THE COIN STREET JOURNAL
Market News - August 30th 2024
BITCOIN UNDERPERFORMING IN AUGUST IS FACING CHALLENGES AHEAD
In August, Bitcoin has underperformed compared to traditional assets, facing challenges such as reduced liquidity and concerns over potential government sales from their cryptocurrency holdings. This anxiety stems from the possibility that countries like the US, China, UK, and Ukraine, which hold significant amounts of Bitcoin, may offload their stockpiles. Additionally, creditors of the defunct Mt. Gox exchange could release more tokens into the market, contributing to a potential $33 billion overhang in Bitcoin supply.
Kaiko, a research firm, estimated that the US government holds about 203,220 Bitcoin, while China has approximately 190,000. The UK and Ukraine possess 61,200 and 46,350 Bitcoin, respectively. These governments typically acquire Bitcoin through criminal seizures, whereas Ukraine has also received Bitcoin donations to support its defense against Russia. Moreover, Mt. Gox still holds around 46,170 Bitcoin, which it is expected to distribute to creditors, raising concerns about additional selling pressure in the market.
The looming threat of large-scale Bitcoin sales has been a significant concern throughout the summer, according to Kaiko analysts. They noted that several prominent holders, including governments and Mt. Gox creditors, could potentially drive a significant sell-off in the coming months, further destabilizing the market.
As a result of these concerns, Bitcoin’s price has dropped, falling as much as 2.9% to $57,800, significantly below its peak earlier in March. Other cryptocurrencies like Polygon and Solana have also suffered, with each experiencing declines of over 5%. This drop is exacerbated by declining liquidity in the Bitcoin market, which has made the cryptocurrency more susceptible to large price swings.
Sean Farrell, head of digital-asset strategy at Fundstrat Global Advisors, highlighted the thinning liquidity in the Bitcoin market as a contributing factor to its recent volatility. He noted that Bitcoin has fallen about 10% in August, contrasting with the roughly 2% gains seen in global stock and bond indices. Farrell also pointed out that trading volumes have been subdued, which has amplified the impact of large trades on Bitcoin’s price.
Despite some positive developments, such as net inflows into US spot-Bitcoin exchange-traded funds (ETFs) and anticipation of a more lenient Federal Reserve monetary policy, Bitcoin has struggled to gain traction in August. The market’s thin liquidity and seasonal patterns have led to choppy price movements, with activity expected to pick up after the US Labor Day holiday.
The challenges extend to the US Bitcoin ETF sector, where liquidity has deteriorated over the past six months. JPMorgan strategists noted that a key liquidity metric, the Hui-Heubel ratio, has been declining for all spot-Bitcoin ETFs since March, indicating worsening conditions. The combined daily trading volume for US Bitcoin ETFs has also dropped sharply, from over $10 billion in March to less than $2 billion recently, reflecting the broader liquidity issues in the Bitcoin market.
Overall, the Bitcoin market faces a precarious situation with potential large-scale sales, declining liquidity, and weakening ETF performance, all contributing to its underperformance relative to traditional assets as August comes to a close.
NFT INDUSTRY: SEC INITIATES INVESTIGATION INTO OPENSEA
The U.S. Securities and Exchange Commission (SEC) has initiated an investigation into Opensea, the largest marketplace for Non-Fungible Tokens (NFTs), signaling a major shift in the regulatory landscape of digital assets. The SEC has issued a Wells notice to Opensea, alleging that some of the tokens traded on the platform are actually securities, a move that could have significant consequences for both the crypto and NFT industries.
This action by the SEC could pose a serious threat to crypto innovation. By classifying NFTs as securities, the regulatory body not only targets Opensea but also endangers the broader creative ecosystem that relies on NFTs. The implications of this move extend far beyond Opensea, potentially affecting thousands of artists and developers who depend on the NFT market for their livelihoods.
Opensea’s CEO, Devin Finzer, has expressed strong opposition to the SEC’s actions, warning that such regulatory measures could stifle innovation and harm the digital art and content creation sectors. Finzer argues that NFTs are creative digital goods and should not be subjected to the same regulations as traditional financial securities like stocks or bonds. Despite these concerns, the SEC appears committed to enforcing its regulatory perspective.
In response to the SEC’s investigation, Opensea is preparing to defend itself vigorously. The platform is not only challenging the SEC’s allegations but is also taking steps to protect its community of creators and artists. To support this effort, Finzer has announced the establishment of a $5 million legal defense fund to assist NFT creators who may face similar regulatory challenges.
This legal battle between Opensea and the SEC is being closely monitored by the crypto community, as its outcome could have far-reaching implications for the future of NFTs. If the SEC is successful in its pursuit, it could disrupt the entire industry. However, if Opensea prevails, it may set a precedent for more balanced regulation, allowing digital innovation to continue without the threat of harsh regulatory action.
The stakes are high as the SEC appears determined to push its regulatory agenda, while Opensea is equally committed to resisting what it sees as an overreach. The outcome of this confrontation could define the relationship between regulators and the crypto industry for years to come.
As the situation unfolds, the broader crypto world is watching with bated breath, aware that the resolution of this conflict could either hinder or help shape the future of digital assets. The case highlights the ongoing tension between innovation in the digital space and the regulatory frameworks that seek to control it.
In this high-stakes battle, the future of NFTs and digital content creation hangs in the balance, with the potential to either stifle or empower a burgeoning industry. The outcome will likely have significant implications not just for Opensea, but for the entire landscape of digital assets and the regulatory environment surrounding them.
ARE CRYPTO OWNERS PSYCHOPATHS? ACCORDING TO A RECENT STUDY THIS APPEARS TO BE THE CASE!
