The Rake Review: July 2024

"Then you win."

Safe to say July has been a notable month for Cryptocurrency and global events. Bitcoin went through a major sell off before politics took centre stage and assisted with a recovery. It was expected that a change in political sentiment would be positive for Bitcoin, but no one could have expected how these events would have unfolded.

It’s Been Ignored, Laughed at, Fought Against, but is the Final Era of Bitcoins History Finally Here?

Just over a year ago, we put out a Rake Review covering the growing concerns surrounding government actions to deliberately restrict everything to do with cryptocurrency. SEC lawsuits were flying left and right, everything other than BTC was being labelled a security, banks were removing AUD rails to crypto exchanges and major financial institutions were bad mouthing Bitcoin.

As of today, we have won. A mere 16 months later, Bitcoin and Ethereum have had spot ETFs launched with BItcoin seeing record breaking inflows within the first 24 hours of trading. Institutions such as Blackrock who’s CEO Larry Fink was a renowned Bitcoin dismisser has flipped his tone and admitted he was wrong about the asset. Bitcoin is now at the point where it is being politicised to garner more votes and support.

Bitcoin 2024 saw invites to both Donald Trump and Kamala Harris to speak. Trump a new endorser of BTC, whilst Harris has been considered the opposite with the Democrats spending the last four years battling Bitcoin and Crypto. Since taking over for Biden, Harris herself has yet to give her stance on Bitcoin and Crypto.

At Bitcoin 2024, Trump has announced his plans for Bitcoin and Crypto if he were to be elected; he intends to make the US the crypto capital of the world, create a strategic Bitcoin reserve, fire Gary Gensler, end Operation Choke point 2.0 and bring Bitcoin mining back to the US.

For those who are unfamiliar with some of the propositions above. Gary Gensler, a Democrat and the current SEC Chairman has been the one leading the fight against cryptocurrency, whilst Operation Choke Point 2.0 is a concerted, government-backed effort to discourage traditional finance institutions from servicing the crypto industry.

All these propositions by Trump are extremely bullish for Bitcoin and crypto. As a result of this, Trump has received support from the majority of the crypto space. Similarly, Independent nominee Robert F Kennedy has endorsed Bitcoin and announced that he will sign an executive order for the US to buy 550 Bitcoin per day to build a reserve of 4 million BTC, if elected president. However, it is statistically improbable for RFK to win the election, the support for Bitcoin is positive. The Democratic Party is pushing Harris to ‘reset’ her crypto stance in an attempt to garner more support from crypto users.

Politicians or their advisors are realising that most Bitcoiners are "single-issue voters" who will vote solely based on the candidates crypto stance.

Overall, it is an outstanding change in sentiment from the government, one that can only be viewed as a positive for the longevity of Bitcoin. As the ones who were fighting Bitcoin the hardest, are now the ones who are offering Bitcoin products and supporting it.

The price doesn't reflect the enormous change of political sentiment yet, however we think there is a large chance that the next 6 months may well fix that. So, now may be the best time to take advantage of prices not reflecting the positive news.

June’s timeline of key events and impact on BTC with prices:

July has been an incredibly volatile month for Bitcoin and cryptocurrency. Here is a simplified timeline of the events that had a great impact on BTC price.

July 1-8:

Mt Gox, German Government and US DOJ begin mass selling of Bitcoin (BTC falls from $63.9k to $53.5K - approximately a 15% pullback).

July 12:

Germany run out of BTC (12 July, $57k).

Assassination attempt on Donald Trump (12 July). The Trump Pump starts a BTC rally, 15% in 5 days ($57k to $66k).

July 17:

Bitcoin reaches $66k as a result of the Trump Pump.

July 15-22:

Mass ETF Inflows, BTC reaches $68.5k.

July 22-24:

Grayscale move almost $3 B worth of BTC to exchange (8% decrease from $68.5k to $63.5k).

July 24:

Ethereum ETF is launched, with almost $1.1 billion in volume traded, but only a net inflow of $100m due to Grayscale outflows (ETH falls 11% in a day from $3500 to $3080).

July 26-27:

The anticipation and rumours begin of Donald Trump endorsing Bitcoin at BTC 2024. BTC increase 10% from $63.5k to $69.4k.

July 28:

Trump speaks at BTC 2024, laying out his bullish plan for Bitcoin if he is to become President again. BTC reclaims $70k for a brief period of time before retracing back to the current levels of $66k.

Top 10 cryptocurrencies by market cap

Here is the fast five of what you need to know about the market in July 2024:

Bitcoin increased 3.3% in July.
The Ethereum ETF launched at the end of the month yet fell ~6% in July.
No new coins in the top 10, XRP and DOGE moved up in the rankings this month moving from 8th to 6th and 10th to 9th respectively.
A volatile month for the total crypto market cap;ending the month 1.5% up after being down 15% and up 8% at times throughout July.
The total net flow of BTC ETFs was + $124.1 million USD.

Video of the month

Donald Trump's Official Keynote; Bitcoin 2024

In the news

US Elections: Trump shot, Biden catches COVID and pulls out, Harris takes over.

