CAM | Market Update | September 2023
- September 11, 2023
- Posted by:AssetManagement
- Categories:crypto market update, cryptocurrencies
In the first two and a half weeks of August, the previous "inertia" (narrow trading range) of the summer continued. On August 17, however, the crypto market experienced a significant drop, exacerbated by massive liquidations of futures positions that had been betting on a price increase. Outside of regular trading hours and with less market observation (around 11:40 p.m. CH time), Bitcoin recorded a loss of 7.2%, depending on the trading venue and on a daily basis, with the price falling below $25,000 during peak hours.
This marks the largest daily loss since the collapse of FTX. Various theories about the cause circulated, including problems at Binance, delays by the SEC regarding the Grayscale Bitcoin Trust, sales by Space X and uncertainties regarding Evergrande. Furthermore, August and September are considered weak months for stocks as well as cryptocurrencies, which has been confirmed so far. A highlight at the end of the month was the decision by an appeals court that the SEC must reconsider Grayscale's ETF application. Positive developments include declining bitcoin holdings on trading platforms, increasing hashrates, and the SEC's expected approval of ether futures ETFs. From a technical perspective, it would be significant to regain and hold the important 200-day and 200-week moving average marks.
Moody's lowers ratings (08.08.23)
Moody's has lowered the credit ratings of 10 smaller and mid-sized U.S. banks and is considering downgrading larger institutions such as U.S. Bancorp and Bank of New York Mellon. The action is based on rising funding costs, potential regulatory capital deficits and increased risks in commercial real estate lending. This downgrade increases pressure on the banking sector and raises questions about the stability of the financial system, which could boost interest in Bitcoin as an investment option.(Source)
Europe Launches First Bitcoin Spot ETF (08/15/2013)
The Jacobi FT Wilshire Bitcoin ETF launches on Euronext Amsterdam, marking Europe's first bitcoin ETF. It is issued by Jacobi Asset Management in Guernsey and does not fall under EU financial laws. Fidelity Digital Assets will provide custody. The ETF will allow investors to access the bitcoin market without holding the cryptocurrency directly. U.S. decisions on similar ETFs are pending.(Source | Source 2)
Another milestone for Coinbase (16.08.23)
US crypto exchange Coinbase has received approval to operate as a Futures Commission Merchant (FCM), offering BTC and ETH futures to institutional clients. The approval is an important step for Coinbase to establish itself as the "most trusted crypto platform." The global crypto derivatives market accounts for 75% of the world's crypto trading volume, according to Coinbase. The company also plans to open a derivatives exchange in Bermuda.(Source)
Oman deems Bitcoin compliant with Islam (08/24/2013)
Oman plans government support for private Bitcoin mining projects that could generate total investment of over $1.1 billion. Also of interest is the government's recognition that Bitcoin is compatible with Islamic law. These steps are intended to reduce dependence on the oil sector, modernize the country's technology infrastructure, and "maintain a commitment to ethical and sustainable practices."(Source)
Twitter or 'X' gets crypto license (08/29/2013)
Social media platform X, formerly Twitter, has received a currency transmitter license from Rhode Island that will allow the company to offer digital asset services such as bitcoin. The move follows previous crypto initiatives by X, including the launch of a Bitcoin tipping feature and support for NFTs as profile pictures. Elon Musk, who heads the platform, plans to turn X into an "everything app," which these recent developments underscore.(Source)
Stage victory for Grayscale regarding ETF conversion (29.08.23)
A Washington appeals court has called the SEC's rejection of a bitcoin ETF application by Grayscale 'arbitrary and capricious'. The SEC must now reconsider the application. This stage win for Grayscale could have far-reaching implications open Bitcoin ETF applications. However, observers do not expect this to mean immediate approval for Grayscale or any other ETF. Further decisions on bitcoin ETFs are due in early September; the final deadline for the SEC is March 15, 2024."(Source | Source 2 | Source 3)
London Stock Exchange plans blockchain trading platform (04.09.23)
The London Stock Exchange (LSE) Group is planning a blockchain platform for trading traditional assets. According to the head of capital markets, the project is aimed at "smoother, smoother, cheaper and more transparent" settlement. However, the exchange is waiting until investors are ready and the public blockchain technology is mature enough. In addition, he said, there is no development planned for cryptocurrencies. The platform would be the first of its kind among global exchanges.(Source | Source 2)
New paradigm in crypto accounting? (07.09.23)
The U.S. Accounting Standards Board has decided to introduce accounting rules that eliminate the adverse treatment of impairment losses on cryptocurrencies. This should make the reporting of companies holding crypto more in line with actual circumstances and therefore more accurate.(Source | Source 2)
Bitcoin On-Chain Analysis
In recent weeks, the rumors surrounding the Bitcoin Spot ETFs have prompted many market participants to accumulate Bitcoin even after the price rises. This is expressed in the realized price of short-term holders, which is significantly higher than that of long-term holders (USD 20,300) at around USD 28,600. According to Fig. 1, the reaction of the longer-term investors (LTH = holding period over 155 days) is assessed by the balances sent on exchanges. These balances are not very relevant and the share of these more robust and considered more experienced investors has risen to an all-time high (orange line).
