Newsletter Volume 61
THE MARKET THIS WEEK
U.S. regulators have granted approval for Bitcoin exchange-traded funds (ETFs), significantly expanding access to the 15-year-old cryptocurrency. The Securities and Exchange Commission (SEC) declared key filings effective from markets seeking to list these innovative financial products. Trading for these ETFs commenced on Thursday, coinciding with Bitcoin’s price surpassing $47,500. The decision also led to a rally in other cryptocurrencies, reflecting positive market sentiment.
Despite the broader acceptance of Bitcoin ETFs, Vanguard, a major asset manager, has opted not to offer spot Bitcoin ETFs for purchase on its platform. A spokesperson clarified that Vanguard has no plans to provide Vanguard Bitcoin ETFs or other crypto-related products. The decision is attributed to a misalignment with Vanguard’s focus on asset classes that contribute to building well-balanced, long-term investment portfolios. This stance underscores varying approaches among financial institutions toward embracing cryptocurrency-related offerings.
The first day of trading for a suite of new Bitcoin exchange-traded funds has proven successful, with ETFs from prominent issuers like BlackRock, Grayscale, and Fidelity leading in total volumes. Despite the positive start, one issuer faced a delay in commencing trading. Aggregate data from Yahoo Finance indicates that the total volume across ten spot Bitcoin ETFs surpassed $4.5 billion on the inaugural day of trading, signaling strong investor interest and demand for these newly introduced financial instruments.
On January 10, the Ethereum Foundation provided a preview of significant changes to the ERC-4337 standard specification, which addresses account abstraction, also known as smart accounts. Version 0.7 reflects insights gained from nine months of ERC-4337 utilization. The notable change involves the structure of account abstraction transactions, which now require specifying five gas values instead of just one. These updates aim to enhance the functionality and complexity of smart contracts on the Ethereum blockchain, showcasing ongoing advancements in blockchain technology.
KEY METRICS
Total Crypto Market Cap : $1.85 T
Bitcoin Market Cap : $906.55 B
Ethereum Market Cap : $314.70 B
ETH/BTC Ratio : 0.06
Ethereum Gas Price : 18 gwei
DeFi TVL : $99.51 B
Fear and Greed Index : 71 (Greed)
Federal Reserve Balance Sheet : $7.68 T
Weekly Spotlight on IC15
The global cryptocurrency market rebounded from the previous day’s decline, with the IC15 Index gaining 1,234 points to reach 55,794. Notable gainers included Solana, Shiba Inu, Bitcoin, and Chainlink, each experiencing increases in the 2–5% range. The recovery was observed amid regulatory advancements, such as the State Bank of India urging its staff to conduct transactions using the Central Bank Digital Currency (CBDC), contributing to the promotion of the digital rupee. Additionally, the Indonesian central bank announced plans for a full-scale pilot study of its CBDC, the digital rupiah, focusing on wholesale interbank transactions.
The United States government emerged as the world’s largest Bitcoin holder, possessing $8.3 billion worth of Bitcoins, reflecting an increase from $5 billion reported less than 90 days ago. This growth is attributed to the seizure of 70,000 Bitcoins from the Silk Road. Despite the anticipation surrounding Bitcoin ETFs, the global cryptocurrency market started on a weak note amid a warning from the US SEC about FOMO (Fear of Missing Out), causing a slight dip in the IC15 Index to 55,100. Notable losers included Polygon, Cardano, Shiba Inu, and Avalanche in the 4–7% range.
Various countries and financial institutions showcased efforts towards cryptocurrency adoption and blockchain exploration. Spain’s National Bank partnered with Cecabank, Abanca, and Adhara Blockchain for a wholesale CBDC pilot, testing interbank payment settlements using a tokenized wholesale CBDC. The National Bank of Nigeria supported the Africa Stablecoin Consortium (ASC) to guide its cNGN stablecoin, bridging the gap between the naira and digital currencies. Japanese e-commerce giant Mercari announced plans to accept Bitcoin payments from June 2024 through its subsidiary Melcoin, aligning with the broader trend of increasing Bitcoin adoption among in-person sellers.
The global cryptocurrency market experienced a surge following the approval of spot Bitcoin ETFs by the US SEC, marking a significant milestone. The IC15 Index surged by 2,878 points to 57,978, with Solana and Avalanche leading the gains. Major players like BlackRock and Fidelity received approval for their ETFs, contributing to positive market sentiment. Additionally, the approval prompted discussions in Hong Kong about introducing its spot crypto ETF, with the government urged to follow the lead of the US in embracing crypto ETFs. Meanwhile, Turkey progressed toward finalizing its crypto regulations, requiring trading platforms to obtain licenses and adhere to FATF regulations to mitigate risks in the market.
