Aug 30, 2023

Bitcoin (BTC) topped $28,000 before retreating slightly after a federal appeals court ruled that the SEC must review its rejection of Grayscale Investments' attempt to convert its GBTC into an ETF.

Video transcript

Joining us now to discuss perhaps the most important thing. The crypto markets is Clara Mili Kai, co director of research. Welcome, Clara. Thank you. Happy to be here. It's our pleasure to have you here now. Bitcoin prices. Uh They did some somersaults as we know in the last 24 hours, they sold some 7% on Tuesday as traders reacted to this gray scale Bitcoin spot ETF court decision and you noted that liquidity remains thin. So is this sudden price movement sustainable? Well, what's interesting is we looked at the trade volume data today and I think trade volume overall historically is one of the best indicators for general engagement in Cryptocurrency markets. And what we found was trade volume only spiked to its highest level since the August 17th sell off, meaning it's only at its highest level over the past two weeks. Um And it's relatively low compared to other mini bull markets we've seen. Um But the good news is that we did see a spike in average trade size. That's chart that you see on the screen right now. Um This means that even though volumes were still low, um the average buy orders on average were larger, which means it could be a bit of whale activity that was reentering markets. But I think ultimately a lot of this price volatility. Bitcoin gained quite a bit, it crashed quite a bit on August 17th is due to underlying liquidity issues. We still have relatively low liquidity on order books which makes volatility a lot likelier. Yeah, you bring up this low liquidity, low capital in the market. We've been talking about catalysts on this show all week. What do you think it's gonna take to get new investors injecting capital into the market instead of just um these whales that you're speaking about? I mean, I think that a wave of ETF approvals could definitely be the bullish catalyst that crypto markets need right now. That would really open up a whole new class of investor to the space. Um But again, we're in the middle still of a sort of tumultuous period for the industry. There's quite a few bankruptcies and lawsuits that are ongoing, especially in the exchange space. Um And so I think we still need to wait and see how that resolves, especially in the United States. Yeah. Right. Uh You know, you also wrote uh that average trade size for Bitcoin is at its highest level since June, which means buyers were on average, placing larger orders. What does it really tell you about market sentiment? So I think average trade size, it typically correlates with a big market, uh, big market event. And when you see a spike in average trade size, it means that there were either a lot of large buy or sell orders. However, what we see that during a bull market, we typically see a prolonged increase in average trade size. So of course, over the past few months, past 6 to 8 months, we've seen a slow decrease. So any spike we see is good news. Um And I think that yesterday's uh price bump while it may be too early to tell if it's sustained and will get us past the 30 k price level. Um There are some small signs that suggest we could be seeing a slight reversal. I just want to take you through what happened in the minutes and let's say hours right after the result, the court order yesterday, uh initially, there was a bit of legal confusion about whether this was going to mean that the court had actually now approved, uh you know, a spot Bitcoin ETF and that's what it had ordered the SEC to, to basically do. And then later, it was kind of, you know, when the water has kind of calm down, everyone understood that. Well, this is just the case being one for the moment and now it goes back to the SEC, they have 23 options, uh one to review to come up with a different reason, et cetera. And that's when suddenly the market sentiment and, and Bitcoin prices went back down to, let's say a more nominal acceptable, uh less frenzy atmosphere. Is, is that something that you were seeing also? Yeah. Yeah, we were also seeing similar patterns and I think that's common every time you see either a price crash or a price bump, you often see a pullback uh to previous levels shortly after, especially uh in our current environment. It's, you know, liquidity is thin. And so you're seeing these wild uh price uh price swings uh pretty frequently these days. All right. And it's not always all about Bitcoin. Of course, you uh we're talking about lack of liquidity, lack of capital and Bitcoin markets. Uh What are you seeing with, with alt coins? I know two of the top meme coins by market cap and Pepe are down year to date. Um Are meme coins following a different trend here. What's going on outside of Bitcoin? I mean, meme coins are always following their own special trends. Um And I think with Pepe in particular on Monday, we had some of the founders news broke that they were selling a lot of their tokens and so that caused a huge price crash. We wrote about it in our Monday research note for Kai O. But ultimately, I think meme coins, they sort of run on their own clock. Uh You see, especially Doge coin, it's tightly correlated to anything happening with Elon Musk and Pepe. I guess has had some news events over the past few weeks causing it to diverge from what you see with Bitcoin and E now we're jumping a little bit all over the place here, but we of course, spoke to Grace Gill before this segment. Uh The court win ignited a trading frenzy with G BT C shares, pushing trading volume to the highest since June of 2022. What are your thoughts there? Um I mean, I think all the investors in gray scale, they're extremely happy with this news. It's been sort of a major headwind for institutions in the Cryptocurrency industry over the past few years, just the inability to redeem to redeem Bitcoin. And actually, it's been a bit, people have described it as a Bitcoin black hole. So it'll be very interesting to see what happened if they are able to convert into an ETF whether we'll see a lot of because this will actually enable Bitcoin redemptions and what will happen with these Bitcoin then. Um But overall investors are clearly happy with what's going on. Um And I think on the institutional side, it's probably one of the best news we've had so far this year, um especially as we've seen a lot of capital exit the market. All right, Clara, we are gonna have to leave it there. Thanks so much for joining the show. It was wonderful seeing you again. Thank you. That was Clara Bed Kaiko, Director of Research.

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