The Germans are selling!

Thoughts of the Day

That’s the news that has been putting the cryptocurrency market under pressure in the past few days. More than US$900 million worth of Bitcoins were moved from accounts controlled by the German authorities into crypto exchanges yesterday. The German authorities’ stores of confiscated BTC have dropped from 50,000 to 23,788 BTC (US$ 1.3 billion worth), less than half of what they started with before the selling that began recently. 

The price of BTC has dropped from above $71,000 in early June, by more than 20% to 56,500 currently. The market is also worried about the US$9 billion worth of BTC that the now-defunct crypto exchange, Mt Gox, will be repaying creditors this month. 

Obviously, the investors are fearful in the short-term but the market capitalization of BTC is more than US$1.1 trillion. $12 billion ($3 billion from the German authorities and $9 billion worth from Mt Gox creditors) will not change the trajectory in the longer term. Prices will remain under pressure in the short term but it will turn out to be an opportunity as time passes.

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Day Ahead

  • Federal Reserve Chair Powell is due to testify about the Semi-Annual Monetary Policy Report before the Senate Banking Committee.
  • Treasury Secretary Janet Yellen is due to testify on the state of the international financial system before the House Financial Services Committee.
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What Happened Yesterday

Market Movements as of New York Close 8 Jul 24
  • The US stock market opened higher from Friday. The S&P 500 and Nasdaq traded sideways through the New York session while the Dow Jones Index spiked higher before falling and remaining stagnant through the session. Hence, the S&P 500 closed +0.10% higher on the day (high: +0.29%, low: -0.08%) while the Nasdaq rose +0.23% (high: +0.31%, low: -0.14%). The S&P 500 and Nasdaq closed at all time highs again. The Dow Jones edged -0.08% lower (high: +0.71%, low: -0.25%).
  • The crypto market climbed higher once again with Bitcoin up +1.53% and Ether up +3.03% as investors started to fade the Mt Gox and German selling of Bitcoin (see headline 1).
This is a partial analysis of what happened yesterday, for a more detailed analysis, subscribe to a membership plan.

Headlines & Market Impact

The German government owns around $2 billion in bitcoin — and it’s freaking out crypto investors

Notable Snippet: For weeks now, Germany’s government has been selling hundreds of millions of dollars worth of bitcoin — and it’s been a key factor behind the cryptocurrency’s intense sell-off.

Last month, the German government began selling bitcoin from a wallet operated by the country’s Federal Criminal Police Office, referred to locally as the Bundeskriminalamt, or BKA.

The BKA sold 900 bitcoins in June — worth approximately $52 million as of Monday — from a massive haul seized from a now-defunct movie piracy website, according to on-chain data tracked by blockchain analysis firm Arkham Intelligence.

Last week, the government sold an additional 3,000 bitcoins worth roughly $172 million. Then on Monday, German police sold a further 2,739 bitcoins, or $155 million worth of the cryptocurrency.

In tandem with these sales, bitcoin has seen its price fall dramatically. Bitcoin sank below $55,000 on Friday, hitting its lowest level since February 2024, according to CoinGecko data.

At one point in the day, the entire crypto market had shed more than $170 billion in combined market capitalization in a 24-hour period, CoinGecko’s data showed.

Germany’s bitcoin sales aren’t the only concern for crypto investors. The cryptocurrency has also been under pressure from the payout of billions of dollars’ worth of digital currency from the collapsed bitcoin exchange Mt. Gox — which went bankrupt in 2014 — to creditors.

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Bank of Japan signals progress in wage, price hikes

Notable Snippet: The Bank of Japan said wage hikes were broadening across the economy due to tight labour market conditions, signalling its confidence the country was making progress toward durably achieving its 2% inflation target.

The optimistic assessment, made at the BOJ’s quarterly meeting of regional branch managers on Monday, may heighten the case for the central bank to raise interest rates as soon as its next meeting on July 30-31.

Separate data showed Japanese workers saw their average base pay climb 2.5% in May, the fastest pace in 31 years, suggesting that broadening wage gains will give households more purchasing power and underpin consumption.

“Many regions reported that big firms’ big pay hikes in this year’s wage negotiations were spreading to small and medium-sized companies,” the BOJ said in a summary of discussions at the branch managers’ meeting.

The assessment compared with that of the previous meeting in April, when the BOJ said there were “hopeful signs” solid wage increases among big companies would spread to smaller firms.

Some regional smaller firms decided to prioritise raising pay to retain or hire workers, even if they were not earning sufficient profits, the BOJ summary said, a sign of how Japan’s shrinking working-age population is intensifying a chronic labour shortage.

BOJ Governor Kazuo Ueda has said wage hikes need to trickle down to smaller firms, and companies to begin charging more for services, before the central bank considers raising interest rates from current near-zero levels.

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NY Fed finds moderating near-term inflation expectations in June

Notable Snippet: The path U.S. inflation is expected to follow over coming years generally softened in June, amid retreating projections of price increases for a wide array of consumer goods and services, a Federal Reserve Bank of New York report released on Monday said.

Inflation a year from now was seen at 3% as of June, from the expected rise of 3.2% in May, while three years from now inflation was seen at 2.9% from May’s 2.8%, according to the bank’s latest Survey of Consumer Expectations. Inflation five years from now was seen at 2.8% from May’s 3%.

The report found that expected price gains for gas, food, rent, medical and college costs all moderated in June relative to what survey respondents projected in May. Expected year ahead home price gains also cooled, hitting 3% in June from the prior month’s 3.3%.

Ebbing price pressure expectations came in a landscape where survey respondents said they see future earnings growth rising at a faster pace and future income growth slowing. Spending expectations held steady at a pace above where it was before the coronavirus pandemic struck.

The survey also found respondents saying credit is getting slightly harder to get as they also marked down their household’s financial situation. Respondents’ outlook on the job market was mixed.

The New York Fed report, which is closely watched for what it says about how the public foresees inflation developing, came as central bankers are actively debating whether inflation pressures have moderated enough to allow them to cut their short-term interest rate target.

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Best,
Phan Vee Leung
CIO & Founder, TrackRecord