The Rake Review: May 2024

The ever changing crypto environment quickly moved on from the BTC halving and onto the highly anticipated Spot Ethereum ETF, which looks to be all but ready to go. As anticipated, Bitcoin experienced a somewhat slow and sideways month post halving. The month of May had seen the lowest volumes traded since September 2023 when Bitcoin was approximately $26,000 USD (the month prior to Bitcoin beginning its rally). At one point Bitcoin was down 11% after its halving and broke below $60,000 and reached $56,500 before ending the month after halving 10% up at $70,000.

Over this last month, the crypto market has seen Ethereum outperform Bitcoin. The ETHBTC chart below shows Ethereum potentially breaking out of its long term downtrend. It seems as if the spot Ethereum ETF approval may be the perfect catalyst for Ethereum to outperform Bitcoin and really kick off the Bull Market.

A clearer view of the image above can be found here: https://www.tradingview.com/x/SFANE1Gg/

The impact a spot crypto ETF can have on an asset should not be underestimated, as we witnessed Bitcoin create new all-time highs (ATH) approximately two months after the approval of its spot ETF. On approval (Jan 11) BTC was still a ~43% move from its ATH, at the time of writing, ETH is only 25% away from its ATH. Does this mean ETH is likely to create a new ATH faster than BTC did post ETF approval?

The Downfall of CBDCs: Good or Bad for Cryptocurrency

As Cryptocurrencies have continued to grow in popularity, the talk of Central Bank Digital Currencies (CBDCs) have grown amongst the majority of countries. By March 2024, over 130 countries have engaged in researching CBDCs for use. With three countries already launching their own (Bahamas, Jamaica and Nigeria ) and 36 countries (including Australia) implementing pilot programs.

Many may not know what CBDCs are and may assume they are the same as cryptocurrency due to the fact that they’re both ‘digital money’. In short, CBDCs are digital currency issued and controlled solely by the central bank of a country. The value of a CBDC is fixed by the central bank and pegged to the value of the country’s fiat currency. There are many reasons as to why countries are looking to implement CBDCs, some may be seen as controversial. By moving to a cashless society, it will phase out the use of physical money, just as gold was phased out as the main form of tender once the Greenbacks were issued. With CBDCs being controlled by the government, sceptics fear that the centralisation of it will mean that individuals will not really own their funds, with the government having control over all issued currency. In a digital age, that would mean granular control over specific spending. ie, it would be feasible to enforce spending limits and approved goods.

Bitcoin is different. At its core, Bitcoin offers a decentralised solution to send and store wealth away from government and other third parties. There is a clear difference between between Bitcoin and CBDCs, the main differences are below:

The potential impact of CBDCs on cryptocurrencies can only be hypothesised, as they will both coexist within the financial system. A major demand for cryptocurrency is individual freedom it provides for one to store their wealth and do so online. The introduction of CBDCs will most likely cause a shift in demand for cryptocurrencies and potentially impact the value of said assets. With certain investors rotating their funds from the ‘highly volatile’ space that is crypto into government regulated CBDCs as they may see it as ‘safer’.

As mentioned, CBDC's and Bitcoin will coexist, this will not change the fact that bitcoiners are against the principles of CBDCs. CBDCs stand for everything that cryptocurrency is against. They pose a serious threat to individuals' freedom as they are centralised and allow governments to gain unprecedented control of their populations' financial lives.

Whilst the majority of countries have begun researching CBDCs, congress has recently passed a bill banning the Federal Reserve from Issuing a CBDC for the US dollar. The news of the world's largest economy currently banning CBDC issuance is incredibly bullish for cryptocurrency as Bitcoin will remain the most sought after digital currency in the world.

Donald Trump recently came out as pro Bitcoin but also stated that there would never be a CBDC under his watch. That's a staggering development and one that bitcoiners applauded.

Cryptocurrency; a deciding factor in the upcoming US Presidential election?

