In July, the valuations of various sectors in the cryptocurrency market increased. From the perspective of the cryptocurrency sector, the best performing sector is the smart contract sector (thanks to a 49% increase in ETH), while the worst performing sector is the artificial intelligence sector, dragged down by the special weakness of a few tokens (see chart 6). During July, the open interest of futures and financing rates (the cost of financing leveraged long positions) for many cryptocurrency assets increased, indicating an increase in investors’ risk appetite and speculative long positions.
After experiencing strong returns, valuations may experience a certain degree of correction or consolidation. The passage of the GENIUS Act is a significant positive for the cryptocurrency asset class, driving absolute and risk adjusted returns. Congress is still considering legislation on the structure of the cryptocurrency market, and the House of Representatives’ CLARITY Act was passed with bipartisan support on July 17th. However, the Senate is currently reviewing its own version of market structure legislation and no significant progress is expected before September. Therefore, there may be fewer legislative catalysts in the short term to support the valuation increase of cryptocurrency assets.
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