Source: Coindesk, Bloomberg; Compilation: Felix, LianGuaiNews
Earlier this summer, BTC rose due to several positive news. The most noteworthy is a series of institutions, led by BlackRock, applying to launch Bitcoin spot ETFs. The ruling of the regional court in the legal lawsuit between Ripple Labs and the US SEC also boosted the entire market. However, the effect of the “booster” was not lasting.
The market sentiment surrounding the positive news is fading, and BTC prices are experiencing a correction. The market is waiting for the decision on the approval of the Bitcoin spot ETF and the SEC’s preparation to appeal against Ripple, with analysts expecting the case to have a result “next year”. This has brought “a new round of legal uncertainty” to the crypto market.
In addition, part of the reason for the correction is also due to a broader correction in risky assets such as stocks, triggered by “the positioning of the technology bubble, rising US real yields, and concerns about Chinese growth”. Federal Reserve Chairman Jerome Powell hinted that the Fed is prepared to raise interest rates further if necessary and intends to keep borrowing costs high until the inflation rate reaches the target.
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End of the Correction
On August 25, a research report from JPMorgan Chase stated that the sell-off in the crypto market may be nearing its end, and the liquidation of long positions “is basically over”. Analysts, including JPMorgan Chase strategist Nikolaos LianGuainigirtzoglou, wrote that in recent weeks, some bearish legal and regulatory news has gradually dissipated. Although the sell-off wave is “still having an impact,” based on the open interest in CME Bitcoin futures contracts (the number of outstanding and active futures contracts traded on the exchange), it appears that this sell-off wave is in its ending stage. Because the decline in open interest usually indicates a weakening price trend. Therefore, analysts believe that the downside potential in the crypto market in the short term is limited.
On August 29, US court documents showed that Grayscale’s motion for reexamination was approved, and the SEC’s order was revoked. Grayscale filed a lawsuit against the SEC last year when the SEC rejected its proposal to convert GBTC into a Bitcoin spot ETF. This ruling means that Grayscale has won the lawsuit against the US SEC. Bloomberg ETF analyst James Seyffart said that this does not mean that GBTC will automatically convert into an ETF, but it does bring the approval of a Bitcoin spot ETF closer.
After the news of Grayscale’s victory came out, BTC prices rose by more than 7% and surpassed $28,000. The price has since risen to slightly above $27,900.
It is worth mentioning that, according to data tracked by analytics firm Santiment, nearly 30,000 BTC (valued at $822 million based on the current market price of $2.74) were transferred to addresses related to centralized exchanges before Grayscale’s victory. Perhaps some traders anticipated the price increase and prepared in advance by transferring tokens to exchanges.
As the price of BTC rose to $28,000, data tracked by CryptoQuant showed that the average amount of BTC flowing into each transaction or transferred to exchanges rose to 1.146, the highest level since June 21.
In addition, the average transaction size of BTC has soared to the highest level since June. According to Kaiko data, after the ruling, the average transaction size of BTC on the cryptocurrency exchange Kraken increased from around $850 to over $2,000. Research firm Kaiko said the last time the average transaction size of Bitcoin was higher than $2,168 was in June. The average transaction size of Bitcoin on most other exchanges has also increased significantly.
How sustainable is it?
Clara Medalie, research director at Kaiko, said in an interview that while it is still too early to judge the sustainability of the price increase, “there are some small signs that we may see a slight reversal.”
It is worth noting that compared to other “mini bull markets”, the trading volume on exchanges in this rally has only reached a two-week high. Medalie explained that trading volume represents the level of market participants’ involvement in the market, so the low trading volume data may indicate some weaknesses behind this trend.
Although the average transaction size of BTC has soared to the highest level since June, indicating the activity of large investors, Medalie said, “the approval of ETFs will definitely be a bullish catalyst for the crypto market. But the market is still in turmoil, with quite a few bankruptcies and lawsuits underway.”
Garreth Soloway, Chief Market Strategist at IntheMoneyStocks.com, predicts that if Bitcoin fails to break through the $28,000 level before the mid-August sell-off, the price of Bitcoin will further decline.