June 2024: Supply Overhang Weighs on Bitcoin
Research Team
Last Updated: 7/1/2024 | 10 min. read
Ongoing and expected selling pressure from a variety of sources weighed on Bitcoin and crypto markets more broadly during June. However, fundamentals for the asset class were little changed, in Grayscale Research’s view.
There appeared to be more progress toward the listing of spot Ether exchange-traded products (ETPs). While timing remains uncertain, for the purposes of our market analysis, Grayscale Research assumes that these products will begin trading in Q3 2024.
Absent a major shift in the macroeconomic outlook, Grayscale Research expects that crypto valuations can recover in the coming months.
Crypto markets pulled back in June 2024 as pockets of Bitcoin selling pressure triggered a broader reduction in investor risk appetite, but Grayscale Research maintains a constructive outlook for the asset class.
Exhibit 1: Crypto valuations pulled back in June in a mixed month for traditional assets
In Grayscale Research’s view, actual and expected selling pressure from several sources contributed to Bitcoin’s drawdown during the month. Weakness in Bitcoin, in turn, appeared to spill over to the rest of crypto. The major new sources of selling pressure included:
U.S. Government: On June 26,the U.S. government sent 3,940 BTC ($240 million) — seized from a wallet related to a convicted drug trafficker — to Coinbase Prime Deposit. Previously, the most recent confirmed sale by the U.S. government had been in March 2023, when it sold 9,861 BTC, then worth $216 million.
Exhibit 2: Growth in daily active users of major smart contract platforms
Despite the crypto market setback in June, Grayscale Research remains optimistic about the outlook for valuations for the balance of the year. In our view, the macro backdrop remains broadly supportive for the crypto asset class, with a growing economy, potential Federal Reserve rate cuts, and buoyant equity markets. Although a U.S. recession would likely weigh on crypto markets, a period of slower but positive growth still appears to be the central scenario for the economy. Moreover, Ether ETP approval has the potential to introduce more investors to the concept of smart contracts and decentralized applications — and therefore to the potential for public blockchains to transform digital commerce.
[1] Through June 28.
[3] Source: Arkham Intelligence. Data as of June 28, 2024.
[5] Source: Arkham Intelligence. Data as of June 28, 2024. Dollar valued based on Bitcoin price of $60,000.
[6] Source: Bloomberg, Grayscale Investments. Data as of June 28, 2024.
[7] Source: Glassnode. Data as of July 1, 2024. Dollar value calculated by taking the price of Bitcoin on the day it was transferred
[9] Source: Bloomberg, Grayscale Investments. Federal Reserve interest rate cut pricing based on Dec. 24 and 25 SOFR futures contracts. As of June 28, 2024.
[12] The Grayscale Research Top 20 represents a diversified set of assets across Crypto Sectors that, in our view, have high potential over the coming quarter, due to a combination of (i) immediate catalysts or trending themes, (ii) favorable protocol-specific adoption trends, and (iii) low or moderate token supply inflation. Several of the assets in our Top 20 list have high price volatility and should be considered high risk. This content does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of investors.
[14] Source: Artemis. Data as of June 28, 2024.
