Economic Data Week- Flagship Vault Update Week 33

Over the past seven days, the Portfolio Vault's share price has increased from $48.28 to $49.73, a 3.0% increase. Regarding BTC and ETH, the Flagship portfolio vault outperformed BTC by 0.6% and underperformed ETH by 4.90%.

Portfolio Vault Assets update

Bitcoin

Bitcoin is up 2.4% this week. Recent data on the Consumer Price Index (CPI) and Producer Price Index (PPI) shows that inflation is easing, which could impact risk assets and future interest rate cuts by the Federal Reserve.

The July CPI report indicated a 0.2% increase from June, keeping the annual inflation rate at 3%. The core CPI, excluding food and energy, also rose by 0.2% but slowed to 3.2% annually. Meanwhile, the PPI, which tracks price changes for producers, rose by 2.2% over the past year, down from 2.7% in June, with a monthly increase of just 0.1%.

These signs of cooling inflation are positive for risk assets like stocks and cryptocurrencies, as they reduce the likelihood of further aggressive interest rate hikes. Following the PPI release, major stock indices, including the Dow, S&P 500, and Nasdaq, saw significant gains, reflecting investor optimism about a more favorable monetary environment.

The easing inflation raises the possibility of the Federal Reserve pausing or cutting interest rates sooner than expected. Economists are now anticipating potential rate cuts later this year, with further reductions in 2025, assuming inflation continues to decline and the economy slows gradually.

However, if future CPI readings come in higher than expected, it could delay these rate cuts and raise concerns about stagflation—a mix of slow growth and high inflation—though such fears remain low for now.

The Open Network

Over the past week, TON has seen a 5.19% increase. Binance has recently launched TON as the 56th project on its Launchpool platform, offering users the opportunity to earn TON tokens by staking BNB or FDUSD from August 15 to September 3, 2024. This initiative allows users to farm a total of 7.65 million TON tokens, with 85% of the rewards allocated to BNB stakers and the remaining 15% to FDUSD stakers.

In addition to the Launchpool, Binance introduced a new feature called Super Earn, which offers higher-than-average annual percentage rates (APR) for locking TON tokens. This is part of a promotional effort to encourage users to stake their newly listed tokens, with rewards funded by the respective projects.

TON has been one of the strongest alts in the space and one of the strongest alt blockchains for the last month. Currently, it is exhibiting some strength relative to the market. If TON can reclaim the daily trend, it can become a leader.

Pendle Finance

Pendle has increased by 4.63% over the last seven days, continuing its short-term downtrend. Pendle TVL has seen strong outflows with the recent market downturn. Pendle Finance’s Ecosystem Fund has made another significant transfer, depositing 600,000 PENDLE tokens, valued at $1.64 million, to Binance. Interestingly, the price of PENDLE typically experiences a slight dip following these deposits, but it quickly rebounds

Pendle is now testing high time frame support. If Pendle can reclaim its daily trend, it would show that we are in for a volatility crunch, with one side needing to break.

Solana

Solana has decreased by 8.08% in the last seven days. With Solana overtaking Ethereum on DEX volumes and montly revenue, most on-chain participants have flipped over to Solana because of the cheap fees and memecoin trading.

The chart for Solana looks good in terms of a high time frame, as it has retraced a large part of its previous move. It has now attempting to reclaim its daily trend.

Fetch

Fetch is down 0.38% in the last seven days. The Fetch merger is now complete, and the ASI token merger integrates FET, AGIX, and OCEAN into a unified platform to advance decentralized AI technologies.

Fetch is testing its high time fram support. We want to see a range from here. Losing this support would insinuate a further downward trend.

Bittensor

Bittensor is down 0.50% in the last seven days. Grayscale Investments has launched the Grayscale Bittensor Trust, which is focused on TAO, the token of the Bittensor protocol. The trust allows accredited investors to gain exposure to TAO through a familiar investment vehicle​. The launch of the Bittensor Trust aims to meet the increasing demand for diversified crypto investment products and is part of Grayscale's broader strategy to expand its portfolio with innovative assets. The trust functions similarly to Grayscale's other single-asset investment products and is available for daily subscription by eligible investors​.

Bittensor has emerged as one of the strongest AI projects in the last week, recently attempting to reclaim the daily trend. From a fundamental perspective, it is one of the strongest projects out there. It captures every sub-AI sector, as these can be built on the Bittensor Network.

Ondo

Ondo Finance is down 0.17% in the last seven days. Ondo is a DeFi protocol that aims to provide institutional-grade financial products on the blockchain, including tokens backed by U.S. Treasuries. It has been supported by prominent figures in the financial industry, including Larry Fink, the CEO of BlackRock, one of the world's largest asset management firms.

BlackRock has made significant investments in Ondo Finance by purchasing over $10 million worth of ONDO tokens. This includes a $5 million buy on August 5, 2024, following a previous $3.11 million purchase. This aggressive investment strategy by BlackRock highlights its confidence in Ondo Finance's potential and the broader RWA sector's future growth.

