Crypto Markets 'Going to Be Choppy' for Remainder of Q3: Coinbase Institutional Head of Research

Bitcoin appears on track to end the 3rd, 3rd quarter. Lower. Joining us now to discuss the crypto markets is Coin based Institutional Head of research. David, welcome to the show, David. Hey, thanks Jen. All right, let's talk about these markets seems to be a whole lot of nothing going on for um the last many weeks. What are, what are you watching? Yeah, I think people are generally kind of misinterpreting the sequence of events here. You know, uh many people are kind of overestimating the importance of macro and what's going on with the Fed, but honestly, those are the best of what happened and it's really not what's gonna be relevant going forward. I mean, in our space, in particular, of course, many people are watching the catalysts and they're pretty well known at this point with regard to the Bitcoins by ETF with regard to the regulatory environment. Um But what I think people are missing is that things are changing at the moment. I mean, just in the back uh in the background, we have this looming government shutdown, it's probably gonna happen. October 1st. Um all things being equal. I actually think that should, should be Bitcoin supportive because Bitcoin, as I've mentioned before on this, uh on this uh show, it's alternative to the traditional financial system and it will be treated as such. But it's still gonna take that little bit of volatility first because I think all uh risk assets and I don't necessarily always categorize Bitcoin in that, but, you know, i it's gonna be impacted at first until people realize. Oh, yeah, actually crypto is actually where things are going to gravitate towards because, you know, it's a good hedge for this kind of stuff. Also, in the meantime, like of course, Chair Powell wants to keep talking about how the economy is doing so well and therefore the need to maintain this, you know, uh this, this hawkish kind of tone this higher for longer kind of stance. Meanwhile, we've got an auto uh workers strike going on, that's clearly gonna hit the economy in Q three that should dampen the Fed's strong GDP outlook plus the credit market is just to look that healthy, you know, like loan delinquencies are rising. We are going to have the student loan repayments coming back in October. So I think all these things are gonna hit around the same time and we're gonna start moving back towards that uh you know, kind of Dovish outlook uh later paint a picture for me say the government does shut down. Um When folks are expecting it to uh what is, what do the crypto markets look like. So I think at first, you know, like the, I've, I've, I've kind of said this for quite a while now, you know, like my view has been that Q three and this is gonna be inclusive of probably the next two, maybe, maybe three weeks. I think things are gonna be choppy still just because it's not purely based on a macro view. I also base it on just where the technicals are at. You know, I, I think that a lot of the shorts had been liquidated, for example, or they were kind of removed. So this is kind of where we are and this is part of why we've been so kind of range bound as far as, as crypto is concerned. But the shutdown, you know, rich markets aren't gonna be happy and, and by that, I mean, equities, you know, like crypto is going to be affected by that. But keep in mind that the correlations between crypto and stocks has been uh fairly low. It's, it's almost been pretty much no relationship at this point. So I think at first, people are going to say, uh you know what, like everything's gonna sell off and it's just gonna be be negative. But then I think probably within the first week or maybe into the second week, people are gonna start buying into Bitcoin in particular and maybe crypto uh as a whole because they're gonna recognize that the the world in fact, is uh transitioning in terms of the trading regime on Friday, 100 and 17,000 Bitcoin options contracts and 1.1 million eth options contracts are going to expire on debit. Do you expect prices to remain stable ahead of this or what do you expect to see? So the max pain points on those contracts are a little bit lower than where I kind of see the current ceiling uh for Bitcoin. And E I think that right now the 200 day moving average actually acts as a better kind of uh you know, top side uh for these things. But you know, my guess is probably there's gonna be a pretty big transition after those contracts expire and you know, like some people are kind of pointing to uh you know, JP Morgan's kind of comments on the eth market. Um Some people are kind of saying, yeah, but you know, there's now this kind of scandal happening in, in Hong Kong, like how are these things kind of impacting the market and they're relevant? Don't get me wrong. Um You know, to the former, I, I see the JP Morgan story kind of as a, as a bit of a reverse indicator because I think it's not really paying attention as much to the pure technical situation even though it's trying to kind of capitalize on the fundamentals somewhat. Uh But I think that going into this, what's gonna matter as we get into October is the timeline of the next FO MC. What's happening with regards to resolutions as far as these auto worker strikes? Um And then I think that the market will suspect that after trading risk off for a little bit into the meeting, uh with, with the Fed, they're gonna recognize that the fed's not gonna hide, they're gonna just keep monitoring the situation and that's gonna set us up for a nice rally. All right. What other tokens are you watching? We talk so much about Bitcoin and Ether in this segment on this show. Anything else you're watching? Well, I think with the alt coin space right now, a lot of it has to do with what's happening with the FTX liquidations. Uh You know, clearly, I hope people recognize now that there's gonna be a lot of mitigating circumstances surrounding that. Uh in part, you know, there's gonna be capped weekly sales. So the court has approved that it could be up to $200 million a week. But at the moment, it seems like it's only gonna be 50 million in the first phase and $100 million. Um And only, unless they get approval from the two committees, will they then increase that size permanently to $200 million. But also you have to realize that a lot of these tokens are just locked up. Um, for example, so, so tokens are gonna be locked up in 2025 to 2027. Um, you also have the fact that, uh, the, they, they can actually hedge, uh, a lot of these sales. So I think, um, probably the acid recovery efforts are, are taking kind of center stage at this point. Um I, I think that's happening because we're quickly approaching the trial. But the, the big question is what they're gonna be able to recover and until people kind of reckon with that, I think, uh that's just kind of keeping some of the, you know, by side pressure on, on all coins a little bit muted at the moment, David, any thoughts on the NFT markets, we had some data come out last week that said 95% of NFTS are now worth almost nothing. Any, any thoughts on NFTS and how we might see them uh progress moving forward, especially when it comes to the institutional adoption of NFTS. So I don't look as a a as closely at the NFT market. I tend to look at more of the liquid tokens, but I will say that what we're seeing in terms of activity on open sea, for example, has just been a very, you know, pretty sharp decline. Um It, it's hard to say what's going to kind of motivate the space. I think gaming is probably the biggest opportunity. Um So I think probably that theme, you know, I was at uh Singapore for Token 2049 for example, I think that's much more prominent uh overseas in Asia than it is in the United States. Um Over there they're working on, you know, trying to get games and trying to like uh incorporate entities into that. And so maybe that's gonna be the next part of that, that cycle. Um But for the time being, yeah, I, I agree. It's a fairly depressed market there. David, thanks so much for joining us this morning and giving us that markets update on a Monday. Thank you very much for having me that was coin based institutional head of research. David do.