Source: TradingView, CNBC, Bloomberg, Messari
The Rally is Finally Here
It’s the end of August, and volumes in crypto are matching the work attendance of finance professionals as summer winds to a close. Total exchange volumes continued their declines last week, with volumes falling -16% WoW to $539B in total volumes. It’s quiet out here.
Source: Artemis and Arca Internal Calculations
That said, the rally was real. With market makers pulling back, TradFi seemingly uninterested in crypto at the moment, and less and less liquid crypto funds, it just doesn’t take a lot of capital to spark big moves either way. While the benchmarks (BTC, ETH and SOL) gained 9%, 4%, and 11%, respectively, many small and mid-cap tokens gained +15-30% last week. Smart contract platform tokens posted the strongest gains, with some former laggards like MATIC (+25%), AVAX (+28%), and OP (+13%) leading the pack.
For starters, this was inevitable, as
we wrote last week. Every other risk asset has been rallying for weeks, and it was only a matter of time before crypto caught up. We wrote:
“Quite frankly, either crypto is finally dead this time, or we're setting up for one of the biggest “rip your face off rallies” in history, just as everyone throws in the towel.”
Fed Chairman Powell may have simply put gas in the tank of the inevitable rally car when he gave his speech at Jackson Hole. For the first time, Powell signaled that a shift towards rate cuts has finally come and that the Fed does not desire any more cooling in the labor market. The
Powell pivot left no doubt in the market’s mind.
The biggest question is, what happens from here? Will this rally have legs, or was it just an August low-liquidity short-covering rally? My guess is that we will continue to chop until we get closer to the election in November, but with a positive upsloping bias.
On the positive side, we’re seeing some real dispersion in crypto for the first time since March and signs of “greenshoots”. For example, Helium (HNT) is +28% MTD as user growth continues, plus a governance vote passed HIP-129, which automatically opted in all mobile hotspots to provide free service to beta carriers T-Mobile and AT&T. Eschelon Prime (PRIME) jumped +43% in a week simply on the heels of a few influencer tweets (
here and
here). Aave (AAVE) has gained +27% MTD as borrowers of the DeFi lend/borrow platform hit all-time highs, and revenues have skyrocketed.
On the negative side, Telegram (TON) fell -19% last week after Pavel Durov, the CEO of Telegram, was arrested in France over the weekend on a complaint related to Telegram’s lack of moderation and cooperation with law enforcement. Noelle Acheson
paints a pretty ominous picture regarding this arrest and what it means for the future of privacy.
While these are just a few examples, it’s essential to highlight the outliers because this is how crypto markets usually function during healthier times. Investors and traders are once again willing to make bets based on actual news and information. For months, the entire market has gone up or down (mostly down) together as market makers controlled the market, moving all tokens in lockstep. But more recently, tokens have been going up and down for idiosyncratic reasons.
New capital entering the market remains sticky, however, as it is unlikely that any significant new inflows will happen until the post-presidential election. In the meantime, capital is rotating between sectors, and even though it seems more like price driving narrative rather than specific themes/catalysts driving flows, it was encouraging to see Friday's price action backed up by strong Bitcoin ETF flows (BTC ETFs had their largest inflow in 2 weeks).
It’s unlikely that we’ll see a change in direction or momentum in the near term as we round out the rest of the summer. The trend is your friend!
