Expectations for interest rate cuts are slowing down, and Ethereum ETF approval is accelerating. When will the market turn around?

The cryptocurrency market is undergoing a phased adjustment. The best strategy in the short term is to wait patiently.

Crypto Market Summary

1. Since the BTC price broke through the ATH in March, it has not been able to maintain a significant upward momentum. With the market's pessimism about the US dollar rate cut and the lack of mainstream narratives in the market, the cryptocurrency market is undergoing a phased adjustment. The best strategy in the short term is to wait patiently. In the long run, we believe that the overall bull market will come in late 2024 to 2025.

2. It is expected that the Ethereum spot ETF will be approved for listing as early as July 4, which is good for market sentiment and the Ethereum ecosystem. The S-1 document required for the review of the Ethereum spot ETF has received feedback from the SEC and is required to be modified and submitted before June 21 (this Friday).

3. FMG released an in-depth research report on DePIN, proposing three major trends in the DePIN track: the combination of the DePIN model and consumer goods; the edge device economy and sharing economy based on Web3 mobile phones; and the release of DePIN liquidity through the RWA model.

4. The Meme craze represents the "narrative-free stage" of the market. Due to the lack of narrative in the current market, coupled with a large number of continuously unlocked and high-FDV altcoins, investors have begun to turn to hype Meme. This round of Meme narrative has a more solid foundation than the previous cycle, including the entry of investment institutions, the provision of liquidity by trading platforms, and the increase in community participation.

5. The two recent large airdrops (ZKSync, Eigenlayer) have both seen the hot words "ZKscam" and "EIGENscam" within a few days after the airdrops. If the project's airdrop mechanism is slightly inappropriate, it will cause great dissatisfaction in the community. Airdrop tokens are distributed to users with extremely low retention rates at almost zero cost, and more than half of the tokens will be sold immediately. It is expected that project parties will gradually become less enthusiastic about airdrop operations, and they still need to have excellent product capabilities and market promotion capabilities.

I. Market Overview

1.1 Crypto Market Data

On June 19, the total market value of cryptocurrencies was 2.38 trillion US dollars, down 5.92% from the beginning of the month. BTC's market value accounted for 53.92%, a slight increase from 52.66% at the beginning of the month. The Crypto Fear and Greed Index is on a downward trend and is currently at a neutral level.

As of June 19, the combined market value of Bitcoin and Ethereum fell 3.5% from the beginning of the month, while Altcoin fell 15%.

According to the rules of the first two Bitcoin halvings, the interval between the halving time and the peak of the bull market is 12-18 months. The rise is not achieved overnight, but is accompanied by fluctuations and periodic declines. The halving will take place on April 20, 2024, and the market is expected to start to improve by the end of 2024.

Although this year's net inflows are stronger than last year, they are still significantly lower than the level during the 2021/2022 bull market, and the inflows are not enough to support the arrival of the bull market. According to JPMorgan Chase estimates, the crypto market has received net inflows of $12 billion so far this year. Among them, Bitcoin spot ETFs have received net inflows of $16 billion. Since January, the exchange's Bitcoin reserves have decreased by about 220,000 (US$13 billion), indicating that most of the funds flowing into spot ETFs are actually transferred from existing digital wallets, rather than new funds.

1.2 Macro-monetary environment

After the announcement of lower-than-expected CPI at 20:30 on the evening of June 12, the crypto market generally rose for several hours. At the FOMC meeting at 2:00 a.m. on June 13, the Federal Reserve unexpectedly used a dot plot to indicate that there would only be one rate cut this year, lower than the three times in March. The crypto market then began to weaken.

According to Coinshare statistics, the largest outflow of funds since March 22 totaled $600 million (week number, by 6/15), of which Bitcoin outflow amounted to $621 million, and ETH, LIDO and XRP funds showed a small inflow. According to sosovalue data, BTC spot ETF has been outflowing every day since June 13.

1.3 Crypto Population Forecast

Triple-A released the 2024 Global Cryptocurrency Ownership Status Report, which shows that the global digital currency user base will reach 562 million in 2024 (equivalent to 6.8% of the world's population), higher than 420 million in 2023.

34% of cryptocurrency holders are between 24 and 35 years old, the largest proportion among all age groups, and young people are the absolute main force of the crypto community.

