Heat Town Of 11,000 In Finland (link)
- Bitcoin miner Core Scientific says CoreWeave exercising option for 70 MW of additional infrastructure (link)
- HIVE Digital grows revenue by 8%, ends fiscal year with $141 million of bitcoin (link)
- Lawyers debate FTX's reorganization plan in bankruptcy court as creditors gear up to vote on next steps (link)
- Mt. Gox to begin $9 billion repayment plan in July (link)
- German government sends another $15 million in bitcoin to Bitstamp and Kraken: Arkham (link)
- Crypto Execution-Only Platform Crossover Markets Raises $12M (link)
- 54% of institutional investors in Japan plan to invest in crypto: Survey (link)
- Rep. Matt Gaetz introduces bill requiring the IRS to accept bitcoin as payment for federal income taxes (link)
- EU crypto sector faces disruption from next week's MiCA rules targeting stablecoin activity: analyst (link)
- El Salvador’s national Bitcoin chief has been orange-pilling Argentina (link)

Digital Assets

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for government backed currencies (known as fiat) or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.

Purchasing cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges may not be regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.

This material contained herein is intended for Institutional and Investment Professional Use Only and may not be distributed to the investing public. The views expressed are those of the author and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and StoneX Group Inc. disclaims any responsibility to update such views. Past performance is no guarantee of future results.

StoneX Financial Inc. does not act as counterparty or custodian to any virtual currency transaction(s) offered through its affiliate StoneX Digital LLC and this content should not be construed as a solicitation for futures or securities accounts.

The authors responsible for the preparation of this commentary hereby certify that all the views Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for government backed currencies (known as fiat) or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.

This material contained herein is intended for Institutional and Investment Professional Use Only and may not be distributed to the investing public. The views expressed are those of the author and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and StoneX Group Inc. disclaims any responsibility to update such views. Past performance is no guarantee of future results.

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the- counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. StoneX Digital LLC (“SXD”) is a subsidiary of StoneX Group Inc. and is dedicated to providing institutional clients with access to multiple products and services for digital assets. SXD is not a registered broker-dealer or futures commission merchant subject to federal securities or commodity regulations and does not solicit securities or futures. SXD seeks to provide institutional clients the flexibility and tools to interact with markets on their terms and enable them to trade cryptocurrencies.

Options are not suitable for all investors. There are risks involved in any option strategy. Individuals should not enter into option transactions until they have read and understood the option disclosure document titled "Characteristics and Risks of Standardized Options," which outlines the purposes and risks of option transactions.

Exchange Traded Funds (ETFs) are subject to market risk, including the possible loss of principal. The value of the portfolio will fluctuate with the value of the underlying securities. ETFs trade like a stock, and there will be brokerage commissions associated with buying and selling exchange traded funds unless trading occurs in a fee-based account. ETFs may trade for less than their net asset value. Investors should consider an ETF’s investment objective, risks, charges, and expenses carefully before investing.

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