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🌙 Markets Moon Time, ETH ETFs Set to Launch, The ETF Carry Trade, Polymarket 🔮

🌙 Markets Moon Time, ETH ETFs Set to Launch, The ETF Carry Trade, Polymarket 🔮

Internet Capital
July 21, 2024

gm friends —

While crypto is hardly the hottest topic over the last week… there’s still a lot going on. Imo it’s a pivotal time to keep your eyes open in crypto markets, so let’s dive in.

Today’s topics:

🌙 Moon Time
🚀 Ethereum ETFs Set to Launch
💵 The ETF Carry Trade
🔮 Polymarket: Prediction Markets

Check out this week’s YouTube show for a deeper dive!

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Markets

Like last week, we’re keeping the markets section short. A new format is in the works and should be ready for next week.

But the tldr is that prices are up and everyone is turbo bullish again. Here’s the numbers:

BTC is UP ~10.5% on the week to ~$66,900
ETH is UP ~7.4% on the week to ~$3,480
Crypto Total Market Cap is UP ~9.15% on the week to ~$2.39 T

Here are some notable market takes:

Ethereum ETFs Set to Launch

The highly anticipated Ethereum ETFs are set to begin trading this upcoming Tuesday, July 23.

The approval comes after extensive reviews and final approvals from the U.S. Securities and Exchange Commission and marks a significant milestone for the maturation of crypto in traditional financial markets.

Source

ETFs are a major step forward in making ETH more accessible to traditional investors. The ETFs will allow investors to gain exposure to Ethereum without the need to directly purchase and store the cryptocurrency.

Investors have mixed expectations regarding demand for the ETF.

Bulls point to the BTC ETF’s strong performance, Blackrock CEO Larry Fink’s endorsement, and ETH’s lack of available supply as reasons to be optimistic.

Bears doubt that demand will materialize for the product, believing that most investors view owning BTC as a sufficient crypto allocation.

Regardless of your stance, the mere fact that investors can finally buy ETH through their brokerage account is huge. Over the long term, it’s undoubtedly a bullish catalyst for Ethereum and crypto markets broadly.

Several financial giants are involved in the launch of the ETFs including Blackrock, Franklin Templeton, Fidelity, and VanEck, each offering their own products.

Ethereum ETF Issuers - Source

Closely resembling the BTC ETF issuers, the list above includes some of the largest asset managers in the world, accounting for trillions of dollars in assets under management.

All of these firms make more money by selling more ETFs and therefore have an incentive to see them succeed.

Imo this is still one of the most underappreciated tailwinds that crypto has over the next 5-10 years. Big money wants crypto to win now…

Moreover, the involvement Coinbase as the primary custodian underscores the growing integration of crypto with traditional finance. I anticipate the two to become even more intertwined in the coming years.

Overall, the debut of Ethereum ETFs marks a pivotal moment in the evolution of crypto investments. It’s a huge first step for crypto assets with utility, and paves the way for more innovative products like staked ETFs (more on this another time).

Let me know your predictions for the ETF in the comments!

The ETF Carry Trade

Bitcoin had the most successful ETF launch of all time with inflows of $10 billion + in just the first couple of months. However, much of the volume has come from the so-called cash and carry trade.

A cash-and-carry trade involves exploiting the price differential between a spot asset and its derivative. For the Bitcoin ETF, it refers to buying the spot BTC ETF and selling a corresponding futures contract.

Source

Traders profit because futures contracts typically trade at a premium to the spot price (for a variety of reasons).

Once the futures price converges to the spot price at expiration, the traders can:

Deliver the spot BTC to cover their futures position^* and close the trade
Profit the difference between the spot BTC price bought (LOW) and the futures price sold (HIGH)

It’s a market-neutral trade with the capacity for high volume, which makes it attractive to large money managers.

Analysts estimate that a significant percentage of volume for the Bitcoin ETF is involved in this trade, which explains why BTC prices don’t always respond to increased ETF volumes.

Since the trade is market neutral as it involves being both long (spot) and short (futures) on Bitcoin, it shouldn’t significantly move the price.

