July 31, 2024

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DOJ Moves $2 Billion in Bitcoin from US Government-Linked Crypto Wallet

A crypto wallet associated with the U.S. Department of Justice transferred $2 billion worth of confiscated bitcoin to an unidentified wallet, according to Arkham Intelligence data. The 28,000 BTC, linked to funds seized from the Silk Road, were then split into two addresses: one with 19,800 BTC and another with 10,000 BTC. The transfers follow a mandate formalizing the forfeiture of Bitcoin connected to the Silk Road. The U.S. government's crypto holdings still exceed $12 billion, and former President Donald Trump recently mentioned commuting Silk Road founder Ross Ulbricht's sentence if re-elected.

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DeFi Money Market Giant Aave Sparks Major Rally after Fee Switch Proposal

Aave’s recent governance proposal for a “fee switch” sparked a significant rally in the AAVE token, with its market capitalization increasing by 15% and adding $188 million within days. The proposal, which includes a “buy & distribute” program to buy back AAVE on the secondary market, drove the token's price despite underlying protocol metrics, like Total Value Locked (TVL) and outstanding debts, remaining largely unaffected. This enthusiasm highlights market optimism about the proposal’s potential impact on Aave, even though it hasn’t yet altered the protocol's actual mechanisms.

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Grayscale Loses $20B in Bitcoin and Ether ETFs

Grayscale Investments has experienced over $20.4 billion in outflows from its spot Bitcoin and Ether ETFs, with the Grayscale Bitcoin Trust ETF (GBTC) losing $18.86 billion since January 11, averaging $137.7 million in daily outflows. In contrast, other U.S.-approved Bitcoin ETFs, such as BlackRock's iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund, have maintained positive balances. The newly launched Grayscale Ethereum Trust (ETHE) also saw significant outflows, losing $1.72 billion in five days. Analysts predict that outflows may stabilize soon, potentially indicating a bullish trend.

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Trading Desk Insights

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BTC rocketed to $70,000 recently when Trump made waves at the Bitcoin conference in Nashville, promising to sack U.S. SEC head Gary Gensler and establish a strategic bitcoin reserve if elected. Despite this bullish momentum, BTC took a hit, dropping over 6% since Monday morning. The selloff came after the U.S. Marshals Service moved $2 billion worth of BTC to two new wallets, raising fears of a possible liquidation. BTC is now in defensive mode, while the Japanese Yen has strengthened in the forex market following the Bank of Japan's interest rate hike and liquidity-tightening measures. Traders are bracing for more volatility with major U.S. tech firms set to release earnings this week.

In the ETF market, U.S.-listed BTC funds saw outflows of $18.3 million after four straight days of inflows. Meanwhile, ETH funds marked their second day of inflows, totaling $33.7 million, led by BlackRock. However, ETH ETFs have experienced a net outflow of over $400 million, with Grayscale’s ETHE taking the biggest hit at $1.84 billion in losses, while BlackRock’s ETHA leads inflows at $618 million.

XRP jumped over the past 24 hours to exceed $0.65, its highest level since March 25, driven by a major token unlock and renewed optimism for a settlement in the long-running SEC-Ripple lawsuit. The coin has surged over 70% from its lows earlier this month. A Tuesday filing revealed the SEC's intent to amend its complaint against Binance concerning "Third Party Crypto Asset Securities," suggesting that a decision on whether some tokens are unregistered securities might be postponed. This development is seen by traders as a positive sign that the SEC and Ripple Labs may be nearing a resolution.

On the regulatory front, U.S. Senator Cynthia Lummis's proposed Strategic Bitcoin Reserve aims to finance BTC purchases partly by revaluing gold certificates held by the Federal Reserve. The draft legislation outlines a "Bitcoin Purchase Program" allowing up to 200,000 BTC purchases annually over five years. These reserves would be held for at least 20 years, only to be liquidated for federal debt repayment.

Equity futures edged higher Wednesday as investors digested the latest earnings reports and prepared for the Federal Reserve's monetary policy decision. Meta and RIOT are set to report after market close today. The Fed will conclude its two-day meeting on Wednesday, with expectations of steady rates. All eyes are on Fed Chair Jerome Powell for any hints on potential rate cuts. The FedWatch tool indicates an 88% probability of a rate cut in September, a significant increase from 58% a month ago.

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Disclaimer

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This research is for informational use only. This is not investment advice. Other than disclosures relating to Secure Digital Markets this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.

Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While Secure Digital Markets has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.

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Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.

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