CAM | Market Update | August 2023
- August 8, 2023
- Posted by:AssetManagement
- Categories:crypto market update, cryptocurrencies
The crypto market has been quieter in July than the month before. The ongoing rally in equities, further developments in AI, as well as the weak US dollar and related rumors have attracted attention. In addition, part of the crypto world has achieved a stage success in the legal battle with the SEC. This brought hope to the entire crypto sector. Certain altcoins have reacted positively and recorded larger price jumps. The crypto media has been discussing the issue around crypto-friendly presidential candidates. Robert F. Kennedy Jr. has also come out in favor of bitcoin, along with Ron DeSantis, who was also mentioned earlier. The FED tends to keep a low profile in election years. This raises the question of how much sense high interest rates make during election campaigns and how the FED would react to a recession next year. After the hashrate reached a new all-time high in early July, the 800,000th block was successfully appended to the Bitcoin blockchain towards the end of the month.
Lightning network meets AI (12.06.23)
Lightning Labs has announced it is releasing new developer tools that can be used to connect Large Language Models as well as other AI applications and Bitcoin's Lightning network. This is expected to help AI developers reduce costs and collect them immediately from the end user in a barrier-free manner. Thus, AI operators can continuously fund immediate further development and resources (including GPUs) needed due to higher demand. This could represent a paradigm shift in the development of new models in artificial intelligence and a further establishment of the Bitcoin Lightning network.(Source)
Japan reaffirms Web3, Binance back (07/25-23)
Japanese Prime Minister Fumio Kishida supports the Web3 industry and emphasizes the potential for transformation through Web 3 and for promoting social change. At the same time, Binance, the largest crypto exchange, is returning to Japan by purchasing the 'Sakura Exchange Bitcoin' platform in August 2023 after leaving the country years earlier. The country is working on strict regulations to protect investors and promote Web3, and with the 'Start Next Innovator' project, Japan plans to send a thousand entrepreneurs and students to Silicon Valley to support Web3 startups.(Source | Source 2)
Launch of Worldcoin and World ID (30.07.23)
Sam Altman, known from ChatGPT, has co-founded the "Worldcoin" project, which aims to become a leading global identity and financial network. Since its launch towards the end of July, over two million people, mainly from the global south, have registered. Worldcoin allows users to obtain a unique World ID through an iris scan. The ERC-20 token 'Worldcoin' on Ethereum, is intended to grant a say, with new governance concepts to be worked out with the involvement of users. However, the project is facing criticism due to possible misuse of biometric data and token distribution issues. Data protection authorities in France and the UK have launched investigations while notable crypto personalities are voicing their concerns.(Source | Source 2 | Source 3 | Source 4 | Source 5 | Source 6)
Vanguard invests in bitcoin mining (12.07.23)
Vanguard Group, the second-largest asset manager after BlackRock, has increased its investments in bitcoin mining companies to more than $500 million. Vanguard has increased its stakes in Riot Platforms and Marathon Digital. The firm increased its holdings in Marathon Digital by 60% to 17.5 million shares, equivalent to about USD 280.5 million, and in Riot Blockchain, the largest crypto miner in the U.S., it boosted its investment by 18%. Previously, Vanguard viewed cryptocurrencies as rather "weak" investment opportunities, with these investments now likely representing a shift in their strategy.(Source)
U.S. presses the gas on regulation (07/28/2013)
The Keep Your Coins Act of 2023 safeguards U.S. citizens against restrictions on the use of digital currencies by federal authorities. It allows digital assets to be used for goods and services and stored in self-managed wallets. Congressman Davidson, the bill's author, has been praised for his efforts. There are parallels to MiCA, where payments can only be made to proprietary wallets. In addition, three other crypto-related bills were passed by the House Financial Services Committee.(Source | Source 2 | Source 3)
Coinbase discloses SEC demand (07/31/2013)
According to Coinbase CEO Armstrong, the SEC's position is that "all crypto assets other than Bitcoin are securities" and therefore should be delisted. Armstrong argues the basis for interpretation is unclear. The SEC claims it never formally called for such removal. The situation escalated into a lawsuit filed by the SEC against Coinbase for alleged violations of securities laws. Coinbase moved to dismiss the suit, arguing that the SEC was applying laws inconsistently.(Source)
PayPal with own Stablecoin (07.08.23)
PayPal launches PYUSD, its first regulated stablecoin, in partnership with Paxos. Walter Hessert from Paxos emphasizes the strict supervision by the New York financial authority, which guarantees investor protection. With 431 million users, PayPal could make a significant mark on the crypto market.(Source | Source 2 | Source 3)
Did you know...?
...that there is one bitcoin every 210'000 blocks... Halving exists?
Bitcoin halving is a key element in the design of the Bitcoin blockchain, dating back to Satoshi Nakamoto's ideas about currency stability and inflation protection. It is performed every 210,000 blocks, which happens about every four years, and reduces the number of new Bitcoins created with each new block by 50%. Similar to gold, Bitcoin is finite and miners must use more and more resources to create new units.
