As autumn nears, CoinDesk Indices Managing Director Andy Baehr breaks down how bitcoin (BTC), ether (ETH), and the wider crypto markets have performed this summer, sharing insights into the potential catalysts moving price action.
Joining us now to discuss the crypto markets is Coindesk Indi managing director, Andy Beer. Welcome back, Andy. Hi, good morning. Good to see you both. Good morning to you too. Now, August is coming to a close my favorite month, but with the Labor Day holiday around the corner. So is the traditional end of summer. Let's just look back at the listless summer of 2023 apart from one perhaps gray scale development, uh that, that was more colorful than the name sounds, just take us through what's happened. Sure. And I'll, I'll start with the sort of us definition of summer. Uh uh you know, forgive the localization. So we think about summer beginning at the Memorial Day weekend and, and ending at the weekend that's coming up. Uh The rest of the world can use the formula one Monaco Grand Prix on May 28th as sort of a starting point. And as we know, the biggest theme was that it was a completely listless and directionless crypto market most of the summer and prices haven't made much progress either. Bitcoin was trading around 27,000 in change on Memorial Day weekend and it's trading 27,000 in change right now, Ether had a similar summer, although it lost about $100 since the beginning of summer. Uh By the way, Ether was also trading around here uh a week or two before the merge. So in terms of just kind of price progress and excitement, it's just been lacking. So the lack of news has become the news, even the coin desk market index which tracks over 100 and 80 tokens. Look at it between the end of May and now and it's within a percent of itself. So we're struggling to find something to water ski behind right now, but the boat is not moving too fast. Why did Bitcoin and Ether trade? Similarly this summer? Do you think, what's the data saying there that the data is saying, I think, you know, you have the Macro drivers for Bitcoin in particular. Um And we like to think of that being uh closely related to real interest rates and opportunity costs. And that's, that's kind of been a summer where fed watching and Macro watching has led to some uncertainty about the future. Um Ether, I think it's been a similar correlation story, but it's also been a story about how much the network has been used and we can talk about that in a little bit, but for both markets, um liquidity and uh and volumes and volatility have been low and uh that's a market that nobody likes, right? Because it becomes fragile. If you look at the uh the sort of many flash crash that happened earlier in, in August, you know, markets tend to move fast when there's no support underneath. So I think both markets were characterized mostly by just a lack of energy, lack of liquidity and and lack of momentum, you know, just looking at ethereum staking yields can also provide like a a high level measure of market activity. And we're gonna look at that. Can you just take us through that? Yeah, this is a really interesting and not that we need another yet another way to measure listlessness. Uh It's not a fun topic. Uh But if you want to think about Ethereum staking, we just launched an Ethereum staking index called Caesar earlier this month. So Ethereum validators or Ethereum staker get yield in two different forms, right? They get consensus rewards for providing consensus to the blocks and that's paid by the Ethereum network. They also get paid a portion of the transaction fees by Ethereum users, right? And those two things kind of add up to what the complete kind of yield that Ethereum validators receive for their services. Now, the consensus part is very smooth and very slow moving, right? It's gonna typically sort of drift lower as more validators enter the system. There's almost 800,000 validators on Ethereum right now. And there's a line out that to, to have that number grow so that consensus payment is slowly slowly drifting lower. But the really exciting part is those fees, right? And those fees tend to spike, they spike during rushes towards the entrance and rushes towards the exit. You saw them spike during the during the FTX event last fall during the Silicon Valley Bank weekend, but also during kind of positive events of demand like the pepe coin frenzy that happened early in the spring. So you kind of want to think about demand for the Ethereum network as represented by those priority transaction fees as being a pulse of energy and a use of Ethereum that's going to sort of create more use case commodity like use case for Ethereum. So what I took a quick look at was how the staking rate since the merge, right, compared to what uh the levels look like over the summer and during August. So the the Caesar rate for every single day since the merge sat at 5.19% during the summer, it was only 4.35%. And during August, it was only 4.14%. Now, some of that was due to the fact that the consensus payments as I said before have sort of drifted lower because more validators are entering the network providing more and more security. But the real change has been those transaction fees, those lack of spikes that you see earlier in the history of the rate. So since the merge 1.62% has been the average priority transaction fee layer inside this rate. In the summer, it was only 1.26%. And in August, it was only 1.09% despite that just in the last couple of days when the gray scale news came out. So it's just been pushing a string. Basically, we are all looking for either a thought to the regulatory winter and I really appreciate what, what Keith Miller's comments on that from, from the previous segment. Um and we're looking to see what comes next to sort of give us some momentum and hopefully some positive momentum. All right, Andy, thank you for joining us and giving us that overview of the markets leading up to now. Thanks so much. Good to see you both. That was Coindesk in DC, managing director, Andy Beer.