Abstract

• See 3 different strategies to generate +10% crypto-based returns in our newly posted video. Link.
• The previous high-pressure regulation in the market was speculated to be more like clearing obstacles for Wall Street’s own cryptocurrency platforms.
• We believe that multiple factors have contributed to the weak rebound of Ethereum, making it a good opportunity to buy Ethereum at a low price in the near future.
• With Wall Street firms all entering and releasing news of Crypto-focused products, Bitcoin is making YTD highs with anticipation of institutional funds entering.

Macro Analysis

Wall Street Rushes in as SEC Cleans House

1. On June 16th, BlackRock, with over $10 trillion in assets under management, filed an application for a Bitcoin spot ETF.
2. On June 20th, EDX Markets, a cutting-edge cryptocurrency trading platform backed by Wall Street stalwarts such as Citadel Securities, Fidelity Investments, and Charles Schwab, went live after receiving funding from prominent firms like Sequoia Capital, Paradigm, and Virtu Financial. It aims to serve institutional investors and will offer trading of four cryptocurrencies—Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH)—that have not been classified as securities by the U.S. SEC.
3. Federal Reserve Chairman Jerome Powell stated during a congressional hearing on Wednesday that “cryptocurrencies as an asset class seem to have staying power, and Wall Street institutions are making efforts to adopt the technology.” Subsequently, the market witnessed an increase.
4. On June 23rd, Volatility Shares announced the launch of a 2x leveraged BTC strategy ETF (ticker: BITX), which is currently the only fund in the U.S. that provides double the returns of Bitcoin. It is set to officially launch on June 27th. This news further fueled market sentiment, resulting in a short-term surge of BTC to $31,400.

On June 20th, it was reported that EDX Markets, a new cryptocurrency trading platform backed by prominent Wall Street entities, including Citadel Securities, Fidelity Investments, and Charles Schwab, has commenced trading recently. The platform, which previously secured funding from venture capital firms such as Sequoia Capital, Paradigm, and Virtu Financial, is specifically designed to cater to institutional investors and will facilitate trading of four cryptocurrencies—Bitcoin, Ethereum, Litecoin, and Bitcoin Cash—which have not been classified as securities by the US SEC. In response to this development, Bitcoin experienced a surge, surpassing the $29,000 mark, while Ethereum exceeded $1,800.

Within the past two weeks, several Wall Street financial giants, namely Blackrock, Citadel, Fidelity, Schwab, WisdomTree, Invesco, and Deutsche Bank, have entered the market amid the stagnant cryptocurrency market conditions following the SEC’s lawsuits against Binance and Coinbase. Market speculation suggests that the previous stringent regulations may have served as a means to clear obstacles for Wall Street’s own cryptocurrency platforms.

Considering the recent launch of an ETF for Bitcoin, most of the momentum lies in that direction. Bitcoin dominance remains above 50%, and altcoins, with few short-term exceptions, have generally experienced a decline. However, with EDX also offering LTC, ETH, and BCH for trading, there could be some relative strength in those cryptocurrencies as well.

Due to the absence of significant inflows in the space, the prevailing narrative is heavily focused on Bitcoin and Ethereum. We anticipate that as long as this narrative persists, Bitcoin will likely maintain its strength, with Ethereum catching up later.

As mainstream institutions from Wall Street gradually enter the market, we anticipate that the cryptocurrency market will expand further, and the liquidity shortage will improve significantly. However, the likelihood of abrupt surges in mainstream cryptocurrencies is diminishing, potentially leading to a slower bull market like the post-2008 US stock market.

Fundamental Analysis

Is it time for Ethereum’s opportunity?

Based on Blockchain data, the current gas fees for Ethereum have decreased to levels comparable to those observed towards the end of 2022. In addition, we have noticed that Ethereum’s recovery during this cycle has been relatively lackluster, as evidenced by the ETH/BTC exchange rate nearing its lowest point of the year. Whenever gas fees drop to the 10+ level, it presents a favorable opportunity to accumulate Ethereum. Furthermore, there are no indications of a significant rally associated with the year-end Cancun upgrade at this time. Consequently, taking these factors into account, we recommend considering the purchase of Ethereum at a low price in the near future.

Correlations breaking down

The recent breakdown in correlation between Bitcoin and other assets is worth noting. Over the past year, Bitcoin has exhibited a highly negative correlation with the Dollar Index (DXY), a strongly positive correlation with the Nasdaq (NQ1!), and, more recently, a notably high correlation with Gold (GC1!). However, the correlations have undergone significant changes. Bitcoin, which has generally been categorized as a risk asset akin to tech stocks, currently demonstrates no correlation with them. Surprisingly, while the Nasdaq experienced a pullback, Bitcoin embarked on a significant rally. This suggests that Bitcoin is displaying signs of decoupling from the traditional equities market.