Economist Steve Hanke recently pointed to a study from the University of Toronto that links cryptocurrency ownership to traits associated with the “Dark Tetrad”—a group of personality traits that includes psychopathy, narcissism, Machiavellianism, and sadism. Hanke emphasized that the research suggests that crypto owners exhibit psychopathic tendencies, raising concerns about the psychological profiles of those involved in the crypto market.
The study, published in the peer-reviewed journal PLOS One, was conducted by researchers Shane Littrell, Casey Klofstad, and Joseph E. Uscinski. It explores the correlation between owning cryptocurrencies and the presence of Dark Tetrad traits. The researchers found that individuals who own cryptocurrencies tend to display lower levels of analytic and scientific thinking, which correlates with an increased likelihood of psychopathic behavior compared to the general population.
In 2022, the researchers surveyed 2,001 American adults to gather data for their study. The survey revealed that about 30% of the respondents had owned some form of cryptocurrency. The findings suggest that cryptocurrency owners are more likely to possess diverse political views and tend to oppose authoritarianism, adding a layer of political complexity to the profile of a typical crypto investor.
Moreover, the research highlights that certain demographics are more inclined to invest in cryptocurrencies. Specifically, men, those who obtain their news from alternative or fringe social media sources, and individuals who enjoy engaging in argumentative behavior are more likely to hold cryptocurrencies. These findings suggest that cryptocurrency ownership is not confined to a specific political ideology, such as far-right conservatism, but instead spans a broader range of political and psychological characteristics.
The study’s results challenge common perceptions of cryptocurrency as merely a financial tool for specific political groups. Instead, the researchers present a more nuanced view, where cryptocurrency ownership is linked to complex personality traits and diverse political affiliations. This complexity may also reflect the unique and often volatile nature of the cryptocurrency market itself.
Steve Hanke’s citation of this study draws attention to the potential risks associated with the psychological profiles of cryptocurrency owners. The suggestion that these individuals might be more prone to psychopathic behavior raises questions about the broader societal implications of widespread cryptocurrency adoption. It also underscores the need for further research into the motivations and behaviors of those who participate in the crypto market.
The study’s implications extend beyond the realm of psychology, as they also touch on the social and political dimensions of cryptocurrency ownership. As cryptocurrencies continue to gain popularity, understanding the characteristics of those who invest in them could prove crucial in shaping future regulatory approaches and in assessing the potential societal impact of digital currencies.
In summary, the University of Toronto study cited by economist Steve Hanke reveals a complex relationship between cryptocurrency ownership and personality traits associated with the Dark Tetrad. By challenging existing assumptions about the typical crypto investor, the research opens the door to a deeper exploration of the psychological and political dimensions of the cryptocurrency phenomenon.
WILL TRUMP REVEAL A PLAN TO MAKE THE U.S. THE CRYPTO CAPITAL OF THE PLANET?
On Thursday morning, Donald Trump announced to his 90 million followers on X that he would reveal a plan to make the U.S. the “crypto capital of the planet” later that day. However, despite holding a rally in Michigan and a town hall in Wisconsin, Trump did not deliver on this promise by the end of the day. His campaign did not respond to inquiries from CNBC about the missing plan, leaving his supporters and the public in anticipation.
Trump’s missed promise was particularly surprising given the context of the day. The town hall, moderated by former Congressman and bitcoin supporter Tulsi Gabbard, seemed like the perfect opportunity for Trump to introduce his crypto plan. However, Trump made no mention of digital assets during the event. Earlier that day, Trump had promoted the Trump Organization’s new crypto platform, “World Liberty Financial,” rebranded from “The DeFiant Ones.”
In a video posted on X, Trump indicated that he would soon unveil his strategy to make the U.S. a leader in crypto, using rhetoric about unspecified forces trying to “choke” businesses. This statement, coupled with his failure to follow through, led to further confusion. The crypto platform “World Liberty Fi,” tied to the Trump family and endorsed by Trump’s sons, was also highlighted, though its purpose remained unclear.
“World Liberty Financial,” which was promoted by Trump’s sons, Donald Jr. and Eric Trump, appeared to be a significant part of this plan. Eric Trump announced the launch of the platform on X, while the project’s Telegram channel quickly amassed over 57,000 subscribers. Despite this momentum, it was not immediately clear what services the platform would provide, or if it was even operational.
The launch of “World Liberty Financial” followed closely on the heels of Trump releasing a new series of NFT trading cards. Like the crypto platform, these NFTs are a private venture of the Trump family and are not directly tied to Trump’s presidential campaign. However, they are marketed to his supporters, blending Trump’s business ventures with his political brand, potentially drawing in both voters and financial contributions from the crypto community.
Trump has increasingly positioned himself as the pro-crypto candidate, attracting donations and endorsements from the crypto voting bloc. His campaign claims to have raised $25 million in crypto-related donations, though CNBC could not independently verify this figure. Despite the growing support from the crypto community, there remain questions about the specifics of the “World Liberty Financial” platform and its potential impact.
Eric and Donald Trump Jr. have provided varying descriptions of the platform’s goals. Donald Jr. mentioned the platform’s potential to challenge traditional banking, especially appealing to those who feel marginalized by the current financial system. Eric suggested that the project might involve digital real estate, either through tokenizing real-world assets or selling digitized versions of assets in the metaverse.
Trump himself described the platform as a way for Americans to “take a stand” against the perceived dominance of big banks and financial elites. While he has framed the initiative as a populist effort to empower the average citizen, the lack of clarity and the failure to deliver the promised crypto plan on Thursday has left many wondering what the future holds for Trump’s crypto ambitions.