A New Era of Institutional Demand
After a record-breaking quarter for crypto, recent months have disappointed many. Bitcoin ETFs are losing momentum, and even the announcement of SOL’s Spot ETF filings hasn’t revived the market as expected. This announcement seemed premature, as SOL lacks futures contracts offerings on major exchanges. Fortunately, institutional demand for crypto extends beyond ETFs. The issuance of tokenized funds has grown in recent months, becoming the next big trend. Moreover, MiCAR’s first implementation phase is fostering a USDT-USDC duality that may significantly impact the future of crypto market structure, making it an intriguing development to follow.
Crypto’s Growing Use in Emerging Markets
In Q2, the US Fed reduced its projected rate cuts from three to one due to persistent inflation. This, along with miner sales, volatile US spot ETF inflows, and concerns over Mt. Gox repayments, led to sell-offs and a double-digit drop in crypto trade volumes compared to Q1. Despite this, trading involving emerging market currencies showed resilience. The Turkish Lira surpassed the Euro as the third-largest fiat currency in crypto after the US Dollar and Korean Won. Exchanges have responded to local demand by adding more trading pairs in TRY and Latin American currencies, highlighting the ongoing steady crypto adoption in emerging markets.
A Fundamentally Different Cycle
After a strong start to the year, the crypto market failed to maintain momentum in Q2. This lull could persist in Q3 as we seem to be in a fundamentally different cycle. Previous crypto cycles were driven by short-lived hype around solutions in search of a problem. This cycle, however, is different. Only BNB hit a record high during Q2, while most other altcoins are fast approaching three years below previous record highs. Ether came close, driven by ETF hype, and the approval of S-1s — expected in Q3 — could see it test $4,000 again. However, spot ETH ETFs are unlikely to impact ETH as significantly as BTC approval did. Therefore, the market can’t rely on ETF hype alone to push it higher, and we likely need to see some real innovation soon.
