🤔 What is Gonna Happen to Crypto in the Next Half Year?

Grayscale Research analysts promise that the upcoming quarter for the crypto market will be eventful.

To better understand the origins of changes, let's start with the current situation.

Complex Market Dynamics

Since the beginning of the year, the crypto market has shown mixed dynamics.

Despite the significant growth of $BTC (about 50%), the Crypto Sectors Market Index (CSMI) has decreased by approximately 3%, indicating that the gains were narrow and concentrated in a small number of assets.

We observe a similar situation in traditional stock markets, where returns were also dominated by a narrow circle of companies.

Dividing into Five Segments

To help investors better navigate this complex asset class, Grayscale developed the Crypto Sectors structure, which divides the digital asset market into 5 segments:

1️⃣ Currencies
2️⃣ Smart Contract Platforms
3️⃣ Finance
4️⃣ Consumer and Culture
5️⃣ Services

This structure provides investors with a roadmap similar to tools in traditional markets, helping them better understand and navigate the constantly changing class of crypto assets.

Grayscale Research Top 20 Cryptocurrencies in Q3 2024

Traditionally, Grayscale Research has published the Top 20. Experts selected tokens with high potential for the upcoming quarter.

Among the leaders are:

🪙 Bitcoin ($BTC)
🪙 Ethereum ($ETH)
🪙 Solana ($SOL)
💎 Toncoin ($TON)
🪙 Chainlink ($LINK)

The selection of crypto assets is based on the:
1️⃣ Analysis of upcoming catalysts
2️⃣ Market trends
3️⃣ Fundamental factors of specific tokens

What to Expect?

1️⃣ Ethereum on the Rise: Expected ETF Approval

One of the most important events of this quarter will be the possible approval of the spot Ethereum ETF.

This event could significantly impact the Ethereum ecosystem.

ETF approval will lead to significant capital inflows, potentially supporting the valuations of Ethereum and the related tokens.

As a platform with the largest DeFi ecosystem, Ethereum could see increased activity and support for the valuations of Layer2 tokens such as Mantle, and DeFi protocols such as Uniswap, Maker, and Aave.

2️⃣ The New Wave of AI and Crypto

Among other interesting topics of the quarter is the impact of AI technologies on the crypto, as the AI-related protocols have already shown significant results.

For example, Near, one of the leading smart contract platforms, actively uses AI to develop "custom AGI."

Other examples include decentralized GPU markets like Render and Akash, which could also benefit from the market's continued preference for AI exposures.

3️⃣ Successes of Toncoin and Pendle

Another notable phenomenon is the success of Toncoin and Pendle.

— The TON blockchain, associated with 👤, is seeing significant growth in user numbers and commission revenues (thanks to hamsters and clickers?)

— Pendle Finance allows users to customize the yield profile of their strategies and also shows positive dynamics

What is Next?

The simple answer is — as always, f*ck knows. Will the crypto keep evolving, or the clickers is its last 'innovation'? Most likely, the crypto giga chads will come up with something more cool. But what will it be? — Only the time will show...


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⚡ #BTC Under Pressure: How Mt.Gox Payouts Changed the Market

Today, we'll analyze what led to the decline in Bitcoin, how it will affect the crypto market, and what to expect in the future.

Currently, three main reasons for the drop to $54,300 are identified:

💬 Mt. Gox: The bankruptcy payouts from Mt. Gox are putting pressure on Bitcoin's price.
💬 Low Liquidity: The demand for Bitcoin and the liquidity of stablecoins remain low.
💬 BTC Sales: The German government sold part of its BTC reserves, leaving 41,226 BTC worth about $2.28 billion on its balance sheet.

Now, more details…

😀 The Impact of Mt.Gox on the Market

The announcement of payouts from the bankrupt Mt.Gox, which lost around 850,000 bitcoins in 2014, caused significant pressure on Bitcoin’s price.

Payouts to affected clients have already begun, leading to an increase in the supply of Bitcoin on the market and subsequently its decline.

Some affected clients have started receiving compensations:

"I got back about 13% of my assets stuck in Mt. Gox."

However, it is still unclear what percentage of the original assets will eventually be returned, as the exchange's site also crashed and wasn't loading for half a day due to high traffic.

It is likely that the payout amount will be calculated based on the asset value in 2017, when the price of Bitcoin was $481.

⏳ Some Mt. Gox clients will have to wait for payouts for up to three months, depending on the chosen exchange:

⏺ Kraken – 90 days for processing payouts.
⏺ Bitstamp – 60 days.
⏺ BitGo – 20 days.
⏺ SBI VC Trade and Bitbank – 14 days.

😀 BTC Sales by the German Government

Additional pressure on the market is being exerted by the German government's sales of Bitcoin.

In March 2024, the government announced the sale of part of its Bitcoin reserves to fund various state programs.

Currently, the government has 41,226 BTC left on its balance sheet, equivalent to about $2.28 billion.

😀 Declining Liquidity

Liquidity in the cryptocurrency market continues to decrease.

Long-term Bitcoin holders have increased their purchases to 72,000 BTC per month, compared to 68,000 in May, but this is still significantly lower than the levels of the first quarter of 2024, when they were buying up to 160,000 BTC per month.

Tether (USDT), the largest stablecoin, also shows a slowdown in the growth of its market capitalization.

The 60-day growth rate of USDT has significantly decreased, indicating reduced liquidity in the market.

😀 Negative Demand

Demand for Bitcoin remains weak. Despite a slight increase since May, it is still far from the peak values of early 2024 when the launch of US spot ETFs sparked huge interest.

