Can Bitcoin Continue to Rise After Failed Breakout?

Driven by the potential benefits of Bitcoin spot ETF, BTC quickly rose to around $30,000, and then experienced three weeks of volatility, failing to break through the previous high several times. We believe that the market will not end until the ETF gets an official response, and Bitcoin will fluctuate upward.

Ripple's victory boosted market sentiment, and popular altcoins will also have performance opportunities. At the same time, we are optimistic about the positive impact of RWA on the Crypto market in the long run. It should be noted that macro and regulatory risks may still come back and cause considerable disturbances to the market. We remain cautiously optimistic about the market outlook.

Spot ETFs have a positive start to a small bull market, and the market will last for another month

In the overall correction in June, USDT de-anchoring confirmed the short-term bottom of BTC, and the chips were exchanged during the decline, laying the foundation for a new round of rise.

Blackrock and other established Wall Street institutions applied for Bitcoin spot ETFs, driving the market to rise rapidly. BTC returned to near its previous high and is expected to fluctuate upward in the next month. After Ripple won the lawsuit, XRP rose by more than 100%, market risk appetite rebounded significantly, and popular altcoins will have performance opportunities.

USDT FUD marks short-term bottom, chips complete turnover

Since June, BTC has started a short downward trend, and Tether FUD reappeared in mid-June, USDT slightly depegged, and the USDC/USDT trading pair rose to 1.0042. Last year, USDT depegged twice, one after the Luna crash and the other after the FTX crash, both of which were short-term bottom signals.

The USDT depegging occurred on June 15. BTC retreated to the important support level of $25,000 and then rose. The chips shifted from weak hands to strong hands. The turnover at the bottom made the chip structure more stable. In this round of BTC's rise, the multiple callbacks were quite limited, often stopping at around $30,000.

Figure: BTC rose after hitting the important support level of $25,000 in mid-June

Bitcoin ETF has potential benefits, and the market still has one month to go

Blackrock, Investco and other US asset management giants have successively submitted applications for Bitcoin spot ETFs, driving Bitcoin's strong rise. The issuance of spot ETFs can provide traditional investors with more compliant and convenient investment channels, and is expected to bring hundreds of millions of dollars of incremental funds to the Crypto market.

Looking back at the bull market in the second half of 21, the market rose due to the expectation of Bitcoin futures ETF, and peaked and fell after the Bitcoin futures ETF was approved. Therefore, before the spot ETF was approved, smart money bought in first and restarted the bull market.

Figure: Multiple Wall Street institutions apply for Bitcoin spot ETF

The joint application for a Bitcoin ETF by the old Wall Street institutions seems to be well prepared, and perhaps some of them have already obtained tacit approval from regulators.

In terms of time, the SEC will make a decision on the ARK Bitcoin spot ETF on August 13 at the latest, which means we may have about a month of hot market. During this period, smart money is willing to buy every pullback of Bitcoin, so it is difficult for Bitcoin to fall sharply and it will continue to rise after experiencing fluctuations.

XRP surges, popular altcoins will have a chance to perform

On July 13, a U.S. district court ruled on the Ripple case, deeming XRP not a security token. U.S. exchanges such as Gemini and Coinbase followed suit and relisted XRP.

XRP has risen rapidly, with the highest daily increase exceeding 100%, and market sentiment has turned optimistic. Although there is still room for the Ripple lawsuit, this has already shown the attitude of regulators, which is of great significance for altcoins that may be identified as securities. We are optimistic about the subsequent performance of altcoins.

Figure: XRP rose more than 100% in 4 hours

XRP's market value has reached tens of billions of dollars, but its rise is extremely large and fast, reflecting that the market is in a state of "people's desire to rise". Although the market experienced a round of correction on Friday night, the strong altcoins basically recovered their losses over the weekend, and the bulls are still in the upper hand.

Many altcoins are still at relatively low levels, and once a new narrative emerges, they will perform well. With the recovery of market risk appetite, as long as BTC remains volatile, popular altcoins have great hope of outperforming the market.

Compliance narrative is in the ascendant, and RWA is expected to bring incremental funds

Under the influence of the compliance narrative, RWA has gradually gained market attention. We believe that RWA may be a strategic opportunity, which is expected to bring tens of billions of dollars of capital inflows to the Crypto market and become an important driving force for the next bull market.

DeFi yields decline in bear market, funds continue to flow out

After entering the bear market, DeFi yields have dropped significantly. The APY of USDC on mainstream lending platforms is less than 3%, and the Federal Reserve's aggressive interest rate hikes have caused the risk-free interest rate to rise to more than 5%. A large amount of funds have left the market, and the total market value of stablecoins has continued to decline for a year, from US$184.5 billion in April 2022 to the current US$124.5 billion, with approximately US$60 billion leaving the market.

Figure: DeFi yields decreased in the bear market, and about $60 billion left the market

Funds still in the market have been looking for new places to go, and staking ETH has become a popular choice. LSD-Fi based on ETH can provide about 5% of the currency-based income, which can be said to be the risk-free income of Crypto-Native. The current TVL has reached 45 billion US dollars.

