Weekly Market Update: The Political Lolly Scramble Begins

It’s been a good week in crypto with plenty of positives. The ETH ETFs launched, had a good first day and then ETH outflows have dominated. Then the big news switched to be all about the Nashville BTC conference. You know the pollsters have hit on something when the Presidential candidates are all throwing around positive sound bites.

In the wider crypto space the early Mt Gox payouts haven’t resulted in massive selling pressure, however the movement of US government BTC sproked markets late in the week.

Research confirms that the average Bitcoin holder in the US is just like all the other humans and a city in India is putting house sales on a blockchain. Kaiko points out the BTC and ETH are both decorrelated from tech stocks, which is looking like a good thing given how they are currently trading. 

There was plenty of macro news; tensions in the middle east flared again, the shine is coming off the AI fueled rally and the EU is prepping for what happens if Trump wins. TLDR; a possible tariff war. 

A lighter news week in the US because the FOMC is meeting. PCE inflation supports the continuing decline of inflation, while GDP was way up. The real estate market looks pretty grim. 

In Europe, PMI’s are pulling back slightly, particularly in Germany, while Russia has an inflation problem because the demand for goods is pushing up prices. Those goods are likely sanctioned. 

Regionally, China’s PBOC went again, delivering another surprise rate cut, Japan’s PMI declined and India continues to roar ahead. 

Turning to Australia’, their Q2 CPI is still increasing, they could be rising rates when everyone else is cutting.

In New Zealand the household cost of living is increasing at a healthy clip due to interest, insurance and rates, while consumer confidence has picked up, albeit off a very low base. 

Week on week we were relatively stable in terms of market sentiment, however this hides some of the intraday oscillations that we’ve all seen. All up we remain firmly in greed territory.

Highlights this week: 

• This week we had some pretty large movementss in the top 30 assets, however overall we have about ⅔ of assets in the red, with remainder posting some modest gains
• This week we saw a marked shift toward the sell side as you capitalised on the price surges. This was true for all our segments.  
• BTC dominated this week and was by far and away our most preferred asset.
• At the time of writing BTC and BNB were flat, SOL and XRP were up 4% while  ETH, was down 5% for the week. 
• StormX (STMX) continued its good run, up another 20% on top of last week’s 33% gain. BCH was the best of the majors up 17% 
• Arbitrum (ARB) was our worst performer, down 15%. 

View all top gainers: Visit the top gainers page to find out more.

Highlights from the crypto space

How did the ETH ETSs go on day 1? Bloomberg analyst Eric Balchunas had a look and compared them to other ETF launches.

The ETFs generated $930m of volume and $106m of net inflows on day 1. Better than most expected. However, subsequent performance hasn’t been that great, and some are saying that the street just doesn’t get ETHs narrative. 

The Nakamoto project undertook some research into US Bitcoin owners demographics and political orientation.

Turns out Bitcoiners are pretty much like the rest of the population except they are more educated on Bitcoin as well as skewing to younger males. 

Those of us who live in relatively stable economies with decent banking often question crypto’s role as a hedge against inflation.

That’s because inflation is sneaky for us. In other countries though, inflation is out of control and we can really see crypto’s role as Kaiko’s deep dive on Turkey brilliantly demonstrates. 

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The Indian city of Raipur is putting real estate records on a blockchain. 

The Mt Gox distributions have started with $3.2bn sent out. The good news, on two distribution venues we saw no increase in sell activity. Of course it could be going OTC. 

Other notable highlights from the crypto space:

• In other supply unlock news / rumour. The US Government just moved $2bn of BTC which is causing a stir.
• Trump would stockpile BTC to keep China from dominating it, and would fire Gensler and get pro-crypto people into the SEC.
• In response the Democrats asked the DNC to pivot away from its anti-Bitcoin (read Warren) position. Must be an election year, it’s raining lollies. 
• Check out the best moments from Bitcoin 2024 Nashville (videos) in a X thread. 
• AAVE is changing its staking mechanism and pushing the risk of slashing onto lenders.
• COMP is down considerably after a governance attack.
• Kaiko reports that ETH and BTC are weakly correlated with tech stocks, which is good for a investor looking for diversification in their portfolio.

🌎 Macro news TLDR: …It’s all about the polling.

Global container shipping rates remain incredibly high.

The tensions in the Middle East have spiked again as Lebanon’s Hezbollah and Israel are exchanging rockets. 

Reversing last week’s trend, rising uncertainty about who will win the US political race has given investors risk asset jitters as they skate towards bonds and out of risk assets.

The Magnificent 7 (in purple) has given back 19 % of YTD performance, whilst US small caps (orange) have nearly caught up with the Nasdaq 100 (blue). This is a classic capital rotation in action. 

The EU is preparing a two tier strategy in the event of a Trump victory, a fast carrot or a big stick. Interesting times ahead. 

U.S. economic news

The July Flash PMI was a strong result with composite at 55, however manufacturing declined to 49.5. The US housing market is not in great shape though with oversupply and low mortgage applications (ie demand). 

US Q2 GDP blew through the 2.1% expected, coming in at a whopping 2.8%. PCE inflation was also out, headline PCE declining to 2.5%, and core PCE following suit with a drop to 2.6%. A September rate cut is a lock according to CME. 

In nearly the US news (I needed a segue). Canada’s central bank delivered a 25bps rate cut to 4.5%.

Over in Europe….

European Flash PMI showed a pullback in July, with manufacturing at 56.6, services seems ok at 51.9.

Similarly, German manufacturing continues to contract with PMI at 42.2.

The BoE will meet next week to make the call on their rates and apparently it’s a very close call on which way they will jump. 

The Russian central bank raised its cash rate to 18% due to strong domestic demand outstripping supply. 

And in Asia Pacific…

China’s PBoC delivered another surprise rate cut, this time on the one it uses to lend to financial institutions. Chinese industrial profits were up 5.6% year on year, however down 8.4% on 2 years ago to put it in context. Last year was not great. Foreign Direct investment plummeted to just $1m USD in June.

Japan’s manufacturing PMI slipped into contract at 49.7. Services posted healthy gains though. It’s a different story in India with manufacturing increasing to 62.2, composite PMI is 61.4. Gangbusters. 

Australia’s CPI for the June quarter showed a 0.1% increase and is running at 3.8% annualised.  This is in line with forecast, but up on th 3.6% from the March quarter.  Housing was the major contributor.  Australian building approvals fell 6.5% in the June month. Not to be outdone, New Zealand building consents fell 13.8% in June and are down 24% year on year.

Staying in  NZ, the household living-costs price indexes (HLPIs) for the June quarter is out and it shows an annual increase of 5.4% driven in large part by increases in interest payments, insurance and private transport increases. Seasonally adjusted employment fell 0.1% in June. The ANZ Roy Morgan consumer confidence survey showed a slight improvement as it bounced off the June low of 83 to 88 in July. 

That’s a wrap for this week. 

Stay tuned for the next update.

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