Good morning. Here’s what’s happening:
Prices: Inflation data barely stirred crypto markets, but a partial Ripple victory on Thursday sent bitcoin and other major digital assets sailing higher.
Insights: While the number of large bitcoin holders increases, bitcoin sent to exchanges continues to fall.
Crypto Prices Sail Way Upward
A partial legal victory for Ripple in its fight with the U.S. Securities and Exchange Commission (SEC) on Thursday did what encouraging inflation data couldn't do the previous day: push bitcoin and other major digital assets significantly higher.
The largest cryptocurrency by market capitalization was recently trading at $31,328, up 3.2% over the past 24 hours. Bitcoin shot as high as $31,700 near the close of traditional markets, a more than one-year high. With a few blips, BTC had been languishing between $30,000 and $31,000 for the past three weeks as some investors fretted over potential banking missteps to cure inflation and awaited a significant price catalyst.
The Ripple decision offered that spur, at least temporarily. The U.S. District Court of the Southern District of New York ruled that the sale of its XRP tokens on exchanges and through algorithms did not constitute investment contracts. The court also ruled that the institutional sale of the tokens violated federal securities laws.
XRP rose 96% at one point to change hands at 93.6 cents, its highest level since March 2022. It was recently trading at 74 cents, still up more than 73%. XRP is the native cryptocurrency of XRP Ledger, an open-source, public blockchain that is designed to facilitate faster, cheaper payments.
In an email to CoinDesk, Dave Weisberger, the co-founder and CEO of crypto algorithmic trading platform CoinRoutes, saw a significant upside in Thursday's event. “The ruling in the Ripple case is important as it specifically renders secondary market trading of utility tokens outside SEC jurisdiction, while preserving their jurisdiction over institutional fundraising," Weisberger wrote. "This is very good news for crypto exchanges and investors regarding a wide range of tokens identified by the SEC in the Coinbase and Binance lawsuits."
The agency has accused the two exchange giants of violating securities law and mentioned more than a dozen of the largest tokens in value, including those of smart contracts platforms Cardano (ADA) and Solana (SOL). Those native cryptos dipped sharply in the immediate aftermath, but on Thursday they were skyrocketing with ADA and SOL recently up more than 20% and 17%, respectively. And MATIC, the token of layer 2 blockchain Polygon, which the SEC also flagged, rose more than 16%.
Weisberger wrote that Thursday's ruling "relieves pressure" on these tokens, "and it would not be surprising to see a rally that recovers the initial losses and more."
Ether, the second largest crypto in market value, jumped past $2,000 for the first time in three months before retreating slightly below this threshold but was still up over 6.5% from Wednesday, same time. The CoinDesk Market Index, a measure of crypto markets performance, was up a rousing 6.1%.
Equity indexes rose more modestly with the tech-heavy Nasdaq Composite and S&P 500 climbing 1.5% and 0.8%, respectively. Cryptos and stocks have traveled in increasingly different directions over the past seven months, although investors savored another small jolt of encouraging inflation news as the Producer Price Index (PPI), which measures wholesale price activity, increased by its smallest increment year-over-year in almost a year.
CoinRoutes Weisberger believes that that the SEC and Coinbase are now more likely to resolves their differences positively, which should provide additional tailwinds to the market." Is it a speculative bull market just yet?" he wrote. "Probably not. But the foundations for one have certainly been laid.”
Joe DiPasquale, the CEO of crypto fund manager was similarly upbeat about the prospects of multiple spot bitcoin ETF applications filed last month by some of the financial services industry's biggest brands. "At this point, Bitcoin ETF applications also appear to have promising prospects, and we would be surprised if BTC or other major cryptocurrencies revisit recent lows in the short-term," DiPasquale wrote.
He added: "I spoke with multiple crypto hedge fund investors today who were excited about the favorable legal clarity that the ruling brings."
A Calm Among Short-Term BTC Holders
Bitcoin’s relatively calm trade behavior in recent weeks has likely removed the motivation for shorter term holders to sell their asset, contributing to its recent support around $30,000. (BTC surged past $31,000 on Thursday after Ripple won a partial victory in a federal court decision, but the rally's staying power remains uncertain.)
According to Glassnode, the percentage of short-term bitcoin holders in profit exceeds 83%, a decline from 99% in profit to begin July, but far higher than its percentage in January.
Short-term bitcoin supply is BTC purchased within the most recent 155 days. The direction of short- term bitcoin supply, and the extent to which its holders are in profit is important to monitor as a signal about investor sentiment and motivations.
While long-term holders of BTC are likely to maintain their positions in the asset, shorter term traders tend to have less patience for price fluctuations, liquidating their positions in response.
This article was written and edited by CoinDesk journalists with the sole purpose of informing the reader with accurate information. If you click on a link from Glassnode, CoinDesk may earn a commission. For more, see our Ethics Policy.
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