THE PHENOM CRYPTO LETTER

GM,

Welcome to the Weekly Update. It has been an entertaining week in crypto. ZKSync finally announced their airdrop after 2 years and people are pissed about getting free money (as always) and more high drama in celebrity meme coins with @ansem and Andrew Tate beefing on twitter worse than Kendrick and Drake after Tate launched and shilled his own coin. Its juicy and we are here for it 🍿 Here’s a funny reenactment of their back and forth 🤣

Here’s what we’ve got this week:

• Market Rundown

• Where is the Alt Coin Bull Run?

• Reading Corner

• Blockbuzz

• Crypto Twitter

MARKET RUNDOWN

Market Sentiment:

This week, the cryptocurrency market has been volatile, influenced by macroeconomic factors and significant news events. Despite some downturns, the overall sentiment remains cautiously optimistic, with key developments in regulatory and institutional spheres.

Bitcoin (BTC):

• Current Price: Approximately $69,740, reflecting recent fluctuations.

• Key Developments: Bitcoin experienced a steep decline last Friday, dropping below $70,000. This drop was triggered by a strong U.S. employment report which led to a sell-off in stock market futures and a surge in Treasury yields. The report showed 272,000 jobs added in May, surpassing the forecast of 185,000, which heightened concerns about potential interest rate hikes​ (CoinSwitch)​.

• Market Dynamics: Despite the recent dip, Bitcoin futures positions reached a record high of $37.7 billion. The ongoing net inflows into spot Bitcoin ETFs, extending to 18 days, suggest sustained interest from institutional investors. Analysts predict a potential surge to $83,000 if Bitcoin can break above $72,000, completing an inverted head-and-shoulders pattern​ (CoinSwitch)​.

Ethereum (ETH):

• Current Price: Around $3,597.

• Key Developments: Ethereum's market performance has been bolstered by the U.S. Securities and Exchange Commission (SEC) allowing the creation of spot Ethereum ETFs. This regulatory shift has fueled optimism, driving Ethereum prices higher as investors anticipate the launch of these ETFs​ (Nasdaq)​.

• Market Dynamics: Ethereum remains a key focus for institutional investors, with the SEC's recent rule change enabling major exchanges to list spot Ethereum ETFs. This development is expected to further strengthen Ethereum's position in the market and attract more capital inflows​ (CoinSwitch)​.

Major News and Events:

1. Institutional Investments: Semler Scientific has increased its Bitcoin holdings by $17 million, bringing its total to $74 million. The company plans to raise $150 million to purchase more Bitcoin, highlighting ongoing institutional interest in cryptocurrency​ (CoinSwitch)​.

2. Regulatory Developments: The SEC's approval for spot Ethereum ETFs marks a significant milestone. This move follows the approval of spot Bitcoin ETFs earlier this year, which have seen substantial inflows, indicating a growing acceptance and integration of cryptocurrencies in traditional financial markets​ (Nasdaq)​.

3. Market Volatility: The crypto market saw a broad sell-off triggered by strong macroeconomic data. This has caused significant price swings, particularly in meme coins like the GME token, which plummeted 50% from its highs following an uneventful YouTube livestream by Keith Gill (Roaring Kitty)​ (CoinSwitch)​.

Top Movers:

• (-) Floki ($FLOKI) -28% The biggest loser of the week is the Floki meme.

• (-)Ethena ($ENA) -25% Ethena crashes after whale dumps 19 million tokens

• (+) Brett ($BRETT) +30% Just another meme coin explosion

• (+) Injective ($INJ) +16% Injective moves this week as 6 million tokens are burned

Where is the Alt Coin Bull Run?

As Bitcoin nears its all-time highs, the altcoin market presents a contrasting narrative of underperformance. While Bitcoin enjoys institutional support and media spotlight, altcoins have struggled to keep pace. Several factors, including the Bitcoin ETF narrative, high token dilution, and substantial token unlocks, contribute to this disparity. However, historical patterns and the inherent potential of quality projects suggest that the altcoin market should take off again.

Key Factors Impacting Altcoins

1. Bitcoin ETF Narrative: The anticipation around Bitcoin ETFs has significantly boosted Bitcoin's market performance. Institutional interest and the prospect of regulated Bitcoin investment products have drawn attention and capital towards Bitcoin, overshadowing altcoins.