If you didn't catch one of our latest editions of the ‘Thunder Trading’ article ‘Ethereum ETF likely to be approved’ then you may not understand the potential impact of crypto on the upcoming Presidential election.

With the spot Ethereum ETF approved and Joe Biden coming out and reaffirming that he will not veto the approval has further solidified the importance of cryptocurrency and its impact on the upcoming Presidential election. Donald Trump was the first of the two to endorse cryptocurrency and gave himself the label of ‘The Crypto President’.

This comes as quite a surprise to those who have witnessed both Presidential candidates being on the other side of crypto only a few years ago. Whether Trump and Biden really believe in crypto or just playing politics only time will tell. Regardless, they both understand that five out of the six most recent primaries have been won by the candidate that most endorses cryptocurrency.

Most bitcoiners are one issue voters. That is, they only care about one issue, support for bitcoin. So Trumps bold move into supporting crypto is very calculated and it might just put him over the top in this election. He is now odds on favourite to win.

Top 10 cryptocurrencies by market cap

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

BTC is up 11% on the month, lowest traded volume month of the last 8 months.
Ethereum Spot ETF saw hype ETH rallied 25%
Although both BTC and Ethereum rallied well, the altcoin index underperformed both BTC and ETH
SHIB INU (SHIB) breaks back into the top 10, highlighting the dominance of memecoins in May
Memecoin May; memes leading the market with the top meme coins of the major networks rallying the most (PEPE on ETH, WIF and BONK on SOL, NOT on TON and BRETT on BASE).

Video of the month

Presidential Candidate Donald Trump endorsing cryptocurrency

In the news

2021 cult hero, 'Roaring Kitty' briefly returned to X, posting memes and movie clips that spiked $GME from $10 to $50 in two weeks, but the rally was short-lived, and $GME now trades at $20.
Metamask may integrate BTC support to their platform within the next month, this could bring millions of transactions onto the platform.
Europe’s second largest bank, BNP Paribas purchases BlackRock’s Spot Bitcoin ETF shares.
Mt Gox transfers over 100,000 Bitcoin ($9B USD) to a single address as a part of repayment plans. This causes BTC to fall nearly 2% in a single morning.

Holding your own coins may bring on unnecessary risks

A cryptocurrency trader lost a whopping $69.3 million in an "address poisoning" scam. Scammers created a spoof crypto address and sent a tiny amount of currency to the victim, hoping they’d later send a huge amount to the fake address. Unfortunately, the scam was a success.

The victim’s wallet, which used to be worth tens of millions, now holds just over $1.6 million. The thieves swapped the stolen Bitcoin for 23,000 Ethereum and transferred the stolen funds.

Crypto scams are on the rise, with the FBI reporting $3.94 billion lost to crypto-related frauds last year. This is a small amount compared to USD scams but still worth noting.

Whilst a growing crypto space is bullish for the industry, it also means that the number of scammers will also grow. At Stormrake, we offer a custody service for our clients, this removes the headache and risks for our clients as they know that their assets are safe with us and are being held in highly secure multi-sig storage wallets. Custody with us to ensure that you don’t suffer the same fate.

Institutional adoption is here

Less than 4 months after the inception of the Spot Bitcoin ETF. It has been reported that approximately 1 million BTC (worth ~$70 billion) is being held in custody for the Spot ETFs, spread across 534 institutions.

See the largest 25 hedge funds in the US. 13 are now providing their clients with opportunities to purchase Bitcoin with Millennium Mgmt being the major holder with over 27,000 BTC held valued at approximately $1.8 billion USD.

This buying was the major catalyst of launching Bitcoin past all time highs earlier this year. Whilst this launched the price from $26,000 to $74,000 within a short six months, it is extremely bullish for Bitcoin in the long run as more institutions will continue to adopt Bitcoin and now Ethereum.

Memes of the month

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The information in this newsletter is general only. It should not be taken as constituting professional advice from the author - Stormrake PTY LTD.

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