What We See in the Markets: July 17, 2023
After a rally and then retracement at the end of last week following the Ripple headline, BTC is roughly unchanged, but this market feels quite different. Compared to this time a month and a half ago, the mentality and outlook of this market has done a full 180. June brought an onslaught of regulatory headlines, some of which may have implications for exchanges. The Ripple ruling is particularly interesting in how it may affect exchanges; in particular, the ruling says that in this case, Ripple's anonymous sale of tokens on exchanges did not violate securities law. COIN rallied from $84 to $105 on the headline, and has now tripled YTD.
While some of the moves in the last several months felt impactful, we have essentially traded in a range for the last 90 days. ETH is up about 5% during that period, and has had about a 25% range overall. However, during that same period, the Nasdaq is up 22%, and it is up 44% YTD, the best first-half for the index in decades. We’re in the midst of an historic rally in equities, and thus far crypto has not really participated. The reason for crypto lagging so far this year is straightforward: regulatory pressure has been keeping enthusiasm suppressed. It stands to reason that if the market starts to feel more comfortable with the regulatory risk, crypto could be due for a meaningful rally, similar to the post-Covid rally in 2020 and 2021. The last time the Nasdaq was this high, ETH was $3700. We’re seeing the market start to think about these things: options flow last week was essentially one-way buying of deep out-of-the-money ETH calls. Commentary in the market has passed from “Maybe we’ll get a BTC ETF” to “When will we get an ETH ETF?”
As for the rest of the market, while BTC gave up most of the rally it saw last week, alts have hung onto a good deal of it. For the most part, this is an alts sector recovering from getting hit hard in the beginning of June; most alts are actually still down since June 1st; again, if you think the regulatory environment has changed (and it’s not just Ripple; we can’t ignore the Blackrock headlines either), then crypto probably belongs higher right now. Some alts are up, and there’s quite a bit to learn by diving into some of the outliers. (All performances here since June 1)
We made a note of COMP’s performance last week, and it’s added another 10% since then, now up 111% since the start of June. This is not a sector play (AAVE only up 14% during that same period), but likely due to Superstate.
BCH is up 120%, the rally that really not many believe in. BCH benefits from being one of the coins TradFi exchanges feel most comfortable listing, but so does LTC, and that is unchanged. One thing to note: while this was one of the most liquid cryptoassets in 2018, it hasn’t maintained that status, and so it can move fairly quickly on low volumes.
XRP is up 45%, not surprising given the headline. What is surprising is that XLM is up exactly the same amount, the pair trade that refuses to quit.
SOL has not just recovered from its epic June selloff, it’s thrived. SOL started June at $20, traded below $14, and is currently printing above $27. The 28% rally is an outlier, with its peers in the sector trading down (POL nee MATIC down 15%, AVAX unch). MATIC in particular feels like good value here, given the Polygon 2.0 announcements last week (please reach out to a Cumberland RM for more details on this announcement).
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