THE COIN STREET JOURNAL
Market News - July 12th 2024
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BITCOIN SET FOR RENEWED BULLISH MOMENTUM
The recent data from Capriole Investment’s crypto speculation index indicates that the speculative excesses observed in the first quarter of the year have significantly dissipated. This development suggests that the market could be resetting, creating a healthier environment for potential renewed bullish momentum in Bitcoin.
The speculation index measures the percentage of alternative cryptocurrencies (altcoins) that have 90-day returns greater than Bitcoin. A lower index value typically indicates reduced speculative behavior. As of now, the index has stabilized below 10%, a notable decline from its January high of nearly 60%.
During the first quarter, Bitcoin hit record highs above $70,000 but has since cooled to $58,000. The reduction in speculative fervor, as reflected in the speculation index, indicates that the market may be correcting itself. This aligns asset prices more closely with their fundamentals, potentially paving the way for a more sustainable rally in Bitcoin.
Altcoins, which number over 14,800 according to Coingecko, are mostly illiquid and often seen as speculative investments. Their trading volumes and price performances are closely linked to retail investor interest, as indicated by Google Trends data. A high outperformance of altcoins relative to Bitcoin usually signals speculative mania in the market.
Speculative washouts, such as the current one, serve as corrective mechanisms in the crypto market. They help temper excessive speculation and realign prices with fundamentals. This process creates a healthier market environment, which is crucial for the sustainability of any bullish trends.
Historically, a speculation index below 10% has coincided with the onset of significant Bitcoin rallies. Notable instances include the first half of 2019, late 2020, and the second half of 2023. These periods of reduced speculative activity have typically been followed by sharp increases in Bitcoin’s price.
The current stabilization of the speculation index below 10% suggests that the market has cleared much of its speculative froth. This sets the stage for a potential renewed uptick in Bitcoin, similar to past instances where reduced speculation preceded significant price rallies.
The speculative excesses earlier this year had caused Bitcoin’s price to surge to record highs. However, the subsequent cooling off period has allowed the market to correct itself. The current conditions are reminiscent of past bull market resets, where speculative washouts preceded renewed price increases.
Overall, the dissipation of speculative excesses indicates a healthier market environment for Bitcoin. The historical correlation between a low speculation index and Bitcoin price rallies suggests that the leading cryptocurrency could be on the verge of another significant upward movement.
As the market continues to realign with fundamentals, the potential for renewed bullish action in Bitcoin appears strong. The current conditions, marked by reduced speculative activity, are conducive to a more sustainable and long-term rally in the cryptocurrency market.
NUMBER OF CRYPTO HOLDERS COULD TRIPLE BY 2026
Cryptocurrency adoption is anticipated to experience significant growth, with predictions suggesting the number of crypto holders could triple by 2026. Pavlo Denysiuk, CEO of crypto payments firm Lunu, highlighted this potential during a panel discussion at NFT Fest 2024, noting that the global number of crypto holders could double or triple over the next two years based on current user growth trends.
According to the 2024 Cryptocurrency Ownership report by Triple-A, there are currently an estimated 560 million crypto holders worldwide, which constitutes about 6.8% of the global population. This indicates a solid foundation for the expected growth in cryptocurrency adoption as the number of users is projected to surpass one billion by 2026.
Denysiuk emphasized that the adoption of cryptocurrency payments hinges on the availability of the necessary infrastructure. He suggested that as soon as mainstream companies, such as Starbucks, start accepting crypto, wider adoption will naturally follow. The presence of crypto payment options in everyday retail environments will drive this adoption as it becomes seen as just another payment method, akin to credit cards and digital banking options already in use today.
Lunu, based in Berlin, is actively working on building a stablecoin-powered payments ecosystem to facilitate economic integrations. Denysiuk stressed the importance of stablecoins in this context, citing them as a crucial on-ramp from the fiat to the digital economy. Despite Bitcoin’s origin as a digital currency, it is stablecoins that are most frequently used for transactions, reflecting their stability and suitability for everyday use.
The stablecoin market is currently valued at over $163 billion, representing 7.7% of the entire crypto market’s $2.11 trillion capitalization. This significant market presence underscores the pivotal role stablecoins play in the broader adoption of cryptocurrencies, providing a reliable and less volatile means of conducting transactions.
However, the journey to widespread crypto adoption faces challenges, particularly in terms of user experience. Chintan Turakhia, senior director of engineering at Coinbase, highlighted the need for more beginner-friendly applications to reach a broader audience. Removing friction points in the user experience is essential for attracting the next wave of crypto users, potentially starting with the next 100 million before aiming for a billion.
The adoption of cryptocurrency payments is seen as an inevitable development as infrastructure improves and mainstream companies integrate crypto payment options. Denysiuk’s perspective aligns with the broader industry view that as crypto becomes more accessible and user-friendly, its adoption will accelerate, making it a commonplace part of everyday financial transactions.
In summary, the expected tripling of cryptocurrency holders by 2026 is a reflection of growing user adoption and the potential for mainstream acceptance of crypto payments. The development of stablecoin ecosystems and improved user experiences are crucial factors in this growth trajectory, with infrastructure enhancements playing a pivotal role in facilitating broader adoption.
