Grayscale Stays Bullish on Bitcoin, Predicts ETH Will Retest ATH if US Economy Avoids Recession

The Bitcoin market experienced a significant downturn earlier this week, sparked by rising concerns about the US economic outlook and increased volatility in broader financial markets.

Bitcoin’s market experienced a significant downturn earlier this week, sparked by rising concerns about the US economic outlook and increased volatility in broader financial markets. This downturn was largely attributed to the release of disappointing US employment data for July, which showed an increase in the unemployment rate, a pattern typically observed during past recessions.

These concerns led to weaker performance in cyclical assets like equities, while traditional safe-haven assets such as US Treasury bonds, the Japanese Yen, and the Swiss Franc experienced increased demand.

Within the crypto market, both Bitcoin and Ethereum experienced substantial declines. However, Ethereum’s performance particularly lagged behind other digital assets and traditional market segments.

This underperformance can be partly explained by the liquidation of large long positions in perpetual futures during the downturn, which further exacerbated the price decline. Specifically, the market witnessed a sudden 7.6% drop in Ethereum’s price over a brief three-minute window on August 4, with liquidations totaling $340 million that day alone.

Prominent holders, like Jump Crypto, Paradigm, and the Golem Network, also played a role in Ethereum’s underperformance, engaging in large ETH sells as the token experienced a strong uptrend.

Additionally, shifts in Ethereum’s staking reward rate and validator activity contributed to the varying market performance.

As broader financial markets stabilized in the past week, the VIX index, a measure of US equity market volatility, exhibited a notable decrease after peaking earlier in the week.

This stabilization was driven by improving market sentiment following the release of encouraging corporate earnings and anticipation of favorable upcoming macroeconomic data.

However, market stability moving forward hinges on forthcoming macroeconomic data, corporate earnings releases, and potential policy responses from central banks like the Federal Reserve.

Grayscale anticipates that if the US economy avoids a recession and maintains a path toward a controlled slowdown, token valuations could recover, with Bitcoin potentially retesting its previous all-time high.

The firm also highlighted factors such as steady demand from newly listed US ETFs, limited credit exposure from central financial institutions, and subdued altcoin returns as potential stabilizing influences on the market.

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