Representation of the cryptocurrency Bitcoin is shown in the picture, August 10, 2022. REUTERS/Dado Ruvic/Illustration
Dice Ruvik | Reuters
it seems like bitcoin The new quarter is in good shape, with major institutions at the end of the month expressing confidence in the future of cryptocurrencies and even U.S. regulators. Don’t get too carried away, though — cryptocurrencies are still part of a broader market, and the macro environment remains challenging.
The third quarter was the weakest quarter in Bitcoin’s history. According to data from CoinGecko, the average Q3 gain since 2014 has been just 4.67%, and has seen positive growth in only 4 of the 9 quarters in its lifetime.
Bitcoin’s historical quarterly performance since Q4 2013
| Q1 | Q2 | the third quater | fourth quarter | |
|---|---|---|---|---|
| average return | 6.88% | 36.47% | 4.67% | 93.38% |
| number of positive cycles | 4 out of 10 | 6 out of 9 | 4 out of 9 | 6 out of 10 |
source: Coin Gecko
The second quarter was dismal for traders, before a recent flood of applications to launch a U.S. spot bitcoin ETF injected new optimism into the cryptocurrency market. Between the end of the banking crisis in May and the filing of the BlackRock Bitcoin ETF on June 15, regulatory pressure weighed heavily on market sentiment, with Bitcoin trading sideways. That lull could return over the next three months as industry drivers battle macro drivers.
“It’s clear that (the Fed) is not completely comfortable with where the headline inflation numbers are headed,” Christopher Ferraro, president and chief investment officer at Galaxy Digital, told CNBC. “So while they’re holding off on raising rates, they’re There has been no commitment to a permanent pause or even a rate cut.”
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The Fed left rates unchanged at the end of its June meeting, but said two more changes are likely later this year. Some on Wall Street expect the Fed to act in July and September. Powell said the FOMC has yet to decide whether a new round of rate hikes is likely in July.
“You’re looking at different, sometimes orthogonal data points every day, is the economy growing? Is the economy shrinking? Are we headed for a recession, aren’t we?” Ferraro added. “It’s a very uncertain macro environment, which makes this not a one-way move for any asset class, let alone bitcoin.”
Cantor Fitzgerald’s Elliot Han said that while Bitcoin eventually regained the $30,000 level, it failed to sustain it for a few weeks as macro challenges “are currently capping the cryptocurrency’s upside.”
Regulation and ETFs
Beyond the macro backdrop, apparent developments in US regulation and ETF filings will continue to be a theme in Q3. The approval of the spot bitcoin ETF comes at a time when the SEC’s animosity towards cryptocurrencies is at its peak, with many institutions looking to gain approval for a bitcoin ETF. black stone, Fidelity and Invesco – the company filed for a Bitcoin ETF with Galaxy in June – may bring some changes. However, this may take a while.
“From a timing standpoint, I think it’s largely unknown when a decision on ETFs will come,” Ferraro said. “But … there’s been a really concerted effort by all of these agencies, which probably wouldn’t happen now without a firm belief that the market and regulators, especially the SEC, are ready to allow regulated products .”
He added: “Given all the regulatory uncertainty and ongoing court cases … this is actually a good time for regulators to allow regulated products to come to market and help dispel some of the concerns or lack of clarity.”
the rest of the world
While that uncertainty persists in the U.S., the rest of the world has taken a friendlier stance on the industry. British regulators have developed a “regulatory sandbox” that allows cryptocurrency companies to test new innovations, continental Europe has a mature market for cryptocurrency exchange-traded products, and Hong Kong has made it clear that it wants to become the world’s cryptocurrency center.
“There are still differences in the treatment of cryptocurrencies between the U.S. and the rest of the world,” Han said. “The question is will the U.S. follow suit or continue its approach to litigation?”
He added that as the price of bitcoin moves higher, more and more U.S. companies are no longer willing to wait for regulatory clarity, and many expect a spring price surge that they don’t want to miss out on.
Bitcoin is up over 80% year-to-date
“Some are looking to move their headquarters to a crypto-friendly jurisdiction, or at least set up a large office,” Han added. Also see more U.S. cryptocurrency companies looking to create offshore products” such as Ripple and Coinbase.
While Ferraro and others remain optimistic about the future of cryptocurrencies and are not concerned that regulators will eventually find a suitable path forward for U.S. cryptocurrency businesses, it may end up being too late.
“I’m optimistic we’ll get it right,” Ferraro said. “I worry that the U.S. will take its time, and when that happens, sticky capital and sticky intellectual capital builds up in the rest of the world, and then it’s very hard to reverse.”