While the impact of the cash and carry trade on the BTC market have been understood for months now, they still have implications for the Ethereum ETF.

BTC ETF Net Flows

When estimating demand or “flows” for the ETH ETFs, analysts are using BTC ETF flows as a baseline. If a significant portion of BTC’s flows are indeed coming from the carry trade, then it’s true level of “pure demand” is overstated. Failing to adjust Ethereum ETF flow predictions for this fact will lead to inflated demand forecasts.

Regardless of your view, it’s important to understand the cash and carry trade as a concept and its role in the BTC market. If you want to learn more check out this tweet or leave me a comment below!

_{*BTC futures contracts are typically}_cash-settled_{, meaning that the BTC is not actually delivered upon expiration}

Polymarket: Prediction Markets

Overview
What is it? Polymarket is a decentralized prediction markets app where users can trade on the outcomes of real-world events, such as political elections, sports games, or economic indicators.
How does it work? .📈 Polymarket’s markets allow users to buy and sell shares in the outcomes of future events. The price of these shares reflects the collective belief about the likelihood of the event occurring. . 💰 Users trade shares in event outcomes. For example, if you believe a certain candidate will win an election, you can buy shares that will be worth $1 if that candidate wins and $0 if they lose. . ⚖️ Anyone can create a market for a specific event by providing initial liquidity and defining the event's parameters. This involves specifying the event, its possible outcomes, and a resolution source for verifying the event's result. . 🟣 Polymarket operates on the Polygon Layer 2 network, ensuring transparency and security. Smart contracts govern the trades, guaranteeing that payouts are automatically executed based on the event's outcome..
How can you use it? Explore Markets: Visit Polymarket and browse the available markets. You’ll find a range of topics, from politics and sports to science and technology. Price give you a real-time indicator of the market’s current consensus on the event's outcome. . Trade Shares: Choose an event you’re interested in and decide whether to buy or sell shares based on your prediction. For instance, if you think a sports team will win an upcoming match, you can buy shares that will be worth $1 if they win. . Resolve Outcomes: Once the event concludes, the outcome is verified, and smart contracts automatically settle the trades. If your prediction was correct, you’ll receive $1 per share; if not, your shares become worthless. . Withdraw Earnings: Any earnings from correct predictions can be withdrawn to your wallet, which can be used to trade in other markets or for personal use .. For additional information, see Polymarket’s official documentation

Overview

What is it?

Polymarket is a decentralized prediction markets app where users can trade on the outcomes of real-world events, such as political elections, sports games, or economic indicators.

How does it work?

.📈 Polymarket’s markets allow users to buy and sell shares in the outcomes of future events. The price of these shares reflects the collective belief about the likelihood of the event occurring.

💰 Users trade shares in event outcomes. For example, if you believe a certain candidate will win an election, you can buy shares that will be worth $1 if that candidate wins and $0 if they lose.

⚖️ Anyone can create a market for a specific event by providing initial liquidity and defining the event's parameters. This involves specifying the event, its possible outcomes, and a resolution source for verifying the event's result.

🟣 Polymarket operates on the Polygon Layer 2 network, ensuring transparency and security. Smart contracts govern the trades, guaranteeing that payouts are automatically executed based on the event's outcome..

How can you use it?

Explore Markets: Visit Polymarket and browse the available markets. You’ll find a range of topics, from politics and sports to science and technology. Price give you a real-time indicator of the market’s current consensus on the event's outcome.

Trade Shares: Choose an event you’re interested in and decide whether to buy or sell shares based on your prediction. For instance, if you think a sports team will win an upcoming match, you can buy shares that will be worth $1 if they win.

Resolve Outcomes: Once the event concludes, the outcome is verified, and smart contracts automatically settle the trades. If your prediction was correct, you’ll receive $1 per share; if not, your shares become worthless.

Withdraw Earnings: Any earnings from correct predictions can be withdrawn to your wallet, which can be used to trade in other markets or for personal use

For additional information, see Polymarket’s official documentation

Other News

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