Planting Coins: 08/24

Management Summary

• KDAC Strategy lost 2.3% in July but with increased volatility
• Market dynamics are dominated by both economic and political drivers
• While the Fear & Greed Index approaches the fear level again, Bitcoins are continuously withdrawn from exchanges

What is the crypto investing series? 

This blog post is the eight report in 2024 about the Kaleido Digital Asset Core Strategy. Read more about our crypto portfolio framework here. Don't forget to sign up to our newsletter to get the next reporting straight in your mailbox! 

Dealing with increasing volatility

July 2024 was marked by significant political and economic events. After a subdued start, portfolio values rose significantly towards the middle of the month, before another correction started.

Increasing volatility in July driven by economics and politics

Influence of Macroeconomic Dynamics: Despite the initial dismissal of various crypto-specific events (e.g., Mt. Gox repayments, government sales), the primary driver behind Bitcoin's price decline was external macroeconomic pressures. The Federal Reserve's continued data-dependent stance and the call for more evidence of inflation reduction influenced market sentiment, contributing to the broader market downturn.

Impact of Geopolitical Tensions: While Powell's speech initially resulted in a positive market response, the end of July saw decreased liquidity and increased geopolitical tensions, particularly between Iran and Israel. This led to a significant drop in the stock markets highlighting the market's sensitivity to political developments and foreshadowing potential further declines.

Economic Indicators and Market Volatility: The release of underwhelming Non-Farm Payroll figures and a higher-than-expected Unemployment Rate exacerbated market corrections and heightened volatility (with the VIX rising 25%). The tech sector, in particular, experienced a continued sell-off, which extended to all risk assets, including Bitcoin. Concerns over the Federal Reserve's quantitative tightening and the potential for a recession increased the likelihood of a 25-50 basis point interest rate cut in September, further impacting market dynamics.

KDAC keeps its promise as a diversified core strategy

Staking rewards are continuously accumulated and custodized in the respective cryptocurrency. During volatile times this increases the base to profit again during rising markets.

Ongoing coin accumulation through Staking

The Fear & Greed Index, which often stands for psychological momentum, is getting more volatile, approaching fear levels. This volatility mirrors the broader market's uncertainty and highlights the heightened risk environment.

Fear & Greed Index becoming more volatile

As mentioned in our blog last month, we are also seeing continued outflows of both Bitcoin and Ether from crypto exchanges. Even the Ethereum Spot ETF expected for mid-July was unable to halt this trend. Most recently, the filing by Van Eck also provided the first indications of an upcoming Solana Spot ETF in the medium term.

Aggressive outflows of BTC from exchanges

We are seeing continued outflows of both Bitcoin and Ether from crypto exchanges. Bitcoin outflows have reached new lows, showing further significant outflows from crypto exchanges to Hodlers. Meanwhile, Ether outflows also reached new lows; however, in recent days, with the launch of the Spot ETFs, we saw some flow backs to exchanges.

Minor exchange inflows for Ether (ETH), but still lower compared to June

We are currently in a very exciting phase in which a wide variety of events are accumulating and and exerting reciprocal effects. In addition to economic developments, we are political events in particular, which have a negative impact on the markets. We continue to expect increased volatility, but at the same time also interesting opportunities to opportunities to buy back into the market at more favorable conditions than in recent months.

Disclaimer: This piece of information is for marketing and entertainment purposes only and should not be taken as an investment recommendation. Remember that all investments involve risk. Please read our full Marketing Disclaimer here.