This race for the US Presidency may be one of the most controversial, eventful and entertaining elections of all time. Donald Trump survived an assassination attempt. The last assassination attempt on a US President was 1981, 43 years ago. Joe Biden caught COVID and pulled out of the race. Vice President Kamala Harris become the likely Democratic Presidential Candidate. Many conspiracies were born as a result of these events.

After receiving SEC approval months ago, the Spot Ethereum ETF has launched. The short term impact was not favourable for the price of Ethereum. ETH is currently 20% lower than when it was approved. The launch was met with great volatility before retracing 11%. This is due to the people buying the rumour and selling the news paired with major outflows from Grayscale. Is this a pattern we will see when more crypto ETFs are launched? Extreme volatility followed by a short term pullback of the asset or is it due to Grayscale outflows.

Grayscale Movements (Bitcoin and Ethereum)

Grayscale outflows continue to hinder Bitcoin and we are beginning to see the same effect on Ethereum as a result of the Spot Ethereum ETF. Grayscale BTC outflows were a catalyst for Bitcoin reaching $53.5k. Whilst the Grayscale ETH outflows was the major catalyst of ETH retracing 11% on its launch day.

July saw a total of $354 million in net outflows

Grayscale’s ETHE net outflows totalling $1.7 Billion of outflows since July 24.

Understanding Grayscale: Their Impact on Bitcoin and Ethereum

You may have heard the term grayscale, we’ve mentioned it in many of our reports. For those unfamiliar with grayscale and what they do and who they are. Here is an educational piece that will help you gain an understanding of why they are so important and can dictate Bitcoin and Ethereum's price.

Grayscale Investments is a digital currency asset manager and a subsidiary of the Digital Currency Group. Established in 2013, Grayscale has become one of the largest and most influential players in the cryptocurrency investment space, for good and bad reasons.

Grayscale’s Cryptocurrency Trusts:

One of Grayscale's most significant contributions to the cryptocurrency market is their series of investment products known as trusts. These trusts have been around for much longer than the recent spot ETFs launched this year. GBTC launched in 2013 and ETHE launched in 2017.

The full list of Grayscale’s cryptocurrency trusts can be found below:

Grayscale’s Challenges and Restrictions:

Grayscale faced several significant challenges and restrictions that impacted investors' ability to sell and redeem their holdings. The major obstacle was the hostile regulatory environment that the crypto space faced for many years.

The primary challenge for Grayscale was the regulatory environment. Regulatory bodies, such as the U.S. Securities and Exchange Commission (SEC), were initially hesitant to approve cryptocurrency ETFs due to concerns over 'market manipulation, security, and investor protection'. Without regulatory approval for ETFs, Grayscale's investment products remained structured as trusts. This lack of regulatory clarity and approval prevented Grayscale from converting their trusts into ETFs, which meant investors were not able to redeem/sell their GBTC or ETHE shares until the SEC approved ETFs.

How Grayscale Trusts Differ from Other Spot Bitcoin ETFs:

Grayscale Trusts, like the Grayscale Bitcoin Trust (GBTC), are structured as closed-end funds. They do not continuously issue or redeem shares for underlying assets, often resulting in shares trading at a premium or discount to the net asset value (NAV). In contrast, Bitcoin ETFs like IBIT are open-ended, allowing for the continuous creation and redemption of shares. This mechanism keeps the ETF's market price closely aligned with the NAV, providing greater price transparency and reducing significant premiums or discounts.

Grayscale Trusts also have a six-month lock-up period for newly issued shares, limiting immediate trading and reducing liquidity. Additionally, they generally have higher management fees compared to Bitcoin ETFs. On the other hand, Bitcoin ETFs like IBIT offer daily liquidity and lower expense ratios. They can be traded throughout the day on public stock exchanges, making them more accessible and affordable for a wider range of investors. These differences in structure and operational efficiency make Bitcoin ETFs a more attractive investment option compared to Grayscale Trusts.

Grayscale Finally able to sell:

The official launch of the Spot Bitcoin and Ethereum ETFs have allowed Grayscale investors to convert GBTC and ETHE into ETF products. This has allowed investors who were not able to sell their GBTC/ETHE for many years to finally dispose of these assets.

Since the launch of both Spot ETFs, we have seen consistent outflows from GBTC as those investors are finally able to sell their GBTC. Many of these investors are realising gains from investments made years ago. This same effect has been seen on ETHE with the recent launch of Spot Ethereum ETFs.

These mass outflows has been the main hindrance and anchor to Bitcoin and now Ethereum, when major outflows occur, prices of these assets fall.

Grayscale has played a crucial role in the cryptocurrency market by providing early investment products like the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE). Whilst these products were an early opportunity for investors to gain exposure, these investors were soon stuck and not able to sell their holdings.

The approval and launch of spot Bitcoin and Ethereum ETFs marked a turning point, allowing Grayscale to convert their trusts into more accessible ETF products. This change enabled investors to finally sell their long-held shares, resulting in significant outflows and impacting the prices of Bitcoin and Ethereum. As the market continues to evolve, Grayscale's influence on cryptocurrency investment remains significant but we are not far from the end of that influence.

Written by Alexandar Artis

Memes of the month

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