Grayscale, the second largest Bitcoin holding institution, issued a research report in September. The article mentioned that Bitcoin rose in September, while many traditional assets suffered heavy losses, highlighting the diversified nature of cryptocurrencies. However, rising U.S. government bond yields and rising oil prices still pose challenges to the financial market, and Grayscale is waiting for the approval of the Bitcoin spot ETF and Grayscale’s court ruling, which will be the next important catalyst for the market.

Bitcoin performs well under September spell

With Bitcoin up 4.1% in September and most traditional assets suffering significant losses, cryptocurrencies continue to offer investors a degree of diversification in a challenging market environment.

(Bitcoin and Ethereum surged this morning, getting rid of the September curse, leading the stock market to rebound in the fourth quarter?)

Rising U.S. bond yields weigh on global markets

The Grayscale report pointed out that the latest pressure on global assets seems to come from the U.S. bond market. At the FOMC meeting in mid-September, the Federal Reserve stated that it may raise interest rates again later this year, and the rate of interest rate cuts next year may not be as fast as before. expected. The Fed's updated guidance helped push short-term bond yields higher and boost the value of the dollar.

However, the bigger challenge facing fixed income markets may be the glut of long-dated government debt. The 30-year Treasury yield rose nearly 50 basis points (0.5%) in September, reaching its highest level since 2011. But long-dated Treasuries are generally less sensitive to changes in Fed interest rates. Instead, the bond market appears to be struggling to absorb the massive borrowing by the U.S. Treasury (resulting from the government's massive budget deficit). While budget deficits have remained high during this period, past Fed purchases (known as quantitative easing) have absorbed some of the bond supply. However, the Federal Reserve is currently beginning to shrink its balance sheet (quantitative tightening), and more government borrowing is hitting the open market, thus putting upward pressure on interest rates.

Bitcoin less affected by traditional asset shrinkage, on-chain metrics improving

Bitcoin transaction volume continued to decline in September, but various on-chain metrics improved: funding addresses, active addresses, and the number of transactions all increased. Grayscale attributes this to expectations for a spot Bitcoin ETF and the fact that cryptocurrency exchange Mt Gox will postpone the repayment of creditors (it holds about 138,000 Bitcoins, worth about $3.7 billion) until October 2024.

Ethereum prices are down slightly from last month, with the ETH/BTC ratio falling to a one-year low. Price volatility for the second-largest cryptocurrency has also fallen to extremely low levels. As of September 30, ETH’s 30-day annualized price volatility was just 25%, while the average volatility since January 2022 is about 60%. Unlike Bitcoin, ETH's on-chain fundamentals have changed little, with the ETH/BTC ratio recovering somewhat in late September as market attention focused on the approval of an Ethereum futures ETF.

Stablecoin market capitalization levels off after prolonged decline

According to data from DeFi Llama, the total stablecoin market capitalization has finally stabilized at around $124 billion after almost continuous decline last year. Both DAI and TUSD have seen significant increases in circulation since mid-August, while USDT’s supply has increased slightly since early September.

Stablecoin adoption appears to be driving Tron’s TRX token’s recent outperformance over other coins. TRX price has increased by 15% in the past month. The total value locked (TVL) of stablecoins hosted on Tron is higher than any other blockchain, even more than Ethereum. A large portion of TVL comes from USDT, which is primarily hosted on Tron and currently accounts for an average of 35-40% of daily transactions on the network.

Interestingly, Tron not only leads in terms of TVL, it also significantly surpasses Ethereum in the number of USDT transfers, with average daily transaction volume being approximately 15 times higher. USDT’s strong adoption on Tron demonstrates the stablecoin’s product-market fit and underscores its growing importance in the cryptocurrency ecosystem. The symbiotic relationship between USDT’s success on Tron and TRX’s recent price rise may be a sign that stablecoins are becoming an increasingly important cog in the modern cryptocurrency market mechanism.

Performance of other tokens

The cryptocurrency market remains concerned about the continued growth of Layer 2 blockchains, with social media app friend.tech on BASE L2 collecting more total fees than decentralized exchange Uniswap in September. Other strong performers included DeFi tokens AAVE, CRV and MKR, as well as oracle protocol token LINK.

Additionally, Toncoin (TON) briefly surpassed TRX to become the tenth largest crypto asset by market capitalization. The project was announced at the Token2049 conference in Singapore to integrate with messaging app Telegram. However, Grayscale reminds everyone that although it is optimistic about the prospects of cryptocurrency integration with messaging applications, investors should consider factors such as the liquidity of assets when assessing its valuation, and most of TON’s supply is provided by a small number of It is held by large investors and the trading volume of this token is extremely low compared to its market capitalization.

Awaiting Bitcoin Spot ETF Approval and Grayscale’s Court Ruling

Grayscale believes that Bitcoin’s resilience and the significant losses of traditional assets illustrate the diversified advantages of digital assets and the steady improvement of industry fundamentals. The next major catalyst for Bitcoin prices could come from the approval of a spot ETF. The SEC has until October 13 to seek a rehearing of Grayscale’s defeat in the court’s recent ruling, and if the SEC abandons its appeal, it will reconsider Grayscale’s application to convert GBTC to a spot ETF, as well as other spots currently under consideration Application for Bitcoin ETF.

Finally, Grayscale believes that despite these encouraging signs, the broader financial market background may remain challenging for the time being: the Federal Reserve is still tightening policy, government bond yields may still be finding a new balance, and the U.S. economy A "soft landing" is uncertain. However, Bitcoin’s recent stability suggests that its valuation may begin to recover once the macro backdrop improves.

This article Grayscale Report: Bitcoin provides investors with diversified returns, spot ETFs and Grayscale ruling will be the market’s next catalyst first appeared on Chain News ABMedia.