By LTP Research
Table of contents:
● June summary
● Market Comments
○ Macroeconomic Outlook
○ Bitcoin CME Futures CFTC Commercial Institutional Positions
○ LTP Bitcoin price model
○ Spot and derivative trading volumes on centralized and decentralized exchanges
○ Bitcoin transaction flow in June
○ Bitcoin Price Review (Price Drivers in June)
○ Bitcoin Cash ($BCH) - Biggest gainer in June
○ Performance of popular Layer 1 (L1s) and Layer 2 tokens (L2s)
○ Performance of popular GameFi/Metaverse and DeFi tokens
○ Performance of popular exchange tokens and meme tokens
○ BTCTUSD/BTCUSDT Premium - Negative Premium
● News
● July Volatility Day
● Appendix
Summary of June 2023
Macroeconomics
In June, the Fed paused its rate hikes for the first time this year and continued to reduce its holdings of U.S. Treasuries. Most Fed officials expect another rate hike by the end of 2023; on the other hand, the European Central Bank (ECB) raised interest rates by 25 basis points.
After reaching a debt ceiling agreement in May, the U.S. Treasury Department began to replenish the Treasury General Account (TGA). The funds mainly came from short-term Treasury bonds, and the funds from the Federal Reserve's reverse repurchase (RRP) met most of the demand for newly issued short-term Treasury bonds, alleviating the liquidity loss expected by the market (see Appendix A).
Cryptocurrency Market
In June, in addition to the interest rate decisions of the Federal Reserve and the European Central Bank, several major events also affected the cryptocurrency market. On June 6 and 7, the SEC sued Binance.US and Coinbase for issuing unregistered securities, and Robinood subsequently delisted a variety of cryptocurrencies, triggering a sell-off.
A week later, several traditional financial institutions including Blackrock, WisdomTree, Invesco, Bitwise, Valkyrie Funds and Fidelity submitted Bitcoin spot ETF applications to the SEC, injecting bullish sentiment into the cryptocurrency market. On June 20, EDX Markets, a cryptocurrency exchange backed by Fidelity, Schwab and Citadel, went online, enabling traders to trade Bitcoin ($BTC), Ethereum ($ETH), Litcoin ($LTC) and Bitcoin Cash ($BCH) on the platform.
These events injected huge volatility into the market. Bitcoin reached a yearly high of over $30,000 in late June. Total trading volume on exchanges increased significantly in June compared to May. $BCH was the biggest winner in June, with a massive 170% price increase.
While Bitcoin hit a new yearly high, Ethereum languished below $2,000 as the SEC cracked down on exchanges selling unregistered securities. The SEC has so far classified 68 cryptocurrencies as securities, hitting altcoins hard.
1. Macroeconomics
Quantitative Tightening
The Federal Reserve is conducting quantitative tightening and will continue to reduce its holdings of U.S. Treasury bonds. Reference: https://www.federalreserve.gov/monetarypolicy/files/monetary20230614a1.pdf
Inflation and interest rates
In May, CPI (year-on-year) fell to 4%; but the core CPI (month-on-month) did not fall and remained at 0.4% for three consecutive months.
At the June FOMC meeting, the Fed paused its rate hikes for the first time in 2023. However, at the FOMC press conference, Chairman Powell said that most committee members expected another rate hike by the end of the year, DXY surged, and Bitcoin fell below $25,000 after Chairman Powell's statement.
Inflation in European countries is high, with CPI (year-on-year) falling to 6.1% in May and the European Central Bank raising interest rates by 25 basis points in June.
The U.S. Treasury issued a large amount of short-term Treasury bonds to provide funds for the Treasury General Account (TGA)
After reaching a debt ceiling agreement in late May, the U.S. Treasury began to provide funding for the TGA in June, with the funding source mainly being short-term Treasury bills. Funds from the Federal Reserve's reverse repurchase (RRP) met most of the demand for newly issued short-term Treasury bills, alleviating the liquidity loss expected by the market (see Appendix A).
2. Cryptocurrency Market Review
2.1 Bitcoin outperforms gold, Chicago Mercantile Exchange Bitcoin futures commercial institutions turn to net long positions
After news broke in mid-June about traditional financial institutions applying for Bitcoin spot ETFs, commercial institutions on the Chicago Mercantile Exchange's Bitcoin futures trading platform reduced their short positions and increased their long positions.
The price of Bitcoin has recently diverged from the price of gold, which remains depressed in comparison. In addition, the U.S. dollar index has been on a downward trend, and the value of Bitcoin has increased relative to the U.S. dollar.