2. Token Dilution: In May alone, approximately a million new tokens were created. This high rate of token creation dilutes the market, reducing the perceived value of existing altcoins. With more tokens available, the scarcity that drives demand and value diminishes, causing a negative impact on altcoin prices.

   

3. Token Unlocks: Many altcoins undergo scheduled token unlocks, releasing previously locked tokens into circulation. This sudden increase in supply often leads to sell pressure, driving down prices. For example, significant unlocks can lead to abrupt market dumps as early investors and developers cash out their holdings.

   

Historical Performance of Altcoins

Historically, altcoins tend to peak later in the cryptocurrency cycle compared to Bitcoin. During both the 2017 and 2021 bull run, altcoins saw their most significant gains towards the latter part of the cycle. This pattern suggests that altcoin investors might need to exercise patience, as their investments could yield substantial returns in the next phase of the market cycle.

The Role of Retail Investors

A significant portion of retail investors holds altcoins. Retail investors are often driven by the potential for high returns, as seen in previous bull cycles. However, the current market dynamics, influenced by institutional movements and macroeconomic factors, have shifted the immediate focus towards Bitcoin. This shift means that altcoin holders might have to endure a period of underperformance before seeing potential gains.

The Future of Altcoins

The future of altcoins remains promising, albeit with certain caveats. As the market matures, projects with strong fundamentals, real-world use cases, and solid development teams are likely to emerge as winners. As an investor, you should focus on these quality projects rather than speculative tokens with little to no utility.

The cryptocurrency market is in a transitional phase, with Bitcoin leading the way. While altcoins have underperformed recently, historical trends suggest that their time might come later in the cycle. Investors should remain informed and patient, focusing on projects with strong fundamentals and potential for real-world adoption. The key is to be positioned long now before the market fully focuses on alts.

READING CORNER

A collection of longer form content we are consuming this week

Thought provoking discussion with Eric on Real Vision on Concensus, crypto and AI

Chamath is brilliant capital allocator. I always find value in what he finds worth reading

ZKSync was all over the news this week with their long awaited token launch. This blog about their new token is worth a read if you farmed the airdrop or are planning to purchase in the future

BLOCKBUZZ

Quick Hitters from the week

• World's Largest Bank Labels Ethereum and Bitcoin: A new report describes Ethereum as 'Digital Oil' and Bitcoin as 'Digital Gold,' emphasizing their unique roles in the digital asset space.

• Crypto Market Faces Harsh Liquidations: The ongoing selloff results in $270.4 million in liquidations, signaling continued market volatility.

• ZkSync Announces Massive Token Distribution: Matter Labs plans to distribute 21 billion ZK tokens, the largest among major Layer 2 solutions.

• US Crypto Sector's Resurgence: Despite a tough regulatory year, the US crypto industry is gaining momentum as a significant political force, according to Matter Labs CEO Alex Gluchowski.

• Ether Set for Major Inflows and Price Surge: K33 Research anticipates a supply shock for Ether, predicting $4 billion in inflows from ETFs and a potential outperformance over Bitcoin.

• Binance Hits 200 Million Users Milestone: Now holds $100 billion in assets under custody, representing over a third of all global cryptocurrency holders.

• Arthur Hayes Predicts Crypto Market Revival: Cites recent rate cuts by the Bank of Canada and European Central Bank as catalysts for a reawakening bull market.

• Robinhood Acquires Bitstamp to Grow Internationally: Plans to expand its global footprint with a $200 million all-cash purchase of Bitstamp, set to finalize in the first half of 2025.

• Kraken Eyes Pre-IPO Boost: Aims to secure over $100 million in funding before its anticipated IPO, with plans to finalize by year's end, according to Bloomberg.

• Franklin Templeton Considers Diverse Crypto Fund: Explores launching a private fund focused on a variety of cryptocurrencies beyond Bitcoin and Ether, potentially including staking rewards, as reported by The Information.

THE TWITTERVERSE

A collection of the most interesting stuff on Crypto Twitter this week

WAGMI

For the (crypto) Culture

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