Second, Crypto Market Hotspots and Narratives

2.1 Combination of AI and Crypto
Nvidia estimates that more than 40K companies worldwide use GPUs for AI and accelerated computing, with a developer community of more than 4 million people. Looking ahead, the global AI market is expected to grow from $515 billion in 2023 to $2.74 trillion in 2032, an average annual growth rate of 20.4%. At the same time, the GPU market is expected to reach $400 billion by 2032, an average annual growth rate of 25%.

Bitwise analysts predict that AI + Crypto will unlock a huge market of $20 trillion. As a track that is strongly tied to the concept of AI, the decentralized computing network is one of the vertical fields in the crypto field that is most likely to gain real demand.

2.2 Meme Narrative

Meme has gradually been accepted by the mainstream crypto market, and more and more people agree that consensus is value and existence is reasonable.

• At the institutional level, the Bybit report shows that institutional investors' investment allocation in meme coins has increased by more than 300% this year, reaching a peak of nearly US$300 million in April. The current popular choices are DOGE, SHIB and BONK.

• At the exchange level, Binance has launched several Meme coins, including PEPE, WIF, and BOME, which further provides sufficient liquidity for Meme and arouses investors' enthusiasm for Meme coins.

• At the community level, symbols have great cohesion. Meme, as a universal language, enables the community to quickly reach a consensus and form a simple and effective communication path. In addition, many celebrities have begun to get involved in Memecoin, which has enhanced the spread of Meme, similar to the purchase and holding of NFT collections by celebrities in the previous cycle.

• At the distribution platform level, Pump.fun has issued more than 1 million Memes, and the transaction volume of Pump.fun has reached 3.6 billion US dollars, and the number of new users has continued to grow. With the support of the issuing platform, Meme has become a minimalist fundraising mechanism and listing strategy.

3. Regulatory environment

Bloomberg ETF analysts Eric Balchunas and James Seyffart said that the launch date of the Ethereum spot ETF may be brought forward to July 4. The reason is that the SEC staff sent comments on S-1 to the issuer last week, and the comments were brief and there were no major problems. It was required to complete the modification and submit it before this Friday (June 21).

FMG mentioned in the previous crypto market observation that the 19b-4 form was approved in May, and trading can only begin after the S-1 form takes effect. The sudden approval of the ETF reflects the Biden administration's soft stance on cryptocurrency policy, which is due to election needs. The analysis of ARK Invest CEO and Chief Investment Officer Cathie Wood also supports this judgment. She said at the Consensus conference that the Ethereum spot ETF application was approved because cryptocurrency was an election issue.

Trump's pro-crypto stance against the tens of millions of crypto industries in the United States has prompted Biden voters to make strategic adjustments in cryptocurrency policy. Biden's re-election campaign has begun to contact key figures in the cryptocurrency industry, seeking guidance on "the development of the crypto community and crypto policy moving forward."

Fourth, Research Topic:FHE Fully Homomorphic Encryption

Fully homomorphic encryption (FHE) is an advanced solution for secure computing that allows an unlimited number of arbitrary operations on ciphertext (including any number of addition and multiplication operations), thereby ensuring the privacy and security of data during processing and computing. The lightweight work on FHE has achieved remarkable results at home and abroad, but its high computing, storage and communication overhead still cannot meet the objective performance requirements of resource-constrained local devices in edge computing systems.

Opportunities brought by FHE:

1. Solve the privacy issues of AI and edge computing

In the training process of large language models, all links involving data processing and transmission, such as data distribution, model training, parameters and gradient aggregation, may affect data security and privacy. If the problem of data privacy cannot be solved, it will not be possible to truly scale up on the demand side. In addition, the premise of using edge computing power is to ensure data privacy, and FHE is a privacy computing technology born for this scenario.

2. DePIN hardware acceleration

The computing power required for FHE is about 1000-10000 times that of ZK, and some hardware companies are committed to producing FHE chips.

Recently, projects with FHE concepts have received large investments from VCs, making it a hot technical topic in the crypto community. The application of FHE technology is still in its very early stages, and we will continue to pay attention.

The data comes from: Coinmarketcap, Coinshare, Sosovalue, Bloomberg, Tripe-A, Bybit