Volmex Monthly Research Series

July 2024: A Month of Turbulence in theCrypto Markets
Kadir Gokhan Babaoglu, PhD
Volmex Labs
August 2, 2024

July 2024 was a tumultuous month for the cryptocurrency market, marked by significant priceswings and volatility. From government actions to political developments, the crypto market
experienced notable fluctuations.
The month began with the Saxony state government in Germany selling 50,000 Bitcoin, seizedfrom criminal investigations, which ended on July 12 and stirred market concerns about
manipulation, especially due to sales on July 4 when U.S. markets were closed. On July 5, thedefunct exchange Mt. Gox moved a large sum of BTC into another wallet to begin repaying its
creditors causing panic as BTC prices crashed. The same day, the U.S. unemployment rate wasreported at 4.1%, slightly above expectations, raising hopes for a potential Federal Reserve rate
cut and contributing to a market recovery. A failed assassination attempt on Donald Trump on
July 13, coupled with his pro-crypto stance, further boosted market sentiment, causing a surge incrypto prices.
Between July 15 and 22, significant inflows into Bitcoin ETFs, amounting to over $1 billion,
along with Joe Biden's withdrawal from the presidential race, led to a strong rally in the crypto
markets. Ethereum ETFs began trading on July 23, following the SEC's approval, initially raisingexpectations but later causing a price dip due to selling pressure from Grayscale. On July 25,U.S. GDP data exceeded expectations at 2.8%, dampening hopes for a rate cut, but Donald
Trump's speech on July 27, where he endorsed Bitcoin and suggested a strategic reserve,provided further bullish momentum. The month ended with the FOMC meeting on July 31,
where the Federal Reserve maintained interest rates, emphasizing the need to monitor inflation.
This decision led to a decline in both BTC and ETH prices, closing a month full of significant
market-moving events.
The time-weighted average price of BTC was $62,737.20 in July 2024, with the Bitcoin Volmex
Implied Volatility Index (BVIV) averaging 55.57. BTC reached a high of $70K, accompanied by
the highest BVIV level of 70.38, and a low of $53.5K, with the BVIV dropping to 42.79 at its

lowest. ETH similarly experienced notable volatility, with an average price of $3,273.56 and theEthereum Volmex Implied Volatility Index (EVIV) averaging 65.45. ETH peaked at $3.5K, withthe EVIV hitting a high of 73.02, and fell to a low of $2.8K, with the EVIV at 56.26.

During July 2024, the realized volatility for BTC stood at 46.91%, while ETH experienced ahigher realized volatility at 55.92%. These figures indicate the extent of actual market
fluctuations over the period. The variance risk premium, which represents the difference between
implied and realized volatility, was 8.66 for BTC and 9.53 for ETH. This premium suggests that

option writers received a significant compensation for the risks associated with the uncertainty
prevalent in the market during this time. The high variance risk premiums reflect the market's
anticipation of future volatility, resulting in elevated option prices as a hedge against potential
adverse price movements. This period of high uncertainty and market stress led to substantial
premiums being built into the options market, offering notable returns for those providing theserisk protections.

German Government's Bitcoin Sale
One of the most impactful events in July 2024 was the decision by the Saxony state governmentin Germany to liquidate 50,000 Bitcoin, which had been seized from various criminal
investigations. This significant sale concluded on July 12, 2024, and generated proceeds
exceeding three billion dollars. The timing of the sales raised eyebrows, as they notably took
place during the U.S. Independence Day holiday on July 4, a period when U.S. markets wereclosed. This timing led to accusations of market manipulation, as the lack of U.S. market activity
may have contributed to increased volatility and potential market instability. The large-scalesell-off triggered sharp declines in Bitcoin prices and heightened volatility, reflecting themarket's sensitivity to substantial liquidations, especially from government sources. The incident
highlighted the intricate interplay between regulatory actions and market dynamics, underscoring
how significant government decisions can ripple through the crypto markets, impacting prices
and investor sentiment.