Stacks

Stacks is up 4.2% in the last seven days. The Stacks network has reached an important milestone with the Nakamoto Upgrade, now "code complete". This upgrade aims to enhance transaction speeds, ensure full Bitcoin finality, and prepare for the upcoming release of sBTC. The codebase includes new features to improve Signer and Miner resiliency and has passed initial testing phases. The final testing and audits are scheduled to continue, with the mainnet release anticipated at the end of August​

Stacks is the biggest BTC beta, consolidating at weekly support. If BTC can move up and break out of its current range, we can see Stacks following.

Indicator list

Forex Markets

The Forex market is a proxy for risk on or off the environment. EUR/USD is testing range highs, and the Forex market looks like a risk on environment. The dollar is testing range low, it will interesting to see this range further plays out.

DeFi Stablecoin TVL.

When the Total Value Locked (TVL) exceeds the market capitalization, it indicates a risk-on environment. Conversely, if the TVL falls below the market cap, it suggests a risk-off scenario where investors are more cautious. Recently, TVL has been trending upward, but is stagnating. Thus indicating a neutral environment.

Relative Strength Index

The relative strength index (RSI) is a momentum indicator that measures the speed and magnitude of an asset's recent price changes. When the RSI is above 50 on either daily or weekly charts, it signals a risk-on environment. Conversely, an RSI below 50 on these timeframes suggests a risk-off atmosphere. BTC has lost the 50 level. This indicates we are in a risk off environment.

Trends

We utilise the 12, 21, and 36 Exponential Moving Averages (EMA), precise tools for market analysis, to determine the daily and weekly trends. A move below these EMAs on the daily chart will indicate a shift towards a risk-off environment, signalling caution among investors. The market shows signs of stagnation but has yet to lose the daily trend, suggesting a steady state without clear indications of a downturn. When the market reclaims its position above these EMAs on the daily timeframe, it will be considered a sign of transitioning into a risk-on environment. We have lost the daily trend, indicating a risk off environment.

Bitcoin Dominance

Bitcoin Dominance (BTC.D) doesn't directly indicate a risk-on or risk-off environment. Still, deciding our allocation strategy between Bitcoin and the rest of our portfolio is crucial. An upward trend in BTC.D suggests an increased allocation towards Bitcoin, while a downward trend signals a shift in preference towards investing more in blockchains and decentralized applications (dApps). Currently, we're on the lookout for an upward move. This could be a significant move up for BTC that will lead to ALTS underperforming.

ETF Inflows

Reviewing BTC ETF inflows helps us understand the money movements of institutional investors. The dynamics of spot Bitcoin ETFs have recently displayed notable volatility in their inflow patterns. This week, inflows have been both positive and negative, with the average outflows for the last week being around $-90 to $+190 million daily.

The Ethereum (ETH) ETF has officially started trading, mirroring the price action from the initial Bitcoin ETF launch days. In conjunction, Grayscale has been selling its ETH holdings significantly, with over $2.3 billion worth sold to date . We are now seeing some slow down in selling, potentially leading to a bottom.

Total Market Caps

When analyzing market cap indicators to gauge the overall sentiment in the crypto market, we consider three different aspects. The first indicator, the total market cap of the cryptocurrency sector, hasn't reached an all-time high but is showing bottoming signs.

The second market cap indicator, which excludes Bitcoin, appears weaker than the first and faces resistance. This situation presents a neutral sentiment for altcoins while still neutral for Bitcoin, suggesting that Bitcoin might be a safer bet than other cryptocurrencies in the current market condition.

The third indicator excludes Bitcoin and Ethereum from the total market cap, revealing a neutral outlook. This hints at chop across altcoins, except Bitcoin, which remains neutral.

Liquidity

Global liquidity trends serve as a barometer for market sentiment, with an upward trend being synonymous with a risk-on environment. This suggests investors are more willing to take on risk, buoyed by the availability of capital. Conversely, a downward trend in global liquidity marks a shift towards a risk-off environment, indicating a more cautious approach by investors as capital becomes scarcer.

Equally significant is the trend in US liquidity, which mirrors the global pattern. A rise in US liquidity reflects a risk-on sentiment within the country, indicating investor confidence and a willingness to explore riskier assets. Conversely, a decrease in US liquidity signals a risk-off mood, where there's a tendency to avoid risk, favoring stability and safer investments. Understanding these trends is vital for investors, as it can guide their investment strategies and decisions.

Both global and US liquidity have started to show upward trends, suggesting a more risk-on environment in markets. This indicates that globally and US investors could have a larger risk appetite. But it is summer and can be seen as more of a ranging environment for risk-on assets.

Brent Crude Oil

Brent crude oil prices impact risk assets significantly. When oil prices rise, the cost of goods and transportation increases, leading to higher inflation. This often results in central banks raising interest rates to combat inflation, making borrowing more expensive and reducing investment in risk assets like stocks. Conversely, when oil prices fall, inflation pressures ease, potentially leading to lower interest rates, cheaper borrowing costs, and increased investment in risk assets. We are now seeing a strong rebound from oil.

Risk profile

We have decided to remain ultra-bullish on Bitcoin. We are still in a bull market and are already completely deployed at better prices. Consequently, we decided to not rebalnce the vault.

Until next week,

Flagship’s Captain team