Investors have not yet returned to profitability: their unrealized margins on the blockchain remain negative.

💬 Expert Opinions

Experts are divided in their opinions:

📉 Some analysts believe that the current situation may lead to a prolonged bear market if liquidity and demand do not recover soon.

📈Others believe this is a temporary phenomenon, and after the stabilization of Mt. Gox payouts and the cessation of sales by the German government, the market will return to growth.

❕ Future Forecasts:

- Short-term:

Continued volatility and a price drop to $50,000 are possible.

- Medium-term:

Recovery is possible with improved liquidity and increased demand.

- Long-term:

Bitcoin is expected to return to growth if macroeconomic conditions remain favorable.

The market situation remains challenging, and it is important to be prepared for possible corrections that could push Bitcoin even lower.

P.S. In the last few hours, the price of Bitcoin has risen to $57,500.

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💣 Polkadot ($DOT) is Bankrupt?

Recently, Polkadot announced its financial status for the first half of 2024. The results, to put it mildly, shocked many...

As we know, such reports allow investors to assess the company’s stability and prospects, understanding its market impact.

Let’s dive into the report 📊

🌐 A Bit About Polkadot

Polkadot is an open-source blockchain platform founded by Gavin Wood, co-founder of Ethereum 😀, and supported by the Web3 Foundation.

DOT reached a peak market capitalization of over $56 billion in November 2021, remaining one of the largest tokens in the crypto industry.

However, the development of the Polkadot ecosystem and network activity significantly lag behind its market capitalization, which is interesting to explore in the report.

🪙 Income

The report highlights three main sources of income for Polkadot:

— Network Fees:
In the first half of 2024, income from fees amounted to 39,444 DOT (approximately $250,000), which is 87.4% less compared to the previous half-year.

— $DOT Token Inflation:
DOT is an inflationary token with an annual inflation of 10%. The current staking rate in the Polkadot network is 58.18%, allowing the treasury to receive a portion of the new tokens.

— Other Income:
This includes income from slashes, dust, and OpenGov Returns (returns of unused governance funds).

💸 Expenses

Polkadot’s major expense categories in the first half of 2024 are more diverse than its income sources:

🔻 Marketing: 4,941,691 DOT ($36,739,259)
🔻 General Development: 2,956,611 DOT ($23,133,719)
🔻 Economic Activities: 2,000,497 DOT ($15,261,619)
🔻 Talent and Education: 704,270 DOT ($5,526,829)
🔻 Operations: 451,280 DOT ($3,797,860)
🔻 Research: 272,967 DOT ($2,127,425)

Total expenses amounted to 11,327,316 DOT (approximately $86,586,711). Compared to the previous period, this is an increase of 124% in DOT terms and 225% in USD terms.

💼 Income + Expenses = ...

The current financial situation of Polkadot:

In the first half of 2024:
😀 Income: 2,887,002 DOT
😀 Expenses: 11,327,316 DOT
= Net loss: 8,440,314 DOT

As of today, Polkadot’s treasury holds 29,336,487 DOT in cash and equivalents.

At the current monthly loss rate of 1,406,719 DOT, the treasury’s liquidity will be exhausted in 20.85 months.

Stablecoins constitute less than 5% of Polkadot treasury’s liquid assets, totaling $8,096,505 in USDT and USDC (equivalent to 1,265,080 DOT).

At the current loss rate, these funds will last less than a month, posing a threat to the treasury’s liquidity and solvency.

Despite substantial expenses, income remains low, and liquidity is under threat.

According to the reports, Polkadot’s future remains uncertain...

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🏛 History Repeats: Investment Strategies for Our Time

We are currently at a pivotal moment in the economy, transitioning from one global period to another. While the exact future remains uncertain, the history of the economy helps to illuminate current trends and provide possible development strategies.

❗️2 Types of Economic Periods

Remember, there are 2 types of economic periods:

💼 Local Periods: Authorities suppress depositors' savings to finance military and other government expenditures, leading to inflation.

🌐 Global Periods: Finances are deregulated, stimulating international trade, leading to deflation.

⏳ Historical Context

According to Pax Americana, from the 1930s to the present, we can observe an alternation between local and global periods:

— 1933 to 1980: Rising local cycle, characterized by a post-war economy, financial repression, and industrial growth in the US.

— 1980 to 2008: Global hegemony cycle, characterized by financial market deregulation, globalization, and monetary conservatism.

— 2008 to present: Local cycle of the Middle Kingdom, accompanied by quantitative easing, inflation, and geopolitical instability.

It is easy to trace the most characteristic strategies for local and global cycles.

📈 Investment Strategies:

In periods of local inflation:

Own gold and bitcoin, avoid stocks and bonds that may lose value due to inflation.

In periods of global deflation:

Own stocks that can benefit from economic activity growth, and avoid gold and bonds.

✅ Universal Strategies:

➡️ If you believe in the system but not in those who manage it: Invest in alternative assets like bitcoin and gold.

➡️ If you believe in the system and those who manage it: Invest in government bonds.

➡️ If you do not believe in either the system or those who manage it: Invest in bitcoin and gold, which do not depend on government decisions.

📉 Key Takeaways...

Investors must be ready to adapt to changing conditions, taking into account historical experience and current trends.

Meanwhile, holding bitcoin and other cryptocurrencies can be one way to preserve wealth in the face of increasing inflation and financial repression. Despite current volatility, the long-term prospects for bitcoin remain positive.

Investors should consider global factors and historical cycles when making investment decisions because...

history, though not exactly, tends to repeat itself.

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