Review of the summer market in the encryption market: long and short news are intertwined, and the sustainability of the rise is doubtful

Source: Coindesk, Bloomberg

Editors: Felix, PANews

Earlier this summer, BTC rallied on multiple positive news. Most notably, a series of institutions, led by BlackRock, applied to launch a Bitcoin spot ETF. The district court’s ruling in Ripple Labs’ legal battle with the U.S. SEC also boosted the overall market. But the effect of the "boost in the arm" is not long-lasting.

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Market sentiment surrounding the positive news is fading, and BTC prices are experiencing a correction. The market is awaiting a decision on the approval of a Bitcoin spot ETF and the SEC is preparing to file an appeal against Ripple, a case that is not expected to “come to fruition until next year,” analysts said. This brings “a new round of legal uncertainty” to the crypto market.

Additionally, part of the pullback is due to a broader pullback in risk assets such as stocks, triggered by "bubble positioning in the technology sector, rising U.S. real yields, and concerns about Chinese growth." Federal Reserve Chairman Jerome Powell has signaled that the central bank is ready to raise interest rates further if necessary and intends to keep borrowing costs high until inflation reaches its target.

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On August 25, a research report from JPMorgan Chase stated that the sell-off in the crypto market may be nearing an end, and the liquidation of long positions is “largely behind us.” Analysts including JPMorgan strategist Nikolaos Panigirtzoglou wrote that some bad legal and regulatory news has dissipated in recent weeks, and while the sell-off wave “is still having an impact,” open interest in CME Bitcoin futures contracts contracts (the number of unsettled and active futures contracts traded on exchanges), the sell-off appears to be in its final stages. Because a drop in open interest usually indicates a weakening price trend. As a result, analysts believe the crypto market has limited downside in the short term.

Rising again

On August 29, U.S. court documents showed that Grayscale’s review request was approved and the U.S. SEC’s order was revoked. Grayscale filed a lawsuit against the SEC last year because the SEC rejected its proposal to convert its GBTC into a Bitcoin spot ETF. This judgment means that Grayscale won the lawsuit against the US SEC. Bloomberg ETF analyst James Seyffart said that this does not mean that GBTC will automatically be converted into an ETF, but it does bring things one step closer (the approval of a Bitcoin spot ETF).

After the news of Grayscale’s victory came out, the price of BTC rose by more than 7% and exceeded US$28,000. The price has since risen to just over $27,900.

It is worth mentioning that before Grayscale won, nearly 30,000 BTC (worth $822 million at the current market price of $2.74) were transferred to addresses associated with centralized exchanges, according to data tracked by analytics firm Santiment. . Perhaps some traders anticipated the price increase and prepared in advance by moving their coins to exchanges.

As the price of BTC rose to $28,000, the average BTC inflow per transaction, or the amount transferred to exchanges, rose to 1.146, the highest level since June 21, according to data tracked by CryptoQuant.

Additionally, the average BTC transaction size jumped to its highest point since June. Following the ruling, the average BTC trade size on cryptocurrency exchange Kraken increased from around $850 to over $2,000, according to Kaiko data. Research firm Kaiko said the last time the average Bitcoin transaction size was above $2,168 was in June. The average Bitcoin trade size has also grown significantly on most other exchanges.

How about sustainability?

Clara Medalie, director of research at Kaiko, said in an interview that while it was too early to tell how sustainable the price increases were, "there are some small signs that we may see a slight reversal."

Notably, compared to other "mini-bull markets," exchange volumes only rose to near two-week highs during this rally. Medalie explained that trading volume represents market participants’ level of participation in the market, so lackluster volume data could indicate some weakness behind the move.

While BTC’s average transaction size jumped to its highest level since June, indicating activity from large investors. But Medalie said: “The approval of the ETF will definitely be a bullish catalyst for the crypto market. But the market is still in a turbulent period, and there are quite a few bankruptcies and lawsuits ongoing.”

Garreth Soloway, chief market strategist at IntheMoneyStocks.com, predicts that if Bitcoin fails to break strongly above the $28,000 level before the mid-August sell-off, the price of Bitcoin will fall further.