Greythorn Monthly Market Update — May 2024
OPENING REMARKS
Welcome to Greythorn Asset Management’s May 2024 Monthly Market Update. We’re delighted to share insights and analyses that shed light on our operations and the market trends we’re observing. Our mission is to invest in groundbreaking technologies and asset classes, aiming to generate significant value and contribute positively within the industry.
At Greythorn, we are dedicated to offering monthly updates on the cryptocurrency market. These updates include thorough analyses of market dynamics, regulatory developments, and the macroeconomic elements that impact digital currencies.
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MARKET ANALYSIS
Current Crypto Mood
The overall sentiment in the crypto market remains bleak despite recent rallies. Diversification and store of value narratives are strong, driven by valuation risks in stocks and bonds, and currency volatility. However, short-term traders dominate BTC pricing, influenced by macro concerns and liquidity issues. With the Federal Reserve maintaining its stance on rates and quantitative tightening, and limited efforts from the Treasury to boost asset prices, crypto remains highly sensitive to liquidity conditions, potentially leading to market choppiness.
ETF Launch Disappointment in Hong Kong
Hong Kong’s recent ETF launch underperformed expectations, with only US$11.2 million in volume compared to the US’s US$655 million. US-listed BTC spot ETFs also saw significant outflows, indicating normal market fluctuations and drawdowns, but reinforcing that BTC is holding up relatively well.
Tether’s Stability Questioned
Tether’s substantial holding of US treasuries raises concerns about its impact on the market if it were to liquidate. However, the Treasury market is robust enough to handle such a scenario. Tether’s cooperation with Chainalysis to identify risky addresses reflects ongoing efforts to navigate regulatory challenges amidst growing geopolitical tensions and sanctions.
SAB 121 Repeal Moves Forward
The US House of Representatives voted to repeal SAB 121, SEC guidance hindering banks from offering crypto custody. Despite the White House’s veto threat, the bipartisan support for the repeal highlights a significant step towards integrating crypto assets into traditional financial infrastructure. This political manoeuvre signals increasing recognition of crypto’s potential and the need for regulatory clarity.
Strong Q1 Earnings for Robinhood and Coinbase
Robinhood and Coinbase reported robust Q1 earnings, driven by a surge in crypto trading volumes. Robinhood saw a notable increase from retail traders, while Coinbase experienced growth in institutional volumes. This trend underscores the evolving dynamics in the crypto market, with both retail and institutional investors showing strong interest.
Crypto’s Rising Political Influence
Crypto has become a key issue in the US electoral debate, especially in swing states. A significant portion of voters consider crypto important, influencing campaign strategies. Donald Trump has shown support for crypto, contrasting with President Biden’s administration. The political landscape around crypto is heating up, reflecting broader debates about innovation, financial freedom, and regulatory overreach.
India’s Crypto Market Support
Binance and KuCoin’s successful registration with India’s Financial Intelligence Unit marks a positive shift towards a regulated crypto economy in India. This development highlights India’s growing acceptance of crypto and Binance’s efforts to regain global respectability. The potential for market growth in India is significant, given its large trading and DeFi user base.
Approval of ETH Spot ETFs in the US
The SEC approved the first ETH spot ETFs, signalling a major milestone for crypto legitimacy in the US. This approval underscores ETH’s status as a retail- and institution-ready commodity investment asset and highlights the effectiveness of the crypto lobby. The move is expected to enhance market liquidity and support further innovation on the Ethereum network.
Crypto ETNs on the London Stock Exchange
The listing of BTC and ETH exchange-traded notes (ETNs) on the London Stock Exchange marks a significant step towards greater legitimacy for crypto. While initial excitement is contained, the availability of these products to professional investors offers a convenient way to access crypto exposure, continuing the trend towards smoother onramps for crypto investment.
ETH Liquidity Shifts to Asia
ETH liquidity has shifted significantly from the US to Asia over the past year, likely due to regulatory uncertainties in the US. The recent approval of ETH spot ETFs may reverse this trend, potentially boosting net inflows and improving market liquidity.
BTC Options on the NYSE
The New York Stock Exchange’s plan to list cash-settled BTC options, pending regulatory approval, and its interest in spot crypto listings indicate a potential significant development. This move, coupled with the regulatory thaw and the Biden administration’s outreach to crypto experts, suggests a growing institutional acceptance of crypto assets.
Mt. Gox Refunds Approaching
An important upcoming event is the disbursement from the collapsed Mt. Gox exchange. After ten years, the process to return recovered BTC, BCH, and cash to creditors is beginning. Recently, trustees transferred around 140,000 BTC to prepare for these repayments, although they’ve asked creditors to be patient as preparations continue. The exact timing is unclear, with a deadline set for October, but distributions could start sooner or be delayed further.