As the crypto industry evolves, the integration of stablecoins and user-centric applications will be key to overcoming the challenges of widespread adoption. The insights shared by industry leaders at events like NFT Fest 2024 provide a roadmap for achieving these milestones and realizing the potential of cryptocurrencies in the global economy.
EU REAFFIRMS COMMITMENT TO ADVANCE BLOCKCHAIN SUSTAINABILITY SOLUTION
The European Union (EU) has reaffirmed its collaboration with ChromaWay to advance blockchain-based sustainability solutions, emphasizing Digital Product Passports (DPP) and Intellectual Property (IP) Rights. This continued partnership was announced on July 12, following ChromaWay’s presentation at the EU Pre-Commercial Procurement (PCP) final review meeting, where significant progress in decentralized applications for DPP and IP rights was demonstrated.
At the meeting held in Brussels, ChromaWay showcased its relational blockchain technology, which enhances the efficiency and management of onchain data. This technology combines the adaptability of relational databases with the security features of blockchain, creating a robust foundation for various enterprise solutions. It also supports Chromia, a public layer-1 platform for decentralized applications, set to launch its main net on July 16.
Or Perelman, co-founder of Chromia, expressed enthusiasm about developing new solutions for institutional applications in collaboration with the EU. He highlighted the potential of relational blockchain to unlock the capabilities of Web3 technology and foster widespread adoption through cooperation among governments, regulators, institutions, and blockchain innovators.
The EU’s endorsement of ChromaWay’s work indicates a strong belief in the transformative potential of relational blockchain technology across public and private sectors. This support aligns with the EU’s broader strategy to integrate advanced blockchain solutions, promoting sustainability and efficiency throughout Europe. The EU remains committed to driving economic and environmental benefits via technological innovation.
In July 2024, representatives from RBN Eco and ChromaWay are scheduled for an interview with the European Blockchain Association to evaluate their compatibility with future EU initiatives. This step will be followed by a workshop in Brussels in September, where the next phases for late 2024 and 2025 will be planned.
The EU has been proactive in partnering with various blockchain solutions, reflecting its strategic approach to technological adoption. This includes collaborations like the one with Iota, which the European Commission selected for its Web3 ID for the blockchain sandbox in June 2024. These partnerships highlight the EU’s commitment to leveraging blockchain for sustainable development.
By fostering such collaborations, the EU aims to establish a robust framework for the integration of blockchain technology into different sectors. This effort is part of a larger vision to enhance both economic and environmental sustainability across the region. The EU’s actions underscore its dedication to being at the forefront of technological advancements that benefit society at large.
Overall, the continuation of the EU’s partnership with ChromaWay represents a significant step towards realizing the potential of relational blockchain technology. This initiative is expected to drive meaningful progress in creating efficient, secure, and sustainable solutions, thereby supporting the EU’s long-term goals of innovation and sustainability.
SEC ALLOWS CERTAIN BANKS AND BROKERAGES TO BYPASS REPORTING REQUIREMENTS
The Securities and Exchange Commission (SEC) has allowed certain banks and brokerages to bypass the requirement to report their customers’ cryptocurrency holdings on their balance sheets, provided they mitigate the associated risks. This decision follows guidance issued by the SEC two years ago, which has faced opposition from Congress. Banks and brokerages must ensure customer assets are safeguarded in the event of a bankruptcy or failure to qualify for this exemption.
Several major banks that have consulted with the SEC since 2023 have received permission to avoid balance sheet reporting. These banks have demonstrated their ability to protect customer assets through internal safeguards and legal measures. The SEC believes that its guidance has prompted companies to address the risks of hacking and business failures, thereby protecting investors.
This accounting stance by the SEC could broaden the options available to American crypto holders by allowing more financial institutions to offer crypto services without triggering additional capital requirements. Previously, the requirement to report these assets on balance sheets discouraged lenders from entering the crypto market due to the increased regulatory burden.
Despite efforts by financial industry trade groups to overturn the SEC’s guidance, the House recently failed to override a presidential veto on a measure aimed at revoking Staff Accounting Bulletin 121. This bulletin, issued in 2022, was intended to keep investors informed about the risks associated with cryptocurrencies. The collapse of the crypto exchange FTX shortly after the bulletin’s issuance underscored the need for such transparency.
Major crypto platforms like Coinbase Global Inc. and Robinhood Markets Inc. have complied with the SEC’s guidance by reporting their customers’ crypto assets on their balance sheets since 2022. However, banks have successfully argued that certain crypto assets, such as wallets and spot Bitcoin exchange-traded products, should be exempt from this requirement.
Financial institutions are increasingly eager to participate in the crypto industry, especially following the SEC’s approval of spot Bitcoin products. According to Aaron Jacob, head of accounting solutions at TaxBit, the new exemptions allow even the largest and oldest financial institutions in the U.S. to engage in the crypto market.
In summary, the SEC’s recent guidance offers a compromise by allowing certain banks and brokerages to avoid balance sheet reporting of crypto assets while still protecting investor interests. This move could potentially increase the number of financial institutions offering crypto services and further integrate cryptocurrencies into the mainstream financial system.