The first halving took place in 2012, with the reward dropping from an initial 50 to 25 Bitcoins. In the third halving in 2020, it was reduced to 6.25 Bitcoins. At the fourth halving, expected to take place in April 2024, the reward will drop accordingly to 3.125 Bitcoins. For miners, the decrease or halving of the payout is often offset by price increases and increased transaction costs. Halving often leads to speculation and is seen as a potential signal for price increases, as there are simply fewer Bitcoins coming onto the market, reducing supply. The last Bitcoin halving is scheduled for 2140. After that, no new bitcoins will be created and miners will only be compensated for their efforts through transaction fees.
More videos in the new short format
The name says it all: Short, entertaining and informative - in this issue we again present two refreshing surveys. Our short videos on cryptocurrencies offer versatile insights into the crypto world. If you have a small time budget, but a need to quench your thirst for knowledge and broaden your horizons, this is the ideal format.
Public Blockchain: Open to everyone, decentralized and transparent. Anyone can review transactions, add new transactions, and view the data. Examples: Bitcoin, Ethereum.
Private Blockchain: Limited to selected participants or organizations. Access and participation are limited. Used for internal purposes, provides more control and confidentiality.
The price of bitcoin is showing a tight 30-day trading range in July, following the announcement of bitcoin ETF and regulatory moves last month. At the same time, the U.S. dollar posted a weak performance, increasing discussions around overarching generational as well as financial cycles and the role of Bitcoin and crypto as a hedge against the traditional monetary system. Historical analyses shed light on hegemonic powers that have lost influence through debt and demonetization. Speculation around a gold-backed BRICS currency questions the future of the U.S. dollar. Given the current inflationary situation, which is calming down for the time being and then accelerating again due to renewed money injections and green economy, a scenario similar to the 1970s could emerge. Litecoin, a major proof-of-work cryptocurrency, completed its third halving in early August, but this is not seen as a template for bitcoin halving. A Blackrock report in early 2022 recommending a high Bitcoin allocation in equity/bond portfolios attracted attention in late July. Bitcoin has recently shown a negative correlation to the Nasdaq 100, which could signify a reassessment of crypto risk by investors.
Bitcoin On-chain analysis
In July, the 800,000th Bitcoin block was confirmed - a major milestone for the Bitcoin network. Up to this point, around 19,437,000 bitcoins had been mined. During this time, a total of approximately 268,700 bitcoins were paid to the miners as fees for transactions. The total revenues of the miners amount to an impressive 52.59 billion USD, of which 94.5% came from block rewards and 5.5% from said fee revenues. Interestingly, about 1.45 million of the generated bitcoins have not changed their position since July 2010, when the first exchange price was recorded - they could be considered lost. This number could be even higher. Due to the continued increase in hashrate (computing power), mining is considered lucrative and plays an important role in securing the network.
The historical yield curve shows that restrictive monetary policy often triggers recessions. However, the exact time between a reversal point in the yield curve and the onset of a recession is unpredictable and its severity unpredictable. By the time an economic situation is recognized as a recession, markets are often already in contraction. At the same time, good corporate results are currently surprising, although they are not expected to be clearly above average overall. Despite a slight decline in real estate construction and sales, recent U.S. GDP, consumer and labor market data, which have been surprisingly strong, suggest a soft economic landing. However, the situation remains challenging, as evidenced by overly cautious forecasts for the first half of the year by some Wall Street heavyweights. However, the cautious voices have also recently become louder again. Next, the markets expect some insights from the central bank symposium in Jackson Hole at the end of August, before the September meeting of the FED (Sept. 20) should provide further clarity.
From our point of view, no extremely relevant events are expected in the coming weeks and months, although unpredictable news could always have an impact. The internals of Binance, the largest exchange, are difficult to gauge. However, the crypto market seems robust enough to withstand negative news, even if it puts pressure on prices in the short term. An SEC decision to approve a Bitcoin ETF is likely to wait until spring 2024, even if the
pressure has increased recently. There are no significant updates to the Ethereum network in the coming weeks, however, interesting advancements such as real-time token streaming and Web3 integration were discussed at the Ethereum Community Conference in Paris. The next major development for Ethereum, proto-thanksharding for further scaling, could be realized by the end of 2023. Hodl group loyalty continues to show strong conviction among long-term investors.
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(*Information: bitcoin and Bitcoin: bitcoin lowercase is used in the crypto domain to denote the monetary unit. Bitcoin capitalized refers to the network as a whole. For simplicity, we use upper case in this newsletter).
This communication/blog article/market update is for informational purposes only and does not constitute a recommendation, offer or solicitation to buy or sell any securities, cryptocurrencies, fund shares, structured products, financial instruments or other investment products, nor shall it be deemed to constitute a solicitation of an offer to enter into a contract for any financial service, or otherwise constitute a personal recommendation. This communication/information cannot replace personal advice from a financial, legal and/or tax advisor.