All Roads Lead to Bitcoin

The Week in Crypto Felt Like a Football Match

The week in crypto markets felt like a football match: two completely different halves. Early in the week, Bitcoin reached new all-time highs and Ethereum was approaching its 2021 records. By week's end, however, the market had turned lower.

U.S. macro data was mixed. Tuesday's inflation report showed consumer price growth slowing. Inflation fell to 0.2% month-over-month, reinforcing expectations for a September rate cut. However, later in the week, producer price data showed accelerating inflation, which dampened rate cut expectations and caused markets to react negatively. In crypto, this triggered liquidations of overextended positions and the start of a consolidation phase.

Macro Environment Remains Supportive

Although the inflation data raised some uncertainty, it doesn't change the bigger picture. The Fed and other central banks have essentially accepted slightly higher inflation, as long as it doesn't spiral out of control. Currently, the focus is more on growth and employment. We still expect the Fed to cut rates by 25 basis points in September.

More importantly, the Fed is not the primary market driver right now. The massive U.S. budget deficits, global rate cuts, expanding monetary policy, and a weakening dollar create a strong foundation for both equities and crypto to rally. Additionally, geopolitical tensions are easing and the China tariff stance was delayed by 90 days. If Trump can negotiate an end to the Russia-Ukraine war, that would be another positive catalyst for markets.

Fed "Not QE" QE Is Coming

One potential market-moving factor relates to the so-called Treasury QE mechanism. The Treasury has increased T-bill issuance, absorbing cash into markets from the Fed's Reverse Repo Facility. This arrangement, which has been a significant source of liquidity, is now nearly depleted. When RRP reaches zero, market funding will become increasingly dependent on bank reserve money.

Bank reserves are still around $3.3 trillion, but if they fall below $2.5 trillion, the Fed may have to add liquidity again, even if it won't officially be called QE. In practice, however, it's monetary stimulus that supports both government debt financing and risk markets.

All Roads Lead to Bitcoin

Growing budget deficits, money printing, and a weakening dollar create a favorable environment for Bitcoin and other hard assets. While there will be volatility along the way, the direction remains clear. The Fed will sooner or later have to act as a liquidity backstop, and this path leads ever higher, at least when measured in dollars.

Crypto News from Around the World

• Lido has lost market share in Ethereum staking and is now at 24.4%. Among competitors, Figment in particular has grown its share rapidly.
• Coinbase has acquired Deribit, the world's largest crypto options platform. This strengthens the company's position in derivatives markets.
• Mesh, a crypto payments infrastructure developer, has raised over $130 million in new funding. The company works with PayPal and Coinbase, among others.
• Bullish exchange has listed on the New York Stock Exchange and raised $1.11 billion. Backers include Peter Thiel and the former chairman of the NYSE.

Institutional Moves

• Standard Chartered raised its Ethereum price target for 2028 to $25,000. The bank cites institutional demand, regulatory reforms (GENIUS Act), and network upgrades.
• The SEC has delayed its decision on Bitwise and 21Shares Solana ETF applications until October.
• Hong Kong's SFC has tightened requirements for licensed crypto exchanges, particularly regarding client asset custody.

Market Outlook

Technical outlook is improving. Bitcoin support appears to be holding at $110,000 and Ethereum is attracting new ETF inflows.

• Gemini is preparing to list on Nasdaq. It also released an updated crypto wallet that improves both security and DeFi compatibility.
• Major players like Brevan Howard, Goldman Sachs, and the Harvard endowment have increased their investments in Bitcoin ETFs, reinforcing its status as an institutional investment vehicle.
• Companies have started accumulating ETH on their balance sheets, particularly for staking yields and network activity.
• Stripe and Circle are now competing in stablecoin payments, aiming to dominate internet economy payment infrastructure.
• Do Kwon has pleaded guilty in the TerraUSD scandal and may face a 12-year prison sentence.

We continue to monitor the market's liquidity situation and the Fed's potential shift toward more accommodative monetary policy. For now, the direction remains the same: all roads lead to Bitcoin.