Has the cryptocurrency market also entered the rainy season?

My name is Yasuo Matsuda, a senior analyst at Rakuten Wallet Co., Ltd., and I will be writing a series starting with this issue. I look forward to sharing the latest developments in the cryptocurrency market.

June in Review

After failing to try to rise higher in June, the BTC market tried to reach the lower end of the range towards the end of the month. Fundamentals were relatively favorable, and the employment statistics at the beginning of the month were strong, but the CPI, which was attracting attention, fell short of expectations. Meanwhile, contrary to the expectations of FOMC members, the futures market's expectations of interest rate cuts this year rose from one to two, which was a tailwind for BTC.

In addition, capital flows into BTC spot ETFs pushed up the market. In the four weeks since May 13, $4 billion has flowed in, and on June 7, BTC is approaching its all-time high of 11.24 million yen in yen terms, which it set in May.

However, the following week, ETF flows turned negative, and the market changed drastically, and at the end of the month, Mt.GOX's announcement that it would repay $9 billion worth of BTC to creditors from the beginning of July was unpopular, and the price temporarily plummeted to the 9.3 million yen range.

Technically, after a sharp rise from February to March, it has been trading in a range of roughly 9 to 11 million yen. At the beginning of May, it tried to break out of the range, dropping to 8.8 million yen, but ended up being a false positive. In June, it rose to 11.24 million yen, but formed a double top and failed to break out of the range, and is now once again searching for the lower limit of the range.

Future outlook

The BTC market is likely to continue trading within a range for the next two months. The sudden drop towards the end of June was also influenced by selling pressure related to Mt.GOX, which is an unknown and potential selling pressure, but the 140,000 BTC that the company, once known as a large holder, is now paying out is less than half of BlackRock's BTC spot ETF (IBIT). Given this situation, we believe that the sudden drop this time is due to selling pressure from miners.

In the four-year cycle of BTC around the halving, it first rises in anticipation of the halving, and then after the halving, it stagnates for about six months to a year due to profit-taking sales and dumping by miners whose profitability has deteriorated. After that, the cumulative effect of the reduction in supply due to the halving gradually begins to take effect, and it takes six months to a year to peak, but this time, as with the previous pattern, it seems that we have entered a slump period after the halving.

However, I believe that this slump is not a "winter for crypto assets" but rather a "rainy season" in seasonal terms, after which a hot summer for crypto assets awaits. Because of this expectation, I don't think the market will bottom out even with some selling pressure. In this case, although it is still early in July, the market is looking at a rate cut in September or November, and the second wave of ETF flows is expected to arrive with the entry of traditional institutional investors such as insurance and pension funds.

In addition, it is expected that the movement of institutional investors, which was mainly in the United States, to enter the BTC market will spread to other regions. According to a survey by Nomura Holdings, 54% of 547 institutional investors in Japan have expressed their intention to purchase crypto assets within three years, and Japan is no exception.

In this situation, BTC is likely to remain firm for a while, but unfortunately, the (real) summer, when the market is quiet, is a season that BTC is not good at because of its constant supply, and it is likely that the upside will continue to be heavy.

Profile

◉Yasuo Matsuda

Senior Analyst, Rakuten Wallet Co., Ltd.

Majored in international monetary systems at the Faculty of Economics, University of Tokyo. Engaged in sales and trading of foreign exchange and bonds at Mitsubishi UFJ Bank and Deutsche Bank Group. Since 2018, engaged in analyzing and forecasting the cryptocurrency market at a cryptocurrency exchange, predicting a peak of 8 million yen in 2021 and 5 million yen at the end of the year, which was almost accurate. Has been in current position since January 2022.

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