There are worries that recipients might sell their BTC, causing price drops. However, the market has been expecting these distributions for years and the payouts will be staggered, perhaps even many recipients are long-term bitcoin holders who may not sell immediately.
MACRO INSIGHTS
Consumer Sentiment Rises Amid Recession Fears
US consumer confidence saw an unexpected rise to 102 in May, breaking a three-month decline. While optimism about the current economy is strong, concerns about a possible recession within the next year persist. Inflation expectations also edged up slightly, reflecting ongoing anxiety about rising costs. Fed officials have hinted that rate hikes could still be on the table, adding to the cautious market sentiment.
Stablecoins in International Trade
Two major Russian metals companies are now using stablecoins for transactions with Chinese partners, bypassing traditional banking systems. This move underscores the efficiency of stablecoins for cross-border payments and might push US regulators to consider clearer regulations. The growing adoption of stablecoins highlights their potential in global trade.
Japan’s Tokenization Efforts
Tokyo has launched a subsidy program to support security token issuance, aiming to cover a significant portion of the costs. This initiative positions Tokyo as a key player in the tokenization market, potentially competing with Osaka. Japan’s commitment to tokenization could boost economic activity and innovation, attracting more businesses to explore this emerging field.
Rising Tensions Around Taiwan
China has ramped up military activities near Taiwan following provocative statements by Taiwanese officials. These manoeuvres, which include mock missile strikes, increase the risk of conflict.
Turkey’s Crypto Legislation
Turkey is advancing a bill to regulate crypto service providers, aiming to formalise and expand its active crypto market. With a high rate of crypto adoption among its citizens, this legislation could enhance the development of digital asset services and products in Turkey.
Impact of New US Tariffs
President Biden’s new tariffs on Chinese goods, including electric vehicles and batteries, are expected to drive up inflation. These tariffs aim to boost domestic production but will likely lead to higher costs and increased fiscal stimulus, raising concerns about further government debt.
Putin’s Strategic Visit to China
Russian President Vladimir Putin’s recent trip to China has strengthened military and technological ties between the two countries. Their partnership challenges US influence and signals a shift in global power dynamics, with both nations deepening their collaboration in various strategic sectors.
Saudi-Japan Oil Trade in Yen
Saudi Arabia’s Crown Prince Mohammed bin Salman is set to visit Japan to discuss oil trade settlements in yen instead of dollars. This move could support the yen, reduce Japan’s need to sell US treasuries, and slightly weaken the dollar’s global dominance.
China-Serbia Trade Agreement in Yuan
China and Serbia have agreed to increase trade conducted in yuan, further reducing reliance on the dollar. This development is part of a broader trend of countries diversifying their trade currencies and financial reserves, signalling a shift in global economic relationships.
CLOSING REMARKS
As we wrap up this month’s market update, it’s clear that the world of crypto and macroeconomics continues to evolve at a rapid pace. From rising consumer sentiment amid recession fears to the growing adoption of stablecoins in international trade, the landscape is both challenging and full of opportunities.
Regulatory changes, like the push for tokenization in Japan and potential new crypto laws in Turkey, show how governments are adapting to this dynamic environment. Meanwhile, geopolitical tensions and economic uncertainties remind us of the interconnected nature of global markets.
Through all these developments, one thing remains constant: the drive for innovation and the quest for financial stability. As we move forward, staying informed and adaptable will be key to navigating the complexities of these ever-changing markets. We look forward to keeping you updated on all the latest trends and insights.
DISCLAIMER
This presentation has been prepared by Greythorn Asset Management Pty Ltd (ABN 96 621 995 659) (Greythorn). The information in this presentation should be regarded as general information only rather than investment advice and financial advice. It is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. In preparing this document Greythorn did not take into account the investment objectives, financial circumstance or particular needs of any recipient who receives or reads it. Before making any investment decisions, recipients of this presentation should consider their own personal circumstances and seek professional advice from their accountant, lawyer or other professional adviser. This presentation contains statements, opinions, projections, forecasts and other material (forward looking statements), based on various assumptions. Greythorn is not obliged to update the information. Those assumptions may or may not prove to be correct. None of Greythorn, its officers, employees, agents, advisers or any other person named in this presentation makes any representation as to the accuracy or likelihood of fulfilment of any forward looking statements or any of the assumptions upon which they are based. Greythorn and its officers, employees, agents and advisers give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this presentation. None of Greythorn and its officers, employees, agents and advisers accept, to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information contained in this presentation. This presentation is the property of Greythorn. By receiving this presentation, the recipient agrees to keep its content confidential and agrees not to copy, supply, disseminate or disclose any information in relation to its content without written consent.