However, staking ETH in a bear market requires taking on the risk of falling prices, and hedging requires a high cost. Therefore, LSD-Fi cannot fully meet the needs of low-risk investors. The market urgently needs an investment product with relatively low risks and relatively high returns to retain funds on the market.

RWA projects based on US debt can bring incremental funds to the market

The emergence of RWA is expected to change the dilemma of continuous outflow of funds in the Crypto market. RWA tokenizes real-world assets, such as bonds, stocks and other financial assets, to bring real benefits to the Crypto world.

Currently, the yield on short-term U.S. Treasury bonds exceeds 5%. If DeFi users can be provided with exposure to U.S. Treasury bonds, that is, if global investors can be provided with investment channels for U.S. Treasury bonds, this asset alone will have the potential to bring in inflows of tens of billions of dollars.

Figure: US 1-month, 3-month, 6-month, 1-year and other short-term treasury bond yields exceed 5%

From another perspective, USDT and USDC are the largest RWA projects with a total market value of nearly US$110 billion, but the profits generated by their US dollar reserves have not been fed back to the market.

The RWA project that provides U.S. Treasury bonds is actually taking away the pie of U.S. dollar stablecoin operators such as Tether and Circle. By charging lower fees, it can feed most of the profits back to the market and bring incremental funds to the market.

Existing RWA projects have made some progress, but there is still a long way to go

There are already many projects in the industry that are developing into the RWA field. For example, MakerDao introduced U.S. Treasury bonds as collateral and distributed interest to DAI holders. The founder of Compound has also started a new business, hoping to tokenize U.S. Treasury bonds and bring real benefits to DeFi users. Benefiting from the development in the RWA field, $MKR and $COMP have performed very well recently.

Figure: MakerDao introduces RWA as collateral to earn real benefits

Of course, we must also see that the current RWA project is not mature, and it is difficult for DeFi users to smoothly obtain a US Treasury bond interest rate of up to 5%. RWA assets still have a long way to go to achieve the goal of being safe, efficient, and accessible. MakerDao's Treasury bond exposure exceeds US$1 billion, but there are also compliance risks, high costs, and insufficient investment efficiency. It is still very difficult to further expand its scale in a short period of time.

Compliance, channels, blockchain, costs, promotion and other aspects all require solid investment from the team, and the RWA project still has a long way to go.

But on the other hand, this also means that the existing RWA projects are still far from reaching their ceiling and still have huge room for growth. When more and more RWA projects are successfully run, RWA-Fi will also become an investment direction similar to LSD-Fi.

MKR and COMP are similar to LDO and RPL, and they rose first in the early stage of RWA development. As the scale of RWA continues to expand, upper-layer DeFi projects based on RWA assets will emerge in the future, becoming Alpha investment opportunities in the mid-to-late stage of RWA. We believe that RWA has long-term strategic significance and will become an important driving force for the next bull market.

Be alert to macro and regulatory risks and remain cautiously optimistic

Although the BTC price has not experienced a large correction in this rally and the current situation is favorable to bulls, we should also note that macro and regulatory risks cannot be ignored and may cause unexpected disturbances to the market. Therefore, we remain cautiously optimistic that the rise of BTC will not be smooth and the volatility may last longer than expected.

The Federal Reserve may continue to raise interest rates, and liquidity will be marginally tightened

Fed officials have repeatedly stressed that there is room for two more rate hikes in the second half of the year, and that there will be no rate cuts this year, which has caused long-term U.S. Treasury bond yields to rebound, which is not conducive to risky assets. At the same time, the Fed's balance sheet reduction is still continuing, and total assets are already below the level before the banking crisis in March, and will continue to decline in the future.

With continued high interest rates and liquidity being withdrawn, it may be difficult for the U.S. stock market to continue its strong performance in the first half of the year. If a sharp decline occurs, this will also have a negative impact on the Crypto market.

Figure: The Fed continues to shrink its balance sheet, and total assets are lower than the level before the banking crisis in March

Binance executives resigned, BNB performed weakly

In early June, after the SEC sued Binance, BNB fell sharply, rebounded after hitting the key support of $220, and then began to bottom out and fluctuate. Although BTC has risen from a low to near the previous high, BNB has not risen synchronously, fluctuating between $220-$250. Binance has also boosted the price of BNB through Launchpad, Launchpool and other methods.

Recently, many senior executives of Binance have resigned, and public opinion is very unfavorable to Binance. Since BTC has risen to a relatively high level, if regulatory incidents come back, it may cause considerable disturbance to the market.

Figure: BNB is relatively weak and is still fluctuating at a low level.

Conclusion

BTC is facing pressure near the previous high and needs to fluctuate sideways for a period of time to digest the selling pressure. With the potential positive expectations of spot ETFs, bulls still have the upper hand and are waiting for a good opportunity to push the market up.

After Ripple won the lawsuit, market risk appetite rebounded, and popular altcoins will have a chance to perform. RWA will bring incremental funds to the market in the long run, but short-term development still faces many challenges. At the same time, macro and regulatory risks may still cause disturbances to the market, and the rise of Bitcoin may experience twists and turns. We remain cautiously optimistic about the market outlook and are optimistic about Bitcoin's volatile upward trend.