The Market
The dramatic development on the political side last week has reignited optimism in the crypto market. With Trump surviving the assassination attempt and picking JD Vance, a pro-crypto pro-VC candidate, as running mate, the prediction market is assigning a 65% chance of the Republicans winning the election.
BTC price has recovered to above $66K, up 19% from the intra-month low, despite the German and Mt. Gox selling pressure. Good news is the German government has completed its selling, and the BTC ETF inflow has shown resilience for the past two weeks, taking advantage of the price dislocation. Furthermore, the FTX estate is seeking creditors' votes to approve the liquidation plan by mid-August. If approved, $16B will begin distribution by the end of Q3, which is likely to be redeployed to the crypto market, adding a nice tailwind for a Q4 rally.
The BTC funding rate has recovered slightly from the negative level last seen in late June but is still at a lower level than at the beginning of 2024, indicating risk appetite hasn’t returned yet in the near term. However, Deribit BTC option data indicates strong open interest at $100K for the Nov. 8 expiry, right after the US election, suggesting the market expects a crypto-friendly administration to take office.
On the macro front, Powell mentioned last week that the Fed doesn’t need to wait for inflation to dip below 2% to cut interest rates, acknowledging the slow growth and inflation trends. In fact, the policy rate indicated by various “theoretical” economic models based on current data is already showing a level lower than the current rate.
The market is predicting a close to 95% chance of a 25bps rate cut by September, a significant increase from the last Fed meeting in June when the chance was ~60%.
Last but not least, the SEC is finally giving the green light to ETH ETF S-1 filings, and they are expected to start trading on July 23. We analyzed the potential price impact in a previous weekly report. The gist of it is that ETH spot ETF inflow will be smaller than BTC given its smaller market cap and narrower narrative. However, since 30% ETH is staked, constraining the supply side, ETH price could be more reflexive to inflows. The ETH inflow in the next few weeks will serve as a good indicator for retail risk appetite and may ignite the Alt season.
DeFi Update
While the macro backdrop is getting more constructive for crypto, we believe a real bull market will be driven by real user adoption, and it is happening with a few blockchain ecosystems leveraging the Web2 user acquisition path. In our recent CoinDesk article, we highlighted how this acceleration is achieved with Base, Solana and TON. The market is taking notice and rewarding these trends. For example, since the introduction of stablecoin to TON this April, its supply has grown ~300X, while the total stablecoin supply has only grown ~3%. Solana and Base have also both experienced accelerated stablecoin supply growth during their respective growth spurts, indicating fresh capital entering the ecosystem.
Although it is difficult for US investors to access TON, the number of wrapped TON users on the Ethereum blockchain has grown exponentially since May 2024, undeterred by the Q2 market selloff.
We believe that when the bull market returns, ecosystems with a large user base and solid user acquisition strategy will benefit disproportionately.
Top 100 MCAP Winners
dogwifhat (+57.78%)
Worldcoin (+51.60%)
Bittensor (+45.63%)
Arweave (+40.49%)
Helium (+39.49%)
Top 100 MCAP Losers
Uniswap (-2.75%)
Tron (-2.66%)
Akash Network (-2.25%)
Toncoin (-0.66%)
Celestia (-0.45%)
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.
About the Author
Kelly is Portfolio Manager and Head of Research at Decentral Park Capital. Investing across sectors with a thesis driven, deep research approach.
Prior to this, Kelly has led research and product efforts at CoinDesk Indices and Fidelity Digital Asset Management. Kelly has been a TradFi investor for 15 years before joining the crypto space.
You can follow Kelly on Twitter and LinkedIn for more frequent analysis and updates.