Mt. Gox Repayments
On July 5, Mt. Gox initiated the repayment process to creditors, distributing Bitcoin (BTC) andBitcoin Cash (BCH). The large-scale distribution led to panic, driving Bitcoin's price below$53,500 and Ethereum (ETH) down to around $2,800​​. By the end of July, approximately 33,000
BTC remained in Mt. Gox's wallet from an initial 142,000 BTC.
On July 5, Mt. Gox, the defunct cryptocurrency exchange that collapsed in 2014, initiated therepayment process to creditors in BTC. This large-scale distribution of digital assets triggered
widespread panic in the crypto markets, causing a significant sell-off. Bitcoin's price plunged to$53K levels, while ETH also experienced a sharp decline, dropping to around $2,800.
By the end of July, Mt. Gox's wallet still held approximately 33,000 BTC, down from an initial
142,000 BTC at the beginning of the month. While the substantial release of assets contributed toincreased levels of price volatility, it also had a positive side effect by clearing the market ofsignificant sell-side pressure. This event potentially paved the way for Bitcoin to approach newATHs in the future, as the market absorbed the shock and stabilized. The clearing of thisoverhang marked a significant step toward resolving one of the most notorious chapters incryptocurrency history, allowing the market to focus on growth and new opportunities.

The U.S. Unemployment
On July 5, 2024, the U.S. unemployment rate was reported at 4.1%, slightly above the expected
4.0%. This marginally higher figure was interpreted by the markets as a potential indicator of alooming recession, which paradoxically boosted investor sentiment. The reasoning was that aweaker-than-expected labor market could prompt the FED to consider cutting interest rates
sooner than anticipated to stimulate economic growth. This news arrived at a critical moment,
following a morning market dip triggered by panic over Mt. Gox's repayment of Bitcoin. The
release of the unemployment data shifted the market's mood, leading to a recovery in asset
prices. The expectation of a more accommodative monetary policy by the FED provided acushion against the earlier sell-off, fostering a more optimistic outlook among investors andhelping to stabilize the market amid ongoing volatility.

End of Bitcoin Selling by German Government
On July 12th, 2024, the German government completed the sale of its last batch of Bitcoin, asignificant event that had immediate effects on the cryptocurrency market. The end of thislarge-scale sell-off, part of a liquidation of 50,000 BTC, led to a notable spike in Bitcoin's price,which rose from $56.6K to $58.5K. Concurrently, there was a sharp decline in the BVIV Index,
which dropped from 53.3 to 47.7, indicating a sudden decrease in market volatility after a major
uncertainty factor disappeared. This event also positively impacted ETH, with its price climbing
from $3,050 to $3,156. EVIV similarly fell, decreasing from 68.3 to 60.4. The end of the Bitcoin
dump by the German government removed a significant source of selling pressure, stabilizing themarket and reducing volatility, as reflected in the falling BVIV and EVIV levels.

Trump Assassination Attempt
On July 13, 2024, an assassination attempt targeted Donald Trump, the Republican presidential
candidate in the United States. The attempt failed, but it nonetheless sent shockwaves throughthe political and financial spheres. Trump's known pro-crypto stance contributed to a swift
market reaction, as investors speculated on potential implications for cryptocurrency regulation
and adoption. The incident led to a notable increase in cryptocurrency prices; BTC rose from$57.8K to $59.8K, while ETH increased from $3,114 to $3,200. The market's response also
included a rise in implied volatilities, reflecting high uncertainty. BVIV and EVIV bothincreased slightly by approximately 1.1 volatility points. The incident highlighted theinterconnected nature of political developments and financial markets, particularly within thehighly reactive and speculative crypto sector.

Inflows to BTC ETFs and Biden’s Withdrawal
From July 15th to the end of July 22nd, crypto markets enjoyed a rally caused by some large
amount of inflows into BTC ETFs totalling more than $1B. Also the presidential candidate Joe
Biden has withdrawn from the race. These events caused increases in both prices and volatilities.
BVIV jumped up to 70.4 from 48.4 while BTC price went up to $68.5K from $60.7K. Similarly,
ETH price went up to $3559 from $3235 while EVIV increased to 72.8 from 60.6.
Between July 15th and the end of July 22nd, the cryptocurrency markets experienced a notable
surge, driven by two significant events: substantial inflows into Bitcoin exchange-traded funds(ETFs) and Joe Biden's withdrawal from the presidential race.
During this period, BTC ETFs saw an influx exceeding $1 billion. This influx acted as a major
catalyst, propelling Bitcoin’s price to new heights. The price of BTC surged from $60.7K to$68.5K, reflecting a robust increase in investor confidence and market activity. Correspondingly,BVIV spiked from 48.4 to 70.4, indicating increased market volatility as traders reacted to theinflows. ETH also benefited from the bullish sentiment. The price of ETH climbed from $3,235
to $3,559. Alongside this price increase, EVIV rose from 60.6 to 72.8, underscoring increased
market fluctuations in response to the same factors.
The combination of substantial ETF inflows and political developments contributed to thevolatility and price escalations across the cryptocurrency markets. As these events unfolded, they
not only amplified price movements but also reflected broader market dynamics influenced byboth financial inflows and political shifts.