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Did you know...?
that it costs USD 208,600 tomine a Bitcoin in Italy ? In Germany, too, solo mining (independent mining without pool participation) is anything but cheap at USD 163,300. In the U.S., it costs a solo miner 46,300 U.S. dollars to mine a Bitcoin, while the mining company Riot, for example, manages this for about 8,400 U.S. dollars. A study by CoinGecko, one of the largest independent data aggregators for cryptocurrencies, analyzes the profitability of private solo mining in 147 countries and achieves revealing results. The study takes into account electricity prices, mining hardware performance, and bitcoin network difficulty. On average, it takes about 266,000 kilowatt-hours (kWh) of electricity to mine a single Bitcoin. That's more energy than many a household uses in a year. And even if the Bitcoin price rises, the cost of electricity is often an insurmountable obstacle.
While it is still possible to make a profit with USD 20,600 per Bitcoin on average in Asia, the situation looks bleak in Europe. The highest costs for a Bitcoin mined with private power can be found in Europe with about USD 85,800 on average. The cause? Increases in wholesale electricity prices due to the COVID-19 pandemic, heat waves in 2022, and geopolitical unrest, such as the Russia-Ukraine war.
In countries such as Poland, Belarus and Ukraine, solo mining is still profitable, but the tax aspects can be an additional challenge.
However, there are also aspects that the study does not take into account. For example, electricity prices for large mining companies are often lower than for private households. Grid congestion and power outages, especially in low-cost countries, are also mentioned only in passing.
In terms of future profitability, 2024 could be a turning point. The halving of block rewards planned for April is a hurdle, unless the price of Bitcoin experiences a corresponding upswing. Conclusion: If you don't live in one of the few profitable countries or have a dam in your backyard, you should think twice about solo mining.
In August, the BTC price was moved by a court ruling that the SEC blockade is not allowed in the case of Grayscale conversion. The crypto market sentiment has improved after this announcement, even though crucial drivers such as fresh liquidity, as measured by stablecoin holdings, have yet to show the desired trend. At this point, a numerical example of bitcoin inflation over the next few years: by the time of halving around April 2024, about 210,000 new BTC will still be mined. In the following 4 years, about 650'000 BTC will be distributed. These approx. 860'000 BTC are worth approx. USD 23.6 billion at the current exchange rate (approx. 0.2% of the
AuM from BlackRock alone). We clearly see the possibility of at least this amount of fresh capital flowing into Bitcoin in these four and a half years. As mentioned, a significant portion of market participants are buying Bitcoin and not holding it on exchanges, suggesting a longer-term investment. These investors tend not to be easily panicked by uncertainties surrounding Binance and any setbacks. For now, however, these convictions must continue to defy declining stablecoin holdings and price capriciousness due to speculative and institutional capital.
A significant proportion of our customers have a voluntary uncommitted investment plan, which enables them to pursue a long-term average cost strategy. In case of lower market prices, the cost prices can thus be reduced. To check your individual suitability for an investment plan, please contact us if you are interested.
(*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.