Wyckoff Accumulation Scenario
Crypto and (Geo)Politics
In our May "How Crypto Impacts Politics in 2024?" article we assessed the current political landscape of United States, and how cryptocurrencies impact it. According to the recent data, a whopping 22 percent of US citizens own digital assets. Thus, United States could have 34.9 million active crypto-related voters, forming a significant voter segment. Those candidates who can most effectively profile themselves as crypto-friendly will reap the benefits of this new voter segment.
Donald John Trump, in particular, has recently profiled himself as a crypto-friendly presidential candidate, and seriously aims towards the November United States presidential election, occurring in 107 days.
In contrast to Trump, his key rival Joe Biden has taken a more critical stance towards cryptocurrencies. Meanwhile another candidate, Robert F. Kennedy Jr. (RFK), has been talking about bitcoin as "freedom technology", and recently promised to put U.S. state budget into a public blockchain. RFK has also been talking at major crypto-related events, while Trump is scheduled to speak at a bitcoin conference in Nashville on July 27th.
The recent assassination attempt on Donald Trump is likely to boost his chances of winning the 2024 presidential election. The assassination attempt could generate sympathy votes for Trump, similar to what happened in Taiwan's 2004 presidential election when the incumbent president Chen Shui-bian narrowly won after being shot at a campaign rally.
While Trump's victory might have geopolitical consequences, especially towards Europe, it represents a huge upside to crypto. Trump is rumored to announce bitcoin as a "strategic reserve asset" during his keynote speech at the upcoming Bitcoin 2024 Conference in Nashville, scheduled for July 25-27. The strategic reserve asset speculation has been fueled by statements from credible sources, including Dennis Porter, co-founder of the Satoshi Action Fund.
Wyckoff Accumulation
From a purely technical vantage point, bitcoin's selling pressure seems to be fading away, and the leading cryptocurrency has gained 15 percent within the past seven days.
In a bigger picture, bitcoin is building a textbook-like Wyckoff accumulation pattern, in which institutional "smart money" investors quietly accumulate at favorable prices, absorbing selling pressure from weaker market participants.
As the accumulation progresses, the spot price may break out above the trading range, signaling the end of the accumulation phase and the start of the markup phase. This breakout is accompanied by increased trading volume.
Sources: Timo Oinonen, CryptoQuant
As the declining spot lures in hungry short sellers, a sudden updraft would trap the shorts, creating a short squeeze scenario. The updraft could be triggered by positive news about politics, spot ETFs, central bank rate cuts, or new institutional buyers.
Cumulative volume delta (CVD) shows most investor segments being increasingly active. Large $100K - $10M category orders have been in an elevated role during the past weeks.
Source: Material Indicators
Stablecoin Market as a Leading Indicator
Another factor supporting our Wyckoff accumulation pattern is the booming stablecoin market, as its market capitalization has grown from 128.76 billion US dollars to $160.53B this year, representing a robust 24.67 percent increase.
Source: CryptoQuant
Tether (USDT) has captured a significant market share, exceeding $113B and accounting for 71% dominance in the stablecoin market. Tether's Q1 2024 attestation report disclosed a record $4.52 billion profit from U.S. Treasury holdings, generating $1 billion in net operating profits. The number of active Tether addresses (non-zero balances) as of April 28 rose to 5.6 million.
The integration of USDT on the TON network, which has lower fees and faster transactions, could prompt users to switch from TRON to TON for frequent, small transactions. This is particularly relevant in Telegram's top user countries, which are key players in the global remittance market.
Source: CryptoQuant
In addition to dominant stablecoins like Tether, the industry is also creating new stablecoin implementations, including the synthetic dollar Ethena (USDe). You can read our thorough Ethena analysis by joining the 21metrics alpha.
Source: 21metrics
Gox Coins Are Priced In
The over ten year old saga of Mt. Gox dates back to 2014, when the exchange was hacked, losing losing almost 950,000 bitcoin units. Over the subsequent ten years, approximately 15% of the lost customer assets were recovered, which equates to 141,768 bitcoins.
In late 2021, Mt. Gox officially published a formal rehabilitation plan in order to return lost funds back to investors. The creditors have an option to receive US dollars (USD), bitcoins (BTC), or bitcoin cash (BCH).
Institutions like Fortress Investment Group have been buying Mt. Gox claims of those individuals who wanted to cash out early. The claims have formed a liquid market for speculators along the years, as each creditor is expected to receive around 20 percent of the original balance.
The recent letter from rehabilitation trustee Nobuaki Kobayashi shows 65 percent of creditors already being repaid. The situation has created a surprisingly low amount of selling pressure, as BTCUSD is up 15 percent on a weekly basis.
Source: Mt. Gox
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Mt. Gox bankruptcy estate balance: ₿47,229
Estimated USD value: $3,021,853,480
Circulating bitcoin supply held by Mt. Gox trustee: 0.24%
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The Mt. Gox bankruptcy estate coins currently account for 0.24 percent of the total bitcoin supply, which is a small number. 0.24% is hardly enough to move the markets by itself, so the Mt. Gox repayments could mainly be considered as a non-event. It’s pretty obvious that all the creditors are not selling as many of them are “old bitcoiners” and thus “holders of last resort." In the after market, many claims have ended up into institutions like Fortress that are unlikely to sell their assets in the short term.
Source: 21co
We expect the market to easily absorb the Gox coins, and their aggregated effect will be lower than expected. Bitcoin, and the larger crypto market in correlation, is currently being uplifted by multiple tailwinds, including Donald Trump's pro-crypto stance, spot ETH ETF, and Fed's anticipated rate cuts in the upcoming fall.
