Crypto market seeks direction
In the past trading week, investors saw mostly red on their screens. Just before the weekend, the price of Bitcoin rebounded sharply, but the relief proved temporary: by Sunday evening, the gains had already disappeared. What's behind the current uncertainty among investors? More on this in this edition of Bitvavo Market News.
Market update
On Friday at 4 p.m., Fed Chairman Jerome Powell delivered a speech at the central bankers’ conference in Jackson Hole. In previous years, Powell's speeches at this event have often set the tone for his policy in the following period. Would that be the case again?
The U.S. central bank has two main goals: to keep prices stable and ensure full employment. These two mandates can often clash. If you stimulate the economy and thus employment, inflation can rise. If you rein in inflation by inhibiting monetary policy, then jobs may suffer.
Weighing up the two risks — inflation and unemployment — Powell clearly leaned toward tackling inflation last year, with inflation remaining above the 2% target. On top of that came import tariffs, while the labor market remained strong. The result was a mildly restrictive monetary policy, with interest rates set, in central bank jargon, “above neutral.”
In Powell's speech last Friday afternoon, however, the tone shifted slightly. He sounded less concerned about levies, and more focused on the labor market. The balance has shifted, and the door to further interest rate cuts is ajar. Financial markets jumped on the news. ETH, SOL and XRP gained more than 10% in a few hours. BTC lagged behind at 4%. Taken together, it was a 7% gain for the crypto market as a whole.
The coming week will show whether markets truly believe Powell, and whether this upswing is the beginning of a new trend. So far, we're not seeing this in the crypto market. Over the weekend, most of the gains were given back. A 4.5% drop brought us back into the price range we saw last Wednesday, Thursday and Friday.
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Bitcoin as a new emergency exit
In 2022, Lebanon suffered a deep financial crisis. Citizens who couldn’t withdraw their savings sometimes stormed their own banks armed, in some cases, with fake weapons in an attempt to get their money back. Judges took a remarkably lenient view. These were acts of desperation after years of withdrawal restrictions and mismanagement by both government and banks.
This may seem like a distant problem, yet it touches on a universal truth: our financial system runs on trust. When you deposit money in a bank, you trust that institution to safeguard it and lend it out responsibly. That works as long as the trust is maintained, and it usually is. Moreover, in the Netherlands this is supported by far-reaching safety nets designed to function even in the face of severe crises.
But what if the trust cracks anyway? Then it's interesting to see how people respond. A study in 2024 showed that crypto is increasingly becoming a way out in such situations. The researchers looked at the premium on credit default swaps (CDS) — insurance against a sovereign default. Their finding: when CDS spreads rise by 10%, the number of crypto app downloads increases by between 2.9% and 4%.
In other words, once citizens sense that their government or banking system is faltering, they are more likely to turn to Bitcoin and other cryptocurrencies. This pattern has been observed in countries such as Argentina, Turkey and Venezuela, as well as during debt crises in Sri Lanka, Greece and Ecuador. It is tangible evidence that the idea of Bitcoin as an alternative financial system is not just the narrative of maximalists. People act on it as soon as their trust in a state or banking system crumbles.
For centuries, gold fulfilled that role. When geopolitical turmoil occurs, it is still gold that is the go-to asset, especially for institutions such as central banks. Bitcoin does not yet fulfill that role, but the difference is that Bitcoin tends to come into the sights of citizens precisely when the state itself is the problem. That makes it a new kind of emergency outlet, or as Larry Fink of BlackRock calls Bitcoin, a "flight to quality."
In other news
China and Japan move ahead with own stablecoins. Beijing is, for the first time, exploring yuan-based stablecoins as a way to give the renminbi more weight internationally. This is notable because so far the People's Republic has been firmly committed to digital central bank money. In Japan, the first yen-stablecoin has been approved, fully backed by deposits and government bonds. Two Asian powerhouses are thus using the same technology to strengthen their currencies.
BTCS introduces first-ever 'bividend' in ether. Shareholders will receive up to $0.40 per share paid out in ETH, a first for a publicly listed company. The idea: ether generates a natural return through staking that can be passed on — something that Bitcoin companies can't do. This sets BTCS apart from Bitcoin treasury companies like Strategy: whereas Bitcoin acts purely as a reserve, ether enables dividend-like rewards directly from protocol revenues.
EU accelerates plans for a digital euro. Following the U.S. GENIUS Act, fears are growing in Brussels that dollar stablecoins will displace the euro. For the first time, the use of public blockchains such as ethereum or solana, instead of a closed variant, is being seriously considered. This could help the euro circulate more widely worldwide, but it also raises privacy concerns. Pressure from Washington is forcing Europe into high gear.
Jack Dorsey's Block launches Proto Rig and Proto Fleet. No more disposable machines, but modular bitcoin miners with easily replaceable parts and a lifespan of up to ten years. Together with open-source software to manage the rigs, this promises lower costs and higher efficiency. Dorsey emphasizes that the goal is not speculation, but using Bitcoin as everyday money. The battle for decentralization is also being waged in the server racks.
Satoshi Radio: In the latest episode of Satoshi Radio "bitcoin buyer" Michael Saylor is prominently featured. The current FUD about his intentions is expertly dissected. You'll also get the week's most important news, including Amdax's announced bitcoin reserve, statements from Scott Bessent, and BlackRock CEO Larry Fink's new job.
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.