Market update: July

Market update: July

Cryptocurrency market shows first signs of recovery

The first half of July was characterized by the first signs of a recovering market. Initially, the market acted cautiously at the start as a result of the previously covered unravelment of Three Arrows Capital and Celsius. Later we saw the Bitcoin price climb from around 19 thousand dollars to well over 24 thousand dollars.

The Bitcoin price experienced an initial upward movement shortly after Binance's announcement on July 6, in which it announced it would no longer charge trading fees for trading Bitcoin. The move accelerated when Fed official Christopher Waller, known for his hawkish position, indicated that a "soft landing" of the economy was still possible. This initial upward move was short-lived, as Celsius officially filed for bankruptcy a few days later. In the market update of June, we already covered the problems with Celsius, but now the centralized crypto lending and staking platform has officially discontinued its service. After the market recovered from this correction, it set course for the $24K mark.

Euro reaches parity with US Dollar

In the current market, it hardly matters whether the price is expressed in Dollars or Euros. For the first time since 2002, the currencies reached parity, with the Euro even briefly dipping below the Dollar. The decline in value is mainly due to the sharp increase in inflation, the dependence on Russia and the lagging monetary policy of the European Central Bank (ECB). Where the Fed already started its first interest rate hikes back in March (with a current interest rate of 1.75%), the ECB continued its negative interest rate of -0.5% during this given period. In other words, it’s more beneficial to hold on to Dollars than Euros. To counter this, the ECB officially announced its first interest rate increase on July 21. Where the market prepared for an increase of 0.25%, it got surprised by a slightly more hawkish hike of 0.5%. This initiated the first steps toward recovery but faced quick backlash as the ECB also introduced a new tool that allows for the purchase of bonds to maintain stable interest rates throughout the EU.

This month, the inflation rate of the US came in at 9.1%, again higher than forecasted. The EU faced an inflation rate of 8.6% for the second month in a row. Two-thirds of the market expects the Fed to raise the interest rate by 0.75% next week, whereas a third prepares for an increase of 1%. It remains to be seen which increase the Fed will eventually implement next week and what this will do to the Euro-Dollar exchange rate and the next possible increase by the ECB in September. When looking at the cryptocurrency market, we also see the weakness of the Euro against the Dollar. Although Euro-stablecoins already did not enjoy much popularity, we saw them continue to lose ground. The past also shows that a strong Dollar is often accompanied by a negative movement in the cryptocurrency market, although this can often be explained as a result of negative economic conditions and/or a bear market in which people exchange their investments for ‘safe’ Dollars.

EU set to implement MiCAR

As a result of the unravelment of several big cryptocurrency businesses over the past months, lawmakers seek to increase their pace of implementing suitable regulations. One of these regulations for the European market is the long-awaited Markets in Crypto-Assets Regulation (MiCA). On the 30th of June, the European Council published a press release in which it stated that the European Parliament and other legislators reached a preliminary agreement on the containings of the agreement. The regulation is intended to create a stricter and clearer legal framework for various participants in the cryptocurrency sector, such as exchanges and companies that issue stablecoins. With the new regulation, stablecoins such as USDT and USDC can be potentially limited to 200 million euros in transactions per day. These enforcements can negatively impact the cryptocurrency market as these stablecoins have an average daily transaction volume of 40B euros. The approved proposal also delivered good news as it no longer contained a ban on the Proof-of-Work consensus mechanism. MiCA is set to be implemented as early as 2023, however, a transition period of 18 months is applied; after this period it will be in force.

Team expansion

This month we welcome two new members to our team. Dirk-Jan (DJ) Schuld has started as Chief Performance Officer and our second addition to the team is Roos Verhulst as Customer Succes Manager.

DJ: “Throughout my career, I served as director of technology and strategy advisor at various international firms. Starting at Hodl, I see a great deal of opportunities for the organization in the emerging cryptocurrency market and I aim to implement a structure for improving performance. Hodl has grown exponentially over the past two years and it's important to have a clear oversight of all activities and to review where and how we can improve.”

Roos: ”I’m very excited to start my journey at Hodl as Customer Success Manager. In the upcoming months, I will be active as a point of contact for the investors of Hodl. Over the past year, the organization has grown tremendously and as we continue we want to put more focus on our participants. I will be actively engaging with our investors to examine how we can improve our affairs. In addition to these activities, I will support the Executive Board with their daily endeavors. Overall, I’m eager to start and you will be hearing from me soon."

Internationalization

At the beginning of the year, we shared some insights into the interest of various parties in the successful Hodl Formula. The cryptocurrency market may have been in a downward movement, but this hasn’t stopped us from broadening our horizons. During the last couple of months, the board explored expansion opportunities within Europe and Asia, and significant progress has been made. The coming months will be an exciting time for everyone involved as we make an international name for ourselves. Stay up to date on our latest developments by following us on LinkedIn and Twitter.

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