Start of Ethereum ETFs Trading
On July 23, 2024, Ethereum ETFs began trading in the United States, marking a significant
milestone for the crypto market. This development followed the SEC's approval of several spot
Ethereum ETF applications on May 23, 2024. The introduction of these ETFs was anticipated toprovide greater market clarity and investment opportunities.
The commencement of Ethereum ETFs served as a key resolution-of-uncertainty event for
implied volatilities. As a result, the EVIV index decreased from 72.8 to 60.7 within a week,reflecting a reduction in market uncertainty. Similarly, the BVIV index fell from 70.4 to 55.2
during the same period, indicating a broader decrease in volatility across the cryptocurrency
market.
However, the launch also brought some immediate challenges. Grayscale’s ETH ETF (ETHE)
created notable selling pressure, which led to a decline in Ethereum's price. Within a few days,

ETH's price dropped to $3,090. Bitcoin also experienced a price adjustment, falling to $63.5K.
These movements underscore the complexities and volatility associated with new financial
products in the crypto space, highlighting both the market's enthusiasm and the potential for
short-term disruptions.

GDP Data and Trump’s Speech
On July 25, 2024, the U.S. GDP data for the second quarter was released, showing a growth rateof 2.8%, surpassing the expected 2.5%. This stronger-than-anticipated economic performancediminished market expectations for a potential interest rate cut by the FED. Consequently, theinitial reaction was a slight decrease in cryptocurrency prices as investors adjusted theirexpectations.
However, the mood shifted dramatically with Donald Trump’s speech on July 27, 2024. In hisaddress, Trump adopted a surprisingly positive stance towards Bitcoin, declaring himself“pro-Bitcoin” and expressing support for integrating the cryptocurrency into his economicvision. Trump also proposed the idea of establishing “a strategic Bitcoin reserve”, marking anotable departure from his previous skepticism about digital assets.

The impact of Trump’s speech was significant. As the speech began, Bitcoin's implied volatility,
measured by the BVIV Index and its term structure, decreased, particularly in the shorter term.
This decline in volatility indicates that Trump’s remarks acted as another
resolution-of-uncertainty event, following the earlier launch of Ethereum ETFs. The
endorsement of Bitcoin by a prominent political figure helped to buoy market sentiment andstabilize prices, reinforcing the positive effects of the ongoing developments in thecryptocurrency space.

FED’s Interest Rate Decision
The final key event of July 2024 was the Federal Open Market Committee (FOMC) meeting.
Contrary to some market speculation, the FOMC did not announce a prospective interest rate cut.
Instead, the Committee emphasized the necessity of ongoing vigilance in monitoring economicindicators, with a particular focus on inflation, which continues to exceed their target levels.
Although there have been some signs of moderation in inflation, it remains a significant concern
for policymakers.
The FOMC’s decision led to a market reaction as both Bitcoin (BTC) and Ethereum (ETH)prices declined. Bitcoin's price fell to $64.5K, while Ethereum dropped to $3,217. This responsereflects investor sentiment adjusting to the FED’s continued cautious stance on monetary policy.
In addition to the price adjustments, the implied volatilities of both cryptocurrencies alsodecreased. The BVIV index decreased to 50.3, and EVIV fell to 56.3. This reduction in volatility
points to a market settling into a new equilibrium after the uncertainty surrounding potential
interest rate adjustments was resolved.

Timeline
July 4, 2024: German regulators kept dumping BTC on a US holiday
July 5, 2024: Mt Gox transferred a large amount of BTC to another wallet.
July 5, 2024: US Unemployment data worse than expected, which created hopes of FED rate cut
July 12, 2024: End of BTC Dump by German government
July 13, 2024: Attempted assassination of Donald Trump
July 15, 2024: $300M BTC ETF Inflow
July 16, 2024: $423M BTC ETF Inflow
July 19, 2024: $427M BTC ETF Inflow
July 20, 2024: Biden drops out of the presidential race
July 22, 2024: $486M BTC ETF Inflow
July 23, 2024: ETH ETFs started trading
July 25, 2024: GDP data
July 27, 2024: Trump’s Speech
July 31, 2024: FED interest rate decision