2.2 Bitcoin price model, the total circulating supply of the top 4 stablecoins and the ratio oscillator of the total circulating supply of stablecoins to the total market value of Bitcoin
In June, Bitcoin prices defended the 200-week moving average and the short-term holder cost baseline, and prices continued to rise, which was largely attributed to positive industry news.
On the other hand, the circulating supply of the top 4 stablecoins continues to decline.
As of June 30, Bitcoin’s market cap was $592 billion, while the total amount locked in decentralized finance on the Ethereum chain was $26 billion.
The Stablecoin Total Circulating Supply to Bitcoin Total Market Cap ratio oscillator is currently in the medium to high range and does not indicate overbought or oversold conditions.
2.3 Spot and derivatives trading volume on centralized and decentralized exchanges
The market is bullish under the influence of favorable industry news, and the total trading volume of centralized exchanges in June exceeded that of May. On June 16, due to the USDT decoupling FUD, traders exchanged USDT for other stablecoins, and the trading volume of Curve Finance surged, resulting in higher than normal trading volume.
In addition, after Blackrock and other traditional financial institutions submitted spot Bitcoin ETFs, market sentiment was optimistic, trading activities surged, and the total trading volume of centralized and decentralized exchanges soared.
2.4 Bitcoin transaction flow (UTC)
In June, Bitcoin's busiest trading hours were between 13:30 and 18:00 (UTC), which corresponds to the end of the London session and the beginning of the New York session. Price displacements also increased significantly during this period, with the highest average displacement of $143.6 during the period between 15:45 and 16:45 (UTC). This is the best time for traders to capture volatility and price movements.
During the Asian trading session, the most active trading session occurs between 00:15 and 01:15 (UTC).
2.5 Bitcoin Price Review (Price Driving Factors in June)
In early June, the SEC sued Binance (US), which led to a panic sell-off in the market and more than $60 million in long positions were liquidated. Subsequently, Robinhood delisted $ADA, $SOL and $MATIC, and Powell announced that interest rates would be further raised by the end of this year, which also triggered a sell-off.
However, in mid-June, Blackrock and several traditional financial institutions successively applied for Bitcoin spot ETFs, which led to a rebound in Bitcoin. Bitcoin hit a 2023 high of $31,432 on June 23, 2023.
Bitcoin’s major price movements tend to occur at the end of the London trading session and the beginning of the New York trading session, when economic data and key news are released and traders from around the world are most active in the market.
As of June 30, the total open interest in the market was approximately $18 billion. In addition, the funding rate was positive, indicating that market sentiment was optimistic.
2.6 Bitcoin Cash ($BCH) had the biggest gain in June
On June 20, EDX Markets, a cryptocurrency exchange backed by Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp., announced the launch of trading in Bitcoin ($BTC), Bitcoin Cash ($BCH), Ether ($ETH), and Litecoin ($LTC).
As Bitcoin Cash ($BCH) gains more attention and hype, its price has increased significantly in just one week.
Additionally, Litecoin’s ($LTC) halving is expected to occur on August 2, which could have an impact on its price in the coming weeks.
However, as the SEC has classified more altcoins as securities, investors are concerned about whether the SEC will consider Ethereum as a security. Therefore, Ethereum has performed relatively weakly relative to Bitcoin.
2.7 Performance of popular Layer 1 and Layer 2 tokens
In June, only Bitcoin ($BTC), Bitcoin Cash ($BCH), Litecoin ($LTC), Ethereum ($ETH) and Tron (TRX) recorded price increases, with most altcoins still in negative growth.
This can be attributed to the SEC's lawsuit against Binance (US) and Coinbase for issuing unregistered securities, as well as the listing of more altcoins as securities. Investors have therefore turned to more mature non-securities cryptocurrencies such as Bitcoin and Bitcoin Cash, which shows that Bitcoin's market capitalization has reached a new high in 2023.
2.8 Performance of popular GameFi/Metaverse and decentralized finance tokens
GameFi, the metaverse, and decentralized finance tokens have been underperforming recently as investors have turned to more established non-security cryptocurrencies like Bitcoin and Bitcoin Cash.
2.9 Performance of popular centralized exchange tokens and meme tokens
Centralized exchange tokens and meme tokens underperformed major cryptocurrencies in June. However, $PEPE, a popular meme token launched in April, has performed strongly in June, with its price up 20% since the beginning of the month.