Moreover, Bitcoin’s correlation with Gold has recently transitioned from 0.8 to -0.8, indicating an almost perfect inverse correlation. This shift can likely be attributed to regulatory risks stemming from the SEC’s actions against Binance and Coinbase. Instead of being perceived as a safe-haven asset like Gold, Bitcoin now faces regulatory pressures, leading to an inverse correlation. Currently, Bitcoin appears to be uncorrelated with major asset classes as it confronts regulatory risks and remains highly influenced by headlines. Hence, it is crucial to consider this change in its nature as we move forward.

Technical Analysis

BTC

In our previous report, we anticipated a resurgence in the $26,500 – $27,000 range and emphasized that a successful reclaim of this range would likely prevent a revisit to $25,000 in the upcoming months. Indeed, the $27,000 zone proved to be a crucial pivot point, and the market was greatly influenced by the news of Blackrock, Citadel, Fidelity, and other TradeFi firms entering the cryptocurrency space. Following the successful reclamation of $27,000, Bitcoin’s price continued to climb and swiftly surpassed the significant psychological barrier of $30,000. Throughout this period, the upward trendline we have closely monitored has provided robust support, resulting in a shift of the levels for potential significant pullbacks to higher thresholds.

Nevertheless, when we take into account the absence of notable enhancements in stablecoin supply, as previously mentioned, and factor in the bearish divergence detected on the 4-hour relative strength index (RSI) indicator for BTC, we consider it prudent to realize partial profits at this juncture. In order for the rally to sustain its momentum, it is crucial to prevent prices from dropping below $28,500 or experiencing a retracement of approximately 50% from the entire upward move. Significant market movements tend to occur when traders find themselves in unfavorable positions and readily buy any price dips. Therefore, if prices undergo a substantial retracement, it would indicate weak buying pressure.

One aspect that we did not accurately anticipate was the significant impact of TradeFi firms entering the cryptocurrency market. Initially, there was not much hype surrounding the news of Blackrock filing for a Bitcoin ETF, so we adopted a wait-and-see approach to gauge the market’s response. However, when the price of Bitcoin surged above $27,000, it became evident that this development was a major driving force, albeit with a delayed effect. Despite the negative sentiment surrounding the crypto market, such as the SEC’s actions against Binance and Coinbase, the collapse of FTX, and France targeting Binance, it appeared unlikely that TradeFi institutions would engage with the market. Nevertheless, the entry of Blackrock, the world’s largest asset manager, with a Bitcoin ETF, along with the official launch of the EDX exchange by Citadel and Fidelity, removed the perception that the market was uninvestable for institutional players. This development is highly positive, especially considering that the top 10 investment firms collectively manage over $20 trillion of investable assets under management, which is 40 times the current market cap of Bitcoin.

Despite the initial challenge in interpreting the significance of the news, our long position was still maintained due to the clear price action around the $25,000 support level. It is often said that asset prices encapsulate all available market news and can even offer insights into potential price movements. For further reference, please consult our research from last week here.

Trading Recommendations

Bitcoin

Regarding the decrease in stablecoin supply, short-term liquidity concerns, and the RSI divergence on the technical front, we believe that a correction is likely to occur after the recent bullish rally this week. We recommend using the profit-taking feature of Pionex’s Dual Investment to take appropriate profits. For Bitcoin, if you have a significant position, we suggest taking 10% to 20% of your position for a quick profit by selecting a product with a 1-day maturity target at $30,750, $30,250, or $31,000, with an annualized return of over 89%.

If you prefer not to take profits from your holdings and instead aim to accumulate more coins at relatively higher levels while waiting for an opportunity to buy at lower prices, we recommend selecting a product with a 2-day maturity target of $32,000, with an annualized return of over 29%. This will further help you stack Bitcoin with coin-based returns.

Ethereum

For Ethereum, considering the limited strength of its rebound, if you have a significant position, we suggest taking 5% to 10% of your position for a quick profit by selecting a product with a 1-day maturity target at $1,925 with an annualized return of over 30%.

If you prefer not to take profits from your holdings and instead aim to accumulate more coins at relatively higher levels while waiting for an opportunity to buy at lower prices, we recommend selecting a product with a 2-day maturity and target of $2,000, with an annualized return of around 15%. This will further help you stack Bitcoin with coin-based returns.