Crypto Assets market dropped in June, but the fundamentals remain stable

In June 2024, the Crypto Assets market experienced a round of adjustments, primarily influenced by selling pressure on Bitcoin, leading to a decline in overall investor risk appetite. Nevertheless, optimism about the long-term prospects of this asset class remains.

In June, traditional assets performed differently as the market digested various new risks. Some sectors performed poorly, such as US home builders (affected by the cooling housing market), the Chinese stock market, and certain industrial metals (due to signs of economic weakness in China), as well as French stocks (possible government changes). In contrast, global bonds, emerging market stocks outside of China, and the S&P 500 index performed relatively well, with the Swiss franc also showing good performance as an international risk barometer. Bitcoin and Ethereum both fell by about 10%, making them among the poorer-performing market sectors on a risk-adjusted basis.

The actual and anticipated selling pressure from multiple sources has led to the decline of Bitcoin this month and has affected other Crypto Assets. The main sources of selling pressure include:

1. Mt Gox Legacy: The bankruptcy trustee announced that it would start repaying Bitcoin and Bitcoin Cash from early July 2024, holding approximately $8.9 billion in Bitcoin.
2. German Government: A government agency has begun liquidating Bitcoin confiscated in 2013, sending nearly 4,000 Bitcoin to exchanges in June.
3. The US government: Sent 3,940 bitcoins to a deposit account on a trading platform, which were seized from the wallet of a convicted drug dealer.
4. US Spot Bitcoin ETP: Experienced a net outflow of $581 million in the second half of June.

In addition, Bitcoin miners continue to reduce their holdings, having sold approximately 1560 Bitcoins in the past 30 days. On the other hand, a listed company purchased nearly 12000 Bitcoins in mid-June, which may provide some support for the price.

Although short-term capital flows have affected the price of Bitcoin, the fundamentals of the assets have not changed significantly. The dollar has strengthened moderately, and the market has priced in the possibility of further interest rate cuts by the Federal Reserve in the next two years to address easing inflation. Adoption metrics for certain smart contract platforms show continuous growth, and the daily active users of major smart contract platforms have been increasing steadily in recent months.

The spot Ethereum ETP has also made progress in the U.S. market. The Securities and Exchange Commission (SEC) has approved applications from several issuers, and these products are expected to begin trading in the third quarter of 2024. The new Ethereum products may generate significant net inflows, supporting the valuation of Ethereum and its ecosystem tokens.

The overall performance of the crypto assets market in June was poor, with the consumer and cultural crypto assets sectors performing the worst, mainly influenced by memecoins. The coin crypto assets sector and the financial crypto assets sector performed relatively better.

It is worth noting that Toncoin (TON) performed outstandingly in June. The TON blockchain is integrated into the Telegram app, with the potential to leverage its 900 million monthly active users. Driven by the Open League token incentive program and Telegram games, the daily active users on the network grew from an average of 27,000 in January to over 400,000 in June. Additionally, a certain stablecoin was quickly adopted after it launched on the TON network in April 2024.

Despite the setbacks in June, there remains an optimistic outlook for the valuation prospects of crypto assets for the remainder of the year. The macro backdrop is generally favorable, with economic growth, potential Federal Reserve interest rate cuts, and a strong stock market all being supportive factors. Although a U.S. economic recession could put pressure on the crypto market, slow yet positive growth remains the central scenario for the economy.

In addition, the approval of the Ethereum ETP may allow more investors to understand the concepts of smart contracts and decentralized applications, recognizing the potential of public blockchains in transforming digital commerce.