The cryptocurrency market experienced a sharp decline this week, following the release of the US Consumer Price Index (CPI) data. Bitcoin, in particular, suffered a “fakeout” after initially reacting positively to the news, only to reverse its gains and fall below $60,000.
Bitcoin’s Fakeout: A False Sense of Relief
On August 14, the US Bureau of Labor Statistics (BLS) released July’s CPI data, which came in lower than expected. This led to speculation that the Federal Reserve might cut interest rates in September, potentially by 25 basis points. Bitcoin initially reacted positively, trading above $60,000, but this proved to be short-lived. The price quickly reversed, losing ground and falling below $60,000. At the time of writing, Bitcoin stands at $58,345, reflecting a 1.95% decrease in the past 24 hours.
Despite this volatility, analysts remain optimistic about Bitcoin’s long-term prospects. Potential catalysts for a bullish trend include anticipated interest rate cuts, increased inflows into Bitcoin exchange-traded products (ETPs), and favorable regulatory trends.
Institutional Investors Increase Crypto Holdings
This week, institutional investors disclosed their positions in Bitcoin and Ethereum ETFs through their 13-F filings with the US Securities and Exchange Commission (SEC). Goldman Sachs, for example, holds positions in seven of the 11 available spot Bitcoin ETFs in the US, with its largest stake in the iShares Bitcoin Trust (IBIT) valued at approximately $238.6 million.
Morgan Stanley, another Wall Street giant, also demonstrated a significant interest in BlackRock’s IBIT, with positions valued at $188 million. Additionally, Morgan Stanley has smaller holdings in the Ark 21Shares Bitcoin ETF (ARKB) and the Grayscale Bitcoin Trust (GBTC).
The trading firm DRW Capital also disclosed its major stake in crypto ETFs, focusing on Ethereum. The firm’s filings reveal an allocation of over $150 million to the Grayscale Ethereum Trust.
Institutional Participation on the Rise
According to Vetle Lunde, a senior analyst at K33 Research, the second quarter of 2024 saw a significant increase in institutional ownership of Bitcoin ETFs. The 13-F filings revealed that 1,199 institutional entities held investments in US spot ETFs as of June 30, marking an increase of 262 entities from the previous quarter.
“While retail traders still hold the majority of the market, institutional investors increased their share of total AUM by 2.41 percentage points, now accounting for 21.15% in Q2,” Lunde remarked.
This growth in institutional participation is significant, indicating that large financial entities have become more comfortable with the risk-reward profile of crypto investments.
Cardano’s Hydra Update Prepares for Hard Fork
On August 9, Cardano released version 0.18.0 of its Hydra Head scaling solution. This update is particularly important as Cardano prepares for its upcoming hard fork, which aims to fully decentralize the blockchain.
Sebastian Nagel, a Cardano developer, emphasized that one of the key features of this update is the ability to withdraw funds from an open head without closing it. This improvement aligns with Cardano’s broader goal of transitioning into a decentralized network. Charles Hoskinson, Cardano’s founder, envisions it as a global system that includes advanced governance and community-driven initiatives.
BlackRock’s Blockchain Speculation
According to a report by Token Terminal, BlackRock may be exploring the launch of a proprietary blockchain similar to Coinbase’s Layer-2 network, Base. The report suggests that this blockchain would centralize the record-keeping of BlackRock’s massive holdings, improving transparency, efficiency, and security. If this project materializes, it would likely align with BlackRock’s broader strategy of leveraging technology to streamline its operations and offer new solutions to its clients.
However, such a project would pose challenges, including managing the complex regulatory environment and ensuring the blockchain’s security and scalability. Despite BlackRock not confirming these plans, the asset management giant potentially launching a blockchain would represent a significant shift in the traditional finance sector.
Binance Delisting Causes Altcoin Price Plunge
On August 12, Binance, the world’s largest crypto exchange by trading volume, announced the delisting of six altcoins. Effective August 26, 2024, at 03:00 UTC, Binance will remove all spot trading pairs for these tokens.
Historically, when Binance announces the listing or delisting of altcoins, it significantly impacts their prices. The recent delisting decision suddenly caused the prices of the affected tokens to fall.
The tokens impacted were PowerPool (CVP), Ellipsis (EPX), ForTube (FOR), Loom Network (LOOM), Reef (REEF), and VGX Token (VGX). Several of these tokens experienced price declines exceeding 20%.
Disclaimer
Readers are encouraged to conduct their own research and consult with a financial professional before making any investment decisions based on this content.