BATTLE OF THE BULL AND BEAR
With the expectation of approval for Bitcoin exchange-traded funds (ETFs), speculation on a potential “sell the news” event has emerged, predicting a 30% drop in Bitcoin’s price from current levels. Contrary to this outlook, there’s a compelling argument for a 10% rally in Bitcoin, surpassing the $50,000 mark. The confidence in approval is fueled by prominent asset manager BlackRock’s positive statements in the days leading up to January 10, along with detailed disclosures from ETF candidates outlining reasonable fee structures, creating a competitive environment reminiscent of previous fee battles in the ETF space.
The disclosed fee structures for the Bitcoin ETFs indicate a strong focus on asset acquisition. BlackRock, Invesco, ARK Invest, and VanEck have strategically set competitive fees, with some offering initial fee waivers. This signals a commitment to attracting substantial capital into Bitcoin within a short period. The intense competition and strategic fee structures increase the likelihood of approval, given the comprehensive analysis and engagement with clients by ETF providers leading up to the launch.
The aggressive asset acquisition goals and strategic fee structures reflect a broader acknowledgment of Bitcoin as a legitimate, regulated investment asset comparable to gold. The potential influx of billions into Bitcoin through these ETFs within a short timeframe highlights a significant regulatory milestone for the cryptocurrency. If BlackRock, Invesco, and ARK Invest achieve their goals, they alone could bring $11 billion into Bitcoin in a year or less, further cementing Bitcoin’s status in the investment landscape.
In a move to enhance its position in the Bitcoin mining sector, Phoenix Group, listed on the Abu Dhabi Securities Market, is injecting $187 million to purchase the latest mining machines from Bitmain Development PTI Ltd. The acquisition aims to increase Phoenix’s hashing power and solidify its position as a major player in global Bitcoin mining. This strategic investment follows Phoenix Group’s previous $380 million hardware acquisition from WhatsMiner in December 2023, signaling the company’s commitment to expanding its presence in the crypto mining industry.
Phoenix Group, which recently began trading on the Abu Dhabi Securities Exchange, experienced notable market success with its share price rising to 2.32 UAE dirhams ($0.63) and a market cap of 14.5 billion AED ($3.95 billion) as of January 4, 2024. The company’s oversubscribed initial public offering (IPO) in November 2023 demonstrated overwhelming investor interest. The recent acquisitions, including the Bitmain deal, contribute to Phoenix Group’s increased hashing power and market share, positioning it as a significant player in the cryptocurrency mining sector in the Middle East.
Weekly Spotlight
1. Bitcoin ETF Approval and Market Dynamics:
U.S. regulators have approved Bitcoin exchange-traded funds (ETFs), marking a significant development for the cryptocurrency market. The Securities and Exchange Commission (SEC) granted approval to key filings, leading to the commencement of trading for these innovative financial products. Bitcoin’s price surged to over $47,500 following the approval, with a positive impact extending to other cryptocurrencies. Despite this, asset manager Vanguard has opted not to offer spot Bitcoin ETFs on its platform, citing a misalignment with its focus on asset classes contributing to long-term investment portfolios.
2. Successful Debut and Ethereum Foundation Updates:
The first day of trading for new Bitcoin ETFs, offered by major issuers like BlackRock, Grayscale, and Fidelity, saw substantial volumes, surpassing $4.5 billion. Notably, the Ethereum Foundation previewed updates to the ERC-4337 standard, focusing on account abstraction or smart accounts. The changes in version 0.7 aim to enhance the structure of account abstraction transactions on the Ethereum blockchain, reflecting ongoing advancements in smart contract functionality.
3. Bitcoin ETF Approval Anticipation and Competitive Fee Structures:
Anticipation surrounding the approval of Bitcoin ETFs has led to varied market sentiments. Contrary to predictions of a “sell the news” event causing a 30% drop, there is a compelling argument for a 10% rally beyond $50,000. The strategic fee structures disclosed by ETF providers, including BlackRock, Invesco, ARK Invest, and VanEck, indicate a strong focus on asset acquisition. The competitive fee environment and asset acquisition goals suggest a high likelihood of approval, positioning Bitcoin ETFs as a regulatory milestone, legitimizing Bitcoin as a regulated investment asset.
4. Phoenix Group’s Strategic Investments in Bitcoin Mining:
Phoenix Group, a cryptocurrency mining and blockchain firm listed on the Abu Dhabi Securities Market, is injecting $187 million to acquire the latest mining machines from Bitmain Development PTI Ltd. This move follows a previous $380 million hardware acquisition from WhatsMiner in December 2023, highlighting Phoenix Group’s commitment to expanding its presence in the global Bitcoin mining sector. The company’s successful IPO and market performance, with a share price rise and significant oversubscription, underscore its strategic positioning in the Middle East.
5. Global Market Recovery, Regulatory Initiatives, and ETF Approval Impact:
The global cryptocurrency market experienