Dear investors,

As many of you probably know the Federal Reserve (Fed) was hinting on easing policies in Jerome Powell's speech last Friday. A bullish signal that got the markets pumping for a short while. At the same time, fears of overvaluation, mainly in AI- and tech- stocks but also crypto assets still linger. 

Ethereum seems to be the investment with the most momentum across stocks, commodities and crypto and is most sensitive to any developments. As we saw after the dovish Fed speech by Powell last friday the ETH price jumped up significantly from $4,250 to $4,850 (an increase of 14% in just a couple hours time. 

Later this sunday we finally saw what many investors were hoping for, a new ETH all time high as the price surpassed the level of $4.900. The rally of the biggest altcoin is a strong signal that investors are going risk on, what does this mean for crypto and stocks? 

To us, Ethereum signals an overall risk asset mentality, following also from an easing Fed policy. This provides opportunities, mainly also for smaller altcoins and small caps in the stock market as they suffer more from higher interest rates. 

Is it smart to go all in on small caps and risky assets? Right now a lot is already priced in, so we can see a significant withdrawal happen once the Fed interest rate announcement in September actually occurs. As prices of many tech and big crypto’s such as ETH are already really high a cooling off period seems likely which will also bring down small altcoins and stocks. However, this drawback could provide the opportunity for investors to shift their positions to smaller altcoins and stocks. 

Some investors are now even calling for a flippening, most notably top analyst Tom Lee. He even stated 50% that ETH will flip BTC in the long term. Is this likely? 

Not in this cycle and probably not for the next 5 years. Why? BTC’s very high valuation and institutional and ETF adoption are simply way greater than the rest of the crypto market. At the same time, large scale blockchain adoption still is not where it needs to be to justify over a $2,2 trillion valuation for Ethereum (the marketcap needed to surpass Bitcoin at current levels). On top of that, ETH also faces massive competition in comparison to BTC. 

However, Ethereum is leading the current crypto market which provides opportunities for investors. We expect some bullish momentum to hold on and potentially help break the significant $5.000 resistance level. 

In the figure below we see the Ethereum Exchange Traded Fund (ETF) inflows, as per data from CoinGlass. After a couple days of bearish inflows we see a strong shift in sentiment at the end of week, showing strong uptick in demand.

At the same time Ethereum strategic reserve strategies are still massively on the rise. In the figure below we can see the ETH reserve adoption (in green) just over the past months, constituting over billions of dollars.  

That’s it for this week.

See you all in the next one!

Disclaimer: At the end of the day, this newsletter is just informational and educational—not financial advice. Always do your own research and invest responsibly, as there is always a risk of losing everything.

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