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Fund Report Q2 2024
GECO CAPITAL: DIGITAL LARGE CAP FUND (DLCF)
Bitwise projects that the fusion of cryptocurrency and AI could elevate global GDP by $20 trillion by 2030. Ripple has launched a USD stablecoin on the XRP and Ethereum blockchains. SEC Chair Gary Gensler expects an Ethereum ETF S1 to be approved sometime this summer. Fidelity International has successfully tokenized its inaugural money market fund. Paradigm has secured $850 million for a new crypto venture fund. President Biden’s campaign is exploring the possibility of accepting cryptocurrency donations. Former President Trump has indicated support for Bitcoin miners if he is re-elected. MetaMask is preparing to introduce pooled staking for Ethereum. Terraform Labs has settled its case with the SEC for $4.47 billion. The Federal Reserve has maintained interest rates at 5.25-5.5%.
Bitcoin
Bitcoin experienced notable volatility this week. It began with a sharp drop of over 5%, causing more than $270 million in market liquidations. Mid-week saw a rebound, but another decline on Friday resulted in a net weekly performance of -$4,170.93 or -5.99%. Bitcoin ended the week at $65,470.55, which is $1,361.23 above the 100-day EMA and $9,707.17 above the 200-day SMA. It remains within the $60k to $72k range, marked by rapid movements that tend to reverse.
Bitcoin’s open interest remains elevated compared to the lows of May, reaching a weekly high of $31.9 billion before slightly retreating to around $30 billion.
Ethereum
Ethereum followed a similar pattern to Bitcoin, with an early-week decline leading to a nearly 7.5% drop. This decline was the main cause of over $70 million in liquidations. After a strong mid-week recovery, Ethereum fell again, closing the week at $3,404.42, reflecting a net performance of -$301.98 or -8.15%. It finished $73.47 above the 100-day EMA and $437.33 above the 200-day SMA.
Ethereum’s open interest saw a slight decrease but remains significantly elevated following ETF-related news in late May. Since May 21st, open interest has hovered around $14.5 billion, dipping to about $13.5 billion this week. This level remains higher than in recent months, although recent volatility has led some speculators to close their positions.
Solana
Solana faced a sharp early-week decline of 10.66%, followed by a brief recovery before continuing to drop. It closed the week at $141.68, marking a performance of -$20.46 or -12.62% for the week. This is its first closure below the 100-day EMA since early May, although it remains $12.46 above the 200-day SMA.
ETF Flows
After a 19-day streak of inflows, ETFs saw outflows of $64 million on Monday and $200 million throughout the week. Despite this, the previous week’s impressive performance remains noteworthy. ETFs acquired over 56,000 Bitcoin during the multi-week streak, with $IBIT reaching $21 billion AUM and 300,000 Bitcoin. Mid-week saw a $101 million net inflow, with $IBIT handling over $1 billion in volume, followed by $226 million in outflows on Thursday. Average inflows since inception are approximately $143 million.
Glassnode has suggested that institutional cash-and-carry trades have been influencing spot ETF flows, which may explain the large inflows without new all-time highs.
DIGITAL ASSETS IN THE ELECTION CYCLE
Former President Donald Trump has expressed support for Bitcoin mining, stating it could be key to making the U.S. „energy dominant.” This marks a significant shift from his previous skepticism towards cryptocurrencies. Trump’s new stance aligns with his broader economic policies emphasizing domestic manufacturing and technological sovereignty. His comments have elicited mixed reactions within the crypto community, with some welcoming his support and others concerned about potential regulatory implications.
In contrast, the Biden campaign is reportedly considering accepting cryptocurrency donations, signaling a possible shift in its stance on digital assets. This could represent a significant change from President Biden’s earlier position on Bitcoin.
Consumer Price Index
The Consumer Price Index (CPI) remained unchanged in May, with a 3.3% year-over-year increase, both figures slightly below market expectations. Core CPI, which excludes food and energy, rose 0.2% month-over-month and 3.4% year-over-year, also below estimates. The energy index dropped by 2%, while food prices increased by only 0.1%. Shelter inflation rose by 0.4% month-over-month and 5.4% year-over-year, continuing to drive inflation. Positive inflation data might influence the Federal Reserve’s monetary policy, with markets increasingly expecting the Fed to maintain current rates. The probability of a rate cut in September has risen to 73%, up from 53%, and the odds for a December cut have also increased. Fed officials require consistent positive data for rate cuts, as durable inflation keeps the Fed cautious.
Federal Open Market Committee
The Federal Reserve has kept its key interest rate unchanged, expecting only one rate cut by year-end. The Fed now believes the long-term interest rate will be higher than previously indicated. There has been modest progress towards the 2% inflation target. The FOMC’s „dot plot” suggests a more aggressive rate-cutting path in 2025, with four reductions projected. The long-term interest rate projection has increased to 2.8% from 2.6%. Inflation projections for 2024 have been revised upwards to 2.6% or 2.8% when excluding food and energy. The federal funds rate remains targeted between 5.25% and 5.50%. Fed Chair Jerome Powell noted progress but emphasized that it is not yet time to loosen policy.
