Author: 10x Research

Compiled by: Azuma, Odaily Planet Daily

Six issuers of Ethereum spot ETFs have submitted updated S-1 forms, indicating that the U.S. Securities and Exchange Commission (SEC) may soon approve the issuance of Ethereum spot ETFs. Meanwhile, cryptocurrency seems to be in a rebound state this week, which we predicted in our report last weekend, with the rebound attributed to market expectations that the U.S. will release lower-than-expected CPI data on Thursday.

Oversold indicators show that the market is anticipating a possible small-scale rebound, suggesting that the market trend may reverse in the short term. Currently, two out of three reversal indicators have shown bullish signals, and the RSI (Relative Strength Index) is temporarily at 38%, indicating that bears may also need to wait and see until Bitcoin's price encounters resistance in the $60,000 to $62,000 range, leading to another downturn.

From a technical analysis perspective, the price range of $55,000 to $56,000 is forming a support level. However, considering that the mid-term technical pattern has deteriorated, we predict that this will only be a short-term rebound and will not last long. It is particularly noteworthy that Bitcoin has recently declined during Asian trading hours, while the trend has remained relatively strong during European and American trading hours.

Despite Bitcoin's price dropping 20% in the past 30 days, the positions of Bitcoin futures traders remain relatively bullish since the expectation of Ethereum spot ETF approval increased on May 20. Since that time, the open interest in Bitcoin has grown from 260,000 BTC to a peak of 305,000 BTC, currently reported at 277,000 BTC, while Bitcoin's price has fallen from $66,000 to $57,000 during the same period; Ethereum's situation is similar, with open interest rising from 2.6 million ETH to 3.1 million ETH, even though its trading price has remained around $3,068.

Since May 24, the net asset value (NAV) premium of Grayscale's Ethereum Trust has significantly narrowed to just -1.5%, down from a peak of -60% in December 2022, primarily due to expectations of the imminent approval of the Ethereum spot ETF. Grayscale's total assets under management are approximately $9 billion, and the transition of this ETN to an ETF means that investors will be able to freely redeem their shares.

Once the Ethereum spot ETF begins trading, Grayscale's redemptions could create significant selling pressure, similar to the situation with Grayscale Bitcoin Trust (GBTC) in January 2024. Since the Bitcoin spot ETF opened for trading, GBTC's assets under management have decreased by 47%. It is predicted that Grayscale's outflows may offset inflows from the other five ETF issuers.

Therefore, although the current price of ETH is still similar to when the SEC indicated its intention to approve, there may be a potential "buy the rumor, sell the news" scenario when the S-1 is approved. For ETH, the open interest in the futures market shows a strong bullish sentiment, while potential outflows from Grayscale could again impact market trends.

A similar pattern exists above Bitcoin, where the inflow of funds into spot ETFs has already occurred ahead of the CPI data release. Following a net inflow of $143 million into Bitcoin ETFs last week, Monday saw another net inflow of $295 million. This corresponds to the observed continuous net inflow of $4 billion over 20 days during the release of CPI data in May and June; however, it is important to note that after the June CPI data release, Bitcoin ETFs experienced a net outflow of $1.2 billion.

The market expects the CPI data to be released on July 11 to drop to 3.1%, aligning with our speculation and the market's rebound expectations. If the core CPI can decrease by 0.2%, it is expected to still affect Bitcoin's price trend. However, potential selling pressure from the German government, Mt. Gox, and the upcoming Bitgo cannot be ignored.

Recent news about "FTX creditors potentially receiving about $16 billion in compensation" has attracted widespread attention in the market. However, many of FTX's creditors have actually been acquired by professional bankruptcy claims firms, which will only focus on the recovery expectations and arbitrage opportunities of the claims themselves and are unlikely to reinvest the received dollars back into the cryptocurrency market. We estimate that the funds returning to the market could be between $3.2 billion and $5 billion. Additionally, when FTX was liquidated in November 2022, Bitcoin's price was around $16,800, and now it is $57,000; the current pullback does not present an enticing discount for FTX's creditors.

The deadline for FTX customers to vote on the bankruptcy liquidation plan is August 16, with a related hearing scheduled for October 7, when Judge Dorsey will consider whether to approve the plan. It is worth mentioning that overseas creditors may face up to a 30% withholding tax upon final compensation.

In summary, we expect Bitcoin to likely first rebound to around $60,000, then drop again to around $50,000, after which the market will enter a relatively complex trading environment. At that time, we anticipate the market will gradually digest the selling pressure from the German government and Mt. Gox on a psychological level, paving the way for some bullish events in the future, such as changes in expectations regarding FTX compensation in mid-August and the potential impact of the upcoming U.S. elections on Bitcoin.