Bitcoin Tops $80,000
Bitcoin (BTC) passed $80,000 overnight, its highest level since May. Over the past 6 months crypto rose about 24%, beating both stocks and gold.
The Slow Summer and the Breakout
The summer was slow and needed patience: low volume, low price movement, and stalled prices. Three things held the market back - trouble around the Clarity Act, a new Fed chair who gave little signal on where the next rate hikes go, and general quiet. Underneath, blockchain integrations, tokenization, and stablecoin growth kept moving forward even while prices sat flat.
The break came last week during a blockchain conference in Jackson Hole. Two pieces of news landed: the Treasury made moves with US treasuries, and the president was gathering crypto industry leaders for a conference. That triggered an explosive breakout, helped by liquidations of short positions. Prices extended the next day and have held for three days since. The market has left the lull and entered a new regime, with hope that a trend forms.
There were many shorts in the market, so the lower leverage now is good overall. Before the breakout the market was almost sickly - low volatility, low volumes. People were writing call options on top of their Bitcoin ETFs or their Bitcoin, which pushed volatility down further. In the crypto-native market, perpetual futures showed little activity and no upside interest.
Market Structure Turned Healthy
That changed overnight. In Bitcoin ETF options there is more interest in long call options, and the same in crypto-native spaces. The perpetual futures market reinflated, funding rates reinflated, and volumes returned. These are all good market structure signs that the rally is real and more energy can follow.
Resistance sits ahead at several levels, including around 88,000 and 108,000, and breaking $80,000 took a long time.
The Clarity Act
Will the Clarity Act pass or is it dead on arrival for September 15th? It could still pass. Prediction markets are the best place to watch, since they gather all the information. A pass would be welcome. Even without it, there are enough active businesses already operating under current CFTC and SEC rules that undoing crypto's footing through regulation changes would be harder. Still, there is no substitute for legislation, and the hope is it gets through this election season, though the odds are what they are. The CFTC has a backup plan if it fails, as does the SEC, and the two agencies are working together in ways not usually seen in traditional markets.
Beyond Bitcoin: Ethereum and Solana Led
Focus tends to fall on Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). GSR runs a model-driven ETF holding those three assets, called Baso, which performed very well over the past week. The models had mostly been overweight Ethereum and Solana for several weeks, betting that momentum and positioning in those names would be stronger. Both were strong as the rally formed.
The two names carry different meaning. Bitcoin is a currency and stands on its own. When people allocate to Ethereum and Solana, it signals belief that blockchain technology will change how things are done through tokenization and stablecoins - a growth story. Seeing those names take part in the rally was a positive sign.
Inflows and the Rate Backdrop
Spot Bitcoin ETF inflows were strong, with nearly $2 billion in net inflows over the last 5 days, sizable as the shorts liquidated. Scott Bessant made known that the Treasury would buy back more long-dated treasuries - $2 billion to $4 billion, maybe more - which pushed yields down and helped Bitcoin. Yields are now creeping back up, and a rate hike may come.
How do rates and Bitcoin relate? An asset like Bitcoin does better when it expects real interest rates - nominal rates minus inflation - to be lower. With a new Fed chair who is not yet well known, it is hard to judge when the most hawkish point arrives; a sign that rate hikes may be over would bring relief.
Bitcoin's other relationship is with the strength of the dollar. Last week's other market news was a $40 trillion debt figure, a psychological number that made people feel the dollar may be feeble. Any dollar debasement ideas push money toward gold and Bitcoin, and that was a tailwind for last week's move.
