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

Abstract

• l 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.
• l
  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.

Disclaimer

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