Crypto Market News Week 34 / 2024

The volatility of the market over the past week seems to be showing signs of a bottom for Bitcoin. There are also some macro issues that we can look at to see how they impact the crypto market.

8/17/20246 min read

The volatility of the market over the past week seems to be showing signs of a bottom for Bitcoin. There are also some macro issues that we can look at to see how they impact the crypto market.

The number of professional firms holding investments in Bitcoin exchange-traded funds (ETFs) in the US jumped to 262 in Q2 2024, reaching a total of 1,199, according to a report from K33 Research.

A recent report by Chainalysis shows a decline in overall illicit cryptocurrency transactions by 2024, even as specific types of criminal activity in the sector surge.

In a recent filing to the federal court, the ACCC revealed that its initial review of cryptocurrency ads on Facebook found that approximately 58% of the ads violated Meta’s Advertising Policy or were likely to be associated with scams.

Democrats’ efforts to influence the Harris/Walz campaign on crypto, a surprise change to BitGo’s WBTC product, and Apple’s expansion of iPhone NFC technology.

And some other news….

US Bitcoin ETF Soars 21% in Q2 This Year

K33 Research reports a 21% increase in institutional Bitcoin ETF adoption in Q2. This was driven by an increase of 262 firms, with market makers leading the way.

While retail investors continue to dominate Bitcoin ownership, institutional investors have significantly increased their stake in the market. Their share of total assets under management (AUM) increased by 2.41 percentage points to 21.15% in Q2.

According to 13F filings, as of June 30, 1,199 professional firms held investments in U.S. spot ETFs, marking an increase of 262 firms over the quarter.

While retail investors still hold the majority of outstanding shares, institutional investors increased their share of total AUM by 2.41 percentage points to 21.15% in Q2.

GBTC has seen a significant decline in institutional capital, while IBIT and FBTC have seen a marked increase in professional investor dominance.

ACCC reveals that 58% of ads breach Meta's Advertising Policy

These fraudulent ads often used the images of famous Australians, including businessman Dick Smith, former casino executive James Packer and Hollywood actors such as Chris Hemsworth, Mel Gibson, Nicole Kidman, Russell Crowe and former politician Mike Baird.

While the ACCC has not yet determined the total financial losses from these scams, data from Scamwatch, an Australian Government website, shows investment scams remain a significant threat.

In 2024 alone, Australians reported 3,456 cases of investment scams, with losses exceeding $78 million.

During its investigation, the ACCC identified around 600 ads that potentially breached Meta's policies, although it is currently focusing on 234 ads.

The Commission believes that more examples of fraudulent cryptocurrency promotions will emerge as the regulatory investigation proceeds.

Chainalysis data shows total illicit activity involving cryptocurrencies has dropped by 19.6%

A recent report from Chainalysis shows a decline in overall illicit cryptocurrency transactions by 2024, even as specific types of criminal activity in the sector surge. Released on August 15 as part of its mid-year cryptocrime update, the report found that hacking and ransomware attacks are becoming increasingly common.

Chainalysis data shows that total illicit cryptocurrency transactions fell 19.6% from $20.9 billion in 2023 to $16.7 billion in July 2024.

While illicit activity in the cryptocurrency ecosystem continues to trend downward, two types of crypto crimes appear to be bucking the trend: stolen funds and ransomware.

Other notable victims of the July crypto hack included algorithmic protocol Compound Finance ($24 million loss), bridging protocol Li.Fi ($10 million), decentralized AI protocol Bittensor ($8 million), and liquidity provider Rho Markets ($8 million).

Does Kamala Harris like cryptocurrency?

Democrats Meet to Rally Crypto Support for Harris/Walz. On Wednesday night, a group called “Crypto4Harris” held a virtual town hall on Zoom with up to 1,000 people attending at once.

Most notably, the discussion featured Senator Chuck Schumer (D-NY), with the most newsworthy moment perhaps being Schumer saying he would push for a cryptocurrency bill to pass in the Senate before the end of the year.

Other notable attendees included Sen. Kirsten Gillibrand (D-NY) and Sen. Debbie Stabenow (D-MI). Sheila Warren (CEO of the Cryptocurrency Innovation Council) and Mark Cuban also joined the call. Neither Harris nor Walz were on the call, nor were any senior campaign officials.

BitGo’s New Partnership Sparks BTC War

BitGo, the largest issuer of Wrapped Bitcoin (WBTC), has created a joint venture with BiT Global to diversify its custody and cold storage operations across multiple jurisdictions.

BiT Global is a global custody platform with regulated operations based in Hong Kong, registered as a Trust and Company Service Provider (TCSP).

BitGo will become a minority owner in a new joint venture with BiT Global, providing “multi-jurisdictional and multi-institutional custody” for the WBTC business. BitGo’s new joint venture also includes a strategic partnership with Justin Sun, founder of the Tron network.

Following the announcement, MakerDAO’s risk management team, Block Analitica Labs, drafted a proposal to remove the ability to borrow against WBTC collateral.

Currently, $466 million in WBTC is collateralized on MakerDAO. On Thursday, MakerDAO’s governance passed a vote to halt new loans backed by WBTC.

Bitcoin Dominance Rises Amid Institutional Capital Flows

Fueled by strong performance and significant investment, Bitcoin’s market dominance continued to grow in July.

The market capitalization of cryptocurrencies relative to the overall crypto market has increased as Bitcoin spot exchange-traded products (ETPs) attracted about $3 billion in net inflows during the month, according to Grayscale's August 1 monthly report .

ETF inflows were positive on August 15 with over $11 million in inflows. However, this was much less than the cumulative outflows of $81.4 million recorded on August 14.

On August 9, 2024, BitGo announced a strategic partnership with BiTGlobal to diversify its custody and cold storage operations across multiple jurisdictions.

The project includes a partnership with Justin Sun, who has raised concerns around Wrapped Bitcoin (WBTC). Despite these concerns, the WBTC supply has remained stable, with only 474.5 WBTC being burned net since BitGo’s announcement.

This represents a 0.31% decrease from 154,727 WBTC on the day of the announcement to 154,252 WBTC as of August 15, 2024. With over 154k BTC, WBTC is one of the largest single Bitcoin reserves in the world.

WBTC/BTC cex trading volume has increased from the average daily volume seen from June 1, 2024 to early August on the day of the announcement.

However, the general market panic, as noted on August 5, 2024, could be a contributing factor to the high volume.

One notable point surrounding WBTC/BTC cex trading volume on the day of the announcement was the prominence of Coinbase. On the day of the announcement, 29% of WBTC/BTC cex trading volume across observed exchanges came from Coinbase. This compares to an average of just 5% over the two-month period leading up to the announcement.

Some personal opinions of HCCVenture

First, Bitcoin, Ethereum, and cryptocurrencies are fundamentally decentralized, non-governmental, and non-national. They are not part of any nation’s network, system, or political assets. So the US presidential election has little impact on this decentralized market. For the US to lead in crypto, it is essential that crypto does not become a purely partisan issue.

Second, Coinbase is expected to launch a wrapped Bitcoin bridge for cbBTC that will be issued on Base, Coinbase’s Optimistic Layer-2 Rollup. Given that Coinbase has custody of Bitcoin for major financial institutions with spot ETFs, the exchange’s track record in custody could encourage existing customers to use wrapped bitcoin.

Third, the current market is leaning towards long-term investors "Hodling" rather than short-term investors "traders", so the main impact from the selling pressure of some ETFs does not really lead to the negative market in the recent period.

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