VanEck’s August 2024 Crypto Recap: Market Volatility and Regulatory Challenges

According
to

VanEck,
most
crypto
assets
experienced
significant
declines
in
August
2024
amid
rising
market
volatility
driven
by
macroeconomic
factors
such
as
the
yen
carry
trade
implosion.
Bitcoin
(BTC)
fell
by
11%,
Ethereum
(ETH)
by
24%,
and
Solana
(SOL)
by
21%,
contrasting
with
the
S&P
500’s
2%
gain
and
Nasdaq’s
1%
increase.

Market
Performance

The
month
of
August
saw
a
sharp
downturn
in
crypto
assets
as
fundamental
usage
and
financial
statistics
underperformed
against
a
backdrop
of
rising
volatility.
The
market
capitalization
of
all
Smart
Contract
Platforms
(SCP)
ended
August
12%
lower
than
July.

The
yen
carry
trade
implosion
was
a
significant
factor,
causing
a
risk-off
environment
that
led
to
Bitcoin’s
price
dropping
as
low
as
$49,000
and
Ethereum
crashing
to
$2,100
on
August
5.
Although
Bitcoin
has
recovered
some
value,
sitting
around
$58,000
at
the
time
of
writing,
Ethereum
remains
around
$2,500.
This
volatility
also
increased
Bitcoin’s
30-day
volatility
by
48%
and
Ethereum’s
by
52%,
with
Bitcoin’s
90-day
correlation
with
the
Nasdaq
rising
to
an
18-month
high
of
38%.

Blockchain
Usage
and
Regulatory
Developments

Blockchain
usage
deteriorated
in
August,
with
daily
active
users
down
10%,
fees
generated
falling
12%,
and
DEX
volumes
decreasing
by
4%
compared
to
July.
Additionally,
the
German
and
US
governments
transferred
62,000
Bitcoin
to
exchanges,
presumably
for
sale,
while
Mt.
Gox
and
Gemini
bankruptcy
distributions
totaled
another
124,000
Bitcoin.
This
resulted
in
approximately
$11
billion
in
non-repeatable
sales.

Regulatory
actions
also
contributed
to
the
market’s
downturn.
The
SEC
issued
a
Wells
Notice
to
OpenSea,
one
of
the
largest
NFT
exchanges,
claiming
the
company
is
an
unregistered
broker.
This
regulatory
pressure
may
continue
unless
there
are
significant
political
changes
in
the
US.

Notable
Developments
in
the
Crypto
Ecosystem

August
also
saw
significant
events
in
the
crypto
ecosystem
beyond
price
movements.
Bitgo,
the
custodian
of
Wrapped
Bitcoin
(WBTC),
announced
a
partnership
with
Justin
Sun,
moving
custody
of
WBTC
to
three
Asian
countries.
This
move
was
met
with
skepticism
due
to
Sun’s
controversial
reputation.
In
response,
MakerDAO
passed
a
governance
proposal
banning
WBTC
as
collateral
for
creating
DAI,
while
Coinbase
announced
its
own
wrapped
version
of
Bitcoin
called
wbBTC.

Solana
faced
several
issues,
including
fraudulent
activities
in
memecoin
trading,
which
accounted
for
47%
of
all
DEX
trading
on
the
network.
This
led
to
a
43%
decline
in
memecoin
trading
volumes
and
a
48%
decrease
in
total
DEX
volume
on
Solana.
Despite
these
challenges,
Solana
saw
positive
developments,
such
as
the
launch
of
the
first
spot
SOL
ETF
in
Brazil
and
the
introduction
of
new
projects
like
Grass
and
Drift.

Ethereum’s
Struggles

Ethereum
has
been
underperforming
compared
to
other
major
Layer-1
projects.
Since
the
beginning
of
the
bull
market
in
November
2023,
Ethereum
ranks
13th
with
a
yearly
return
of
62%,
significantly
lower
than
Bitcoin’s
138%
and
Solana’s
624%
returns.
Over
the
past
30
days,
Ethereum
has
been
one
of
the
worst-performing
assets,
down
23%.

Several
factors
contribute
to
Ethereum’s
poor
performance,
including
declining
revenues,
the
shift
of
speculation
to
high-throughput
blockchains,
and
the
impact
of
Layer-2
solutions
cannibalizing
Ethereum’s
revenue
items
like
transaction
fees
and
MEV.

Future
Outlook

The
crypto
market
remains
volatile,
influenced
by
macroeconomic
factors
and
regulatory
actions.
While
some
blockchain
platforms
face
challenges,
others
are
innovating
and
expanding
their
ecosystems.
The
ongoing
developments
in
the
crypto
space
will
likely
continue
to
shape
market
dynamics
in
the
coming
months.

Image
source:
Shutterstock