Crypto Weekly Review & Outlook July 26 — August 2, 2021

News Highlights

• China’s central bank says it will keep regulatory pressure on cryptocurrencies
• Cardano Will Allow Users to Run Smart Contracts Once Hard Fork Occurs
• $41B hedge fund GoldenTree adds bitcoin to balance sheet
• Congress to Potentially Pass Infrastructure Bill That Threatens Crypto Industry
• MicroStrategy to Buy More Bitcoin Despite Q2 Impairment Loss
• Binance to Stop Offering Crypto Futures and Derivatives In European Countries
• Elon Musk Hints Tesla Owns Around 42k Bitcoin
• German court: Exchange crypto balance freezing is unlawful, must be revoked
• Crypto population doubled to over 200M users since January, report says
• Fed Governor Lael Brainard Can’t Imagine Future Without Digital Dollar
• PayPal’s crypto ‘super app’ set to roll out soon
• Ripple Announces New ODL Corridor in Japan
• Senator Warren Pressing Yellen to Clamp Down on DeFi and Stablecoins
• Goldman Sachs Submits DeFi ETF Application to SEC
• Saudi Aramco, World’s Largest Oil Company, Denies Bitcoin Mining Reports

Markets

• The entire market value of all crypto assets has moved in a range from $1.27 trillion to $1.68 trillion over the past week and as of this writing sits slightly above the $1.6 trillion mark.
• BTC-USD has gained around 3.5% over the last seven days. Earlier in the week, the price touched the $40k level multiple times before breaking out above $42k on Saturday. However, the pair finally ended its winning streak of 10 consecutive days of gains yesterday (not seen since 2013). The price recently fell through $40k and is sitting near $39.6k.
• ETH-USD rose approximately 10.3% during the past week. The pair managed to break above the $2,600 level, reaching its highest price since June 15. However, it has since moved slightly lower and is currently treading water in the $2,500-$2,600 range.
• XRP-USD rose about 14% over the past week. On Wednesday, it had a jump of around 15% on news of a new payment corridor between Japan and the Philippines showcasing a compelling use case. It started the week at $0.65 and is currently hovering around $0.75.

The Week Ahead

• Will the next crypto outperformers come from the gaming token space? Many gaming-focused cryptos saw MASSIVE gains last week. These include Axie Infinity, MyNeighborAlice, Enjin Coin, Decentraland, and The Sandbox. The space is also seeing a significant spike in social and trading volume. The gaming crypto category’s market cap is only at $7.7B while the Defi space’s market cap is at $90B indicating plenty of room to grow. As higher prices (and interest) beget higher prices (and more interest), the gaming token category should be on investors’ radar.
• Ripple’s XRP is definitely one to watch as it eyes a sustained break above the 200 DMA of $0.7774 with the next goal of reclaiming the $1 level. It has been consolidating its gains since the Wednesday jump due to the Japan-Philippines payment corridor news. Support can be found at the 50 DMA of $0.67 and further resistance can be found at the 100 DMA of $0.9343
• Starting today, the German institutional funds (Spezialfonds) will be able to invest up to 20% of their $1.8T worth of assets into cryptocurrencies due to the Fund Location Act coming into effect. This equates to a maximum amount of $415B entering the market. It is believed that the funds will be conservative and stay far below the 20% threshold, however, this new source of demand is definitely bullish for the market.
• Investors have been eagerly awaiting Ethereum’s London hard fork alongside the much-hyped EIP-1559 which could potentially turn Ether into a deflationary asset. The upgrade is currently slated for the early hours of August 5th. Staking on Ethereum 2.0 also continues to grow in anticipation of the network’s switch from Proof-of-work to Proof-of-stake. Just under 6.5 million ETH chain or around US$17 billion worth of ETH is now staked to this version of Ethereum. Furthermore, the trading volume of Ether grew faster than that of Bitcoin in the first half of the year, according to a Coinbase Global Inc. report. Lastly, Ethereum “Millionaire Tier” whales now hold 39.2% of the ETH supply, the largest portion owned in nearly three months. These “Millionaire Tier” wallets hold from 1,000 to 100,000 ETH each.
• Institutional investors are returning to the crypto market, with around $2.8 billion in Bitcoin (BTC) being moved off cryptocurrency exchanges just on Wednesday morning alone. According to Glassnode, the supply on Bitcoin exchanges fell by 70,328 BTC. This was the largest exchange net outflow since November 2020 and a strong indication of demand returning.
• An updated draft of the bipartisan infrastructure bill could still cause major problems for the crypto industry. The bill proposes taxing bitcoin and cryptocurrency profits (raising $28B) to fund U.S. infrastructure investment. The main point of contention is the definition of a broker along with the new reporting requirements. The updated version clarifies that only parties who provide digital asset transfers would be treated as a broker, whereas the earlier version’s definition was so broad that it potentially covered parties who provided only software or hardware to customers and had no visibility into user transactions. The main takeaway is the new version’s language doesn’t explicitly include decentralized exchanges, but it also doesn’t clearly exclude miners, node operators, and software developers. This regulatory uncertainty should be watched carefully, especially as the bill undergoes more changes. The bill should have a final vote in the Senate this week but will still need to pass through the House.
• On Tuesday, Acting Comptroller of the Currency Michael Hsu revealed that regulators are investigating the commercial paper reserves backing leading stablecoin Tether (USDT). Tether previously made public that about 50% of their reserves are backed by commercial paper. Recent rumors have swirled that the commercial paper is of the Chinese low-grade variety. Due to these concerns along with recent allegations of bank fraud against Tether executives, stablecoins USDC and BUSD have been stealing Tether’s market share. Since Tether is still used in the vast majority of crypto transactions, this slow-moving story should not be ignored.

Charts of the Week

The Bitcoin Fear and Greed Index yesterday moved to “greed” (60+) for the first time in 12 weeks as bitcoin rose above $40k. This is after the index plummeted to 10 (extreme fear) just a few weeks earlier.

The Ethereum Fear and Greed Index is also exhibiting “greed” after weeks of fluctuating between “neutral” and “fear.”

Both changes in sentiment appear to be bullish, but it’s important to note that too much greed could be followed by corrections, just as price increases can come in times of extreme fear.

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