July Market Commentary

Bitcoin and Ethereum fell on Monday to multi-month lows as worries over the convergence of geopolitical tensions, the near-certainty of a US recession regardless of any emergency rate cuts, the global impact of the Yen unwind, stock market corrections, and political uncertainty have triggered a rush to safe-haven assets. Last weekend also saw a ramping up of tension in the Middle East as the US and UK moved military assets into the Gulf to support an Israeli strike against Iran.

This is a case of TradFi-specific global macro correlations causing crypto volatility to spike as the macro dominates the micro. Still, the crypto ecosystem is sound and on a much better footing than in 2022.  Crypto markets have fallen alongside other assets, including global equities, in a broad selloff after the Nasdaq slid 3.4% last week into correction territory, capping off the tech-heavy index’s worst three-week stretch since September 2022.

Led by a drop of 11% in Bitcoin in the past 24 hours and a 21% plunge in Ethereum, the overall value of cryptocurrencies sank by around US$270 billion in value over a 24-hour period, while over a $1 billion in value was liquidated on leveraged positions impacting over 278,000 traders. While the impact of this event can be compared to other major crashes such as the FTX collapse and Terra Luna crash, it is important to note that it has been driven primarily by factors outside of cryptocurrency markets and more akin to the initial COVID-19 market shock.

We believe that this is a temporary shakeout that will be short-lived and is an excellent buying opportunity. The crypto markets should recover as rapidly as they fell and be healthier for it.

Beyond Bitcoin Podcast:

In this contemporaneous episode of Beyond Bitcoin, we delve into the recent extraordinary events in the cryptocurrency market. The CI 30, a key cryptocurrency index, has plummeted nearly 20% month-to-date, with Bitcoin dropping 19% in just seven days. We’ll explore the strong correlation between crypto and equities, how global events impact these markets, and the current market sentiment as indicated by the Fear and Greed Index. Join us as we analyse the reasons behind this sudden pullback and discuss what might happen next.

INSIGHTS AT THE FOREFRONT:

MARKET INTELLIGENCE FROM OUR CIO

Market Volatility: Cryptocurrency markets experienced significant fluctuations in July, with initial declines followed by a sharp rally, and ending the month mostly unchanged. The CCI30 Index was down -0.8%, and BTC increased by 3.1%.

Macro Economic Context: The financial markets are adjusting to the reality of higher-for-longer interest rates amidst fears of a looming recession. This shift is seen as potentially beneficial for crypto assets as they offer diversification away from traditional economic pressures.

Federal Reserve’s Signals: Federal Reserve Chair Jerome Powell indicated a potential rate cut in September unless inflation increases, which briefly boosted market sentiment.

Impact of Liquidations: Market pressures included the German government liquidating a $3 billion position and the planned distributions from the Mt. Gox bankruptcy, which added a supply overhang in the market.

Ethereum ETFs Launch: The introduction of Ethereum ETFs in July saw initial high trading volumes but was followed by significant outflows after the first day. Despite this, long-term projections are positive with expected substantial inflows into Ethereum’s market.

Political and Regulatory Landscape: President Trump’s speech at the Bitcoin Nashville conference highlighted the potential changes in U.S. crypto policy, advocating for national BTC reserves and more supportive regulatory frameworks.

Altcoin Market Dynamics: The altcoin market, especially Solana, saw significant positive movement, with institutional advancements and increased transaction volumes on decentralized exchanges. Solana’s market position improved notably, surpassing BNB in market capitalization.

Portfolio Strategy: The fund remains bullish, seeing the current market conditions as an opportunity to increase exposure to altcoins, anticipating that altcoins will outperform in the next phase of the market cycle due to attractive risk-reward profiles.

Secular Bull Market Outlook: Continued support for the view that the market is at the beginning of a multi-year secular bull market, driven by declining supply, rising demand, and favorable political and regulatory developments.

JULY INSIGHTS FROM GREG GALTON

Market Overview: July saw crypto markets undergo significant volatility, with an initial drop of 12.7%, a mid-month recovery to a 7.3% gain, eventually closing the month down by -0.8%.

Asset Performance:

Solana (SOL): Strong performance with a 17.3% increase, benefiting from its position as the largest DEX aggregator on its network.
Bitcoin (BTC): Ended the month up 3.1%, facing selling pressure from several fronts including government sell-offs and miner sales.
Ethereum (ETH): Decreased by 6.0%, pressured by investors shifting from the higher-fee Grayscale ETF to new, lower-fee ETFs.

Notable Fund Performers:

Helium (HNT): Best performer with a 40.7% increase, driven by growth in its mobile offerings and associated token burns.
Jupiter (JUP): Gained 22.3%, benefiting as Solana surpassed Ethereum in monthly DEX trading volume for the first time.

Regulatory and Political Developments:

Ethereum ETFs: Official approval by the US SEC for Ethereum spot ETFs, despite strong starts, faced net outflows.
Trump’s Speech: Former President Trump advocated for Bitcoin and digital currency innovation at the Bitcoin 2024 Conference, proposing a more favourable regulatory environment if re-elected.

Market Dynamics:

Ethereum’s exchange reserves hit a 12-month low despite the market challenges.
The overall crypto market experienced mixed reactions to regulatory news and political endorsements, reflecting the complex interplay between market sentiment and external influences.

FINAL THOUGHTS

July illustrated the volatile nature of cryptocurrency markets, with significant fluctuations across major assets. Solana excelled, capitalizing on its advancements in the decentralized exchange space, while Ethereum faced challenges despite the launch of new ETFs. Bitcoin managed modest gains amid governmental sell-offs and regulatory shifts.

Both commentaries from Mark Witten and Greg Galton highlight strategic responses to these market conditions, emphasizing the adaptability required to navigate the complex crypto landscape. The approval of Ethereum ETFs is a notable regulatory milestone, potentially setting the stage for broader institutional engagement. As the market continues to mature, the Radiance Fund remains strategically positioned to leverage emerging opportunities and tackle the challenges ahead, staying attuned to the evolving regulatory and economic influences on the crypto market.