Tide Capital: Is the Market Bottoming Out After July’s Plunge?

Abstract

• The German government has transferred all seized Bitcoins to exchanges, with the sell-off largely absorbed. Concurrently, Bitcoin spot ETFs saw significant net inflows in July, indicating U.S. investors are buying the dip. The Nasdaq continues to hit new highs, favoring risk assets. We believe BTC will rebound once market sentiment stabilizes.
• Altcoins have undergone significant corrections, helping deflate market bubbles and fostering healthier conditions for the crypto market. Market concentration is increasing, suggesting holding BTC and ETH may continue to outperform.

Market Sell-off Subsiding, Bottom Formation Underway

German Government Sell-off Pressure Absorbed

The Saxony police confiscated nearly 50,000 Bitcoins in January and gradually began selling them from mid-June, totaling over $3 billion, triggering market declines. Currently, all these Bitcoins have been transferred to exchanges, mitigating future sell-off impacts.

Notably, from July 8th to 12th, the German government transferred 40,000 Bitcoins to exchanges, resulting in a brief dip followed by a rebound in BTC. This indicates strong demand, suggesting the negative effect of Germany’s sell-off has largely dissipated.

Bitcoin Spot ETFs Saw Positive Inflows

Bitcoin spot ETFs experienced significant outflows in June, correlating with BTC’s downturn. However, July saw a shift to net inflows nearing $1 billion, signaling optimism among U.S. investors. With favorable factors like Fed rate cuts and the U.S. elections, Bitcoin under $60,000 offers attractive investment odds.

Nasdaq Continues Record Highs, Bitcoin Set to Rebound

Amid favorable macro conditions, U.S. stocks have consistently risen in 2024, with the Nasdaq hitting historic highs. BTC mirrored this trend in the first half of the year but diverged since mid-June due to German sell-offs, resulting in a nearly 30% drop.

From a supply perspective, the impact of BTC sell-offs causing market concern is not long-term but episodic. From a demand perspective, the Nasdaq’s continued highs indicate increasing market appetite for risk assets. As panic subsides, BTC is poised to rebound, aligning with Nasdaq’s performance.

ETH Spot ETF Approval Imminent, Boosting Market Sentiment

Approval for ETH spot ETFs is expected in July, approaching rapidly. With ETHE trading at a discount of less than -1%, approval is highly probable.

However, recent market declines have pushed ETH prices back to levels before the ETH spot ETF announcement. Despite current market pessimism, similar to BTC spot ETFs, ETH spot ETFs are likely to attract billions into the crypto market long-term, buoying market sentiment short-term.

Altcoins Deflate Bubble, Market Concentration Rises

Altcoins Underwent Deep Corrections to Deflate Bubbles, Promoting a Healthy Development of the Crypto Market

Altcoins have continued to plummet since June, deflating overvalued coins. TOTAL3, excluding BTC and ETH, dropped to $573 billion, down $200 billion from March highs. Most altcoin prices now sit below early-year levels, squeezing out speculative bubbles.

Looking at open interest across the crypto market, it’s declined to May lows, significantly reducing leverage levels and clearing out many long positions.

Even the meme coin $PEPE, exceptionally strong this year, lost nearly half its peak value. No altcoin sector has shown resilience; risk appetite and speculative sentiment have plummeted.

Unlike previous bull markets where altcoins rose alongside BTC and ETH, many now decline. This is viewed as a healthy market correction, clearing out altcoin bubbles and laying groundwork for future bull runs.

Market Concentration Rises, BTC and ETH Likely to Outperform

Since 2023, Bitcoin’s market dominance has risen, now exceeding 54%. Compared to BTC and ETH, most altcoins struggle to attract sustained inflows, unable to outperform the broader market. Market concentration is increasing, with funds flowing from altcoins to BTC and ETH.

Looking ahead, amid ongoing altcoin issuance, most struggle to sustain market attention and risk being forgotten by investors. Even in a new bull cycle, these altcoins face challenges in significant price increases. Thus, holding BTC and ETH may continue to outperform.

Conclusion

Following the July sell-off, the market appears to be bottoming out, and investors should maintain patience and confidence. Looking forward, holding BTC and ETH may continue to outperform the market.

Tide Capital

Tide Capital is a research-driven digital asset investment and trading firm. We study macro and fundamentals to capture beta and alpha opportunities from crypto waves to financial tides. Driven by value, we aim to invest in early-stage projects with significant growth potential. Concurrently, we assess market cycles to inform our investment decisions, trading in the public market to achieve returns.

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Disclaimer

The information and data presented in this article are obtained from public sources, and Tide Capital makes no guarantees regarding their accuracy and completeness. Any predictions, speculations, or opinions contained in this article are statements about future events and may differ significantly from actual results due to limitations in data timeliness, assumption validity, uncertainty factors, and unforeseeable risks. Any advice and opinions in this article are for reference purposes only and do not constitute recommendations to buy or sell any digital assets. They do not constitute investment advice or solicitations. The strategies that Tide Capital may adopt may be the same, different, or unrelated to those inferred by readers based on this article. Investors should carefully consider any decisions and seek appropriate legal and financial advice when necessary. Any misunderstanding or misuse of the content in this article does not constitute the responsibility of the author or the publishing institution.