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Today’s Cryptocurrency Headline
NASHVILLE, TENNESSEE — Robert Mitchnick, the head of digital assets at the world’s largest asset manager, BlackRock, said that despite the launch of spot Ethereum ETFs this week, it’s unlikely to open the door to funds that track other crypto assets like Solana’s SOL or Polygon’s MATIC, on the mainstage at the Bitcoin 2024 conference. “I don’t think we’re going to see a long list of crypto ETFs,” Mitchnick said in a conversation with Bloomberg Intelligence ETF analyst James Seyffart. “If you think of bitcoin, today it represents about 55% of the market cap. ETH is at 18%. The next plausible investible asset is at, like, 3%. It’s just not close to being at that threshold or track record of maturity, liquidity, et cetera.” That said, it has been “increasingly clear” that crypto as an asset class is “not going away,” and there will likely be future opportunities for firms like BlackRock to get further involved in the market. Competitor VanEck, for instance, was the first firm to file to launch a Solana ETF, which experts see as a longshot for approval.
Spot ETH exchange-traded funds have only garnered about 20% to 25% of the capital inflows as the 11 spot Bitcoin ETFs trading today are largely on target with expert expectations. Bitcoin ETFs have been a breakout success; BlackRock’s IBIT trust, in particular, is the second-best performing ETF this year, behind only a fund that tracks the S&P 500. The product also represents over 20% of BlackRock’s flows this year and has only seen a single day of negative flows to date.“We don’t view bitcoin and ETH really as competitors,” Mitchnick said. “Bitcoin is trying to be as a global monetary alternative, as a potential global payment system,” while Ethereum is better thought of as a technological platform for building novel applications. “So, really, they’re more compliments” rather than substitutes.” Mitchnick added that while there isn’t “full-blown clarity” from regulators, the Securities and Exchange Commission has been clear that it wants to draw the line somewhere. For instance, Mitchnick said, the SEC is unlikely to approve spot Ethereum ETFs with staking components. BlackRock is largely credited with rekindling interest in launching spot bitcoin ETFs when it filed to launch a product in June 2023. The SEC had been reluctant to approve these investment products for over a decade, often citing the potential for market manipulation and surveillance concerns. The iShares bitcoin ETF filing changed the game by including a market observation agreement addressing those risks.
BingX’s Bitcoin Chart
Source: TradingView & BingX
Strong macroeconomic data, fear of an artificial intelligence bubble, and an ongoing court case could be factors in Bitcoin’s multiday correction. After flirting with the $68,000 level on July 22, Bitcoin faced a 6% correction in three days, erasing the gains from the prior week. From a bullish perspective, there is a positive indication as the $64,000 support held firmly. Buyers stepped in to defend Bitcoin’s market capitalization at $1.25 trillion, slightly above the United Kingdom’s British pound, valued at $1.15 trillion. Still, Bitcoin bears have macroeconomic data on their side, at least in the short term. Bitcoin’s price decline coincides with the Nasdaq index futures movement, which experienced a 4.9% correction between July 23 and July 24. Traders now question if the drivers behind the stock market decline, especially the tech names, justify the correlation with the cryptocurrency market. If investors’ concerns are mostly derived from economic recession fears, Bitcoin’s long-term appeal could present a buying opportunity.
Semiconductor stocks and those related to artificial intelligence infrastructure (AI) led the move, with Crowdstrike (CRWD) down 25.5% in a week, followed by Super Micro Computer (SMCI) down 12.6%, GlobalFoundries (GFS) down 12.2%, NXP Semiconductors (NXPI) down 10.8%, and Intel Corp (INTC) down 10.5%. The market seems especially concerned with the perspective of AI demand, given how the investment in the sector has yet to result in profitability. UBS Global Research’s Stephen Ju warned investors that the AI investment benefits in Google’s cloud platform are “difficult to discern” and should not be visible on the revenue line before mid-2025. Google’s parent company reported spending $2.2 billion building AI models in the second quarter. Consequently, Ju questions if the investment returns will be compromised, as the company will require higher capital expenditure for another two years, as reported by Yahoo Finance. Recent macroeconomic data has also contributed to investors’ worsening sentiment. The United States economy grew at a 2.8% annualized rate in the second quarter, above the market consensus of 1.9%. Additionally, continuing jobless claims, which measure the number of people in the US receiving benefits after an initial week of aid, declined on a seasonally adjusted basis. This indicator typically serves as a proxy for hiring, a more forward-looking metric.
Recent economic indicators signal the success of the US Federal Reserve’s (Fed) strategy to curb inflation without causing a recession. The US central bank has kept its benchmark overnight interest rate in the current 5.25%-5.50% range since 2023, but analysts expect two to three cuts by the end of 2024. This data is somewhat negative for Bitcoin, as part of its appeal is as a hedge against inflation, a lower value of the US dollar, and decreased investor confidence in US Treasury securities. In other words, a strong economy makes alternative assets less appealing, regardless of the stock market’s expectations for corporate earnings. The support level is at $64,500, and the resistance level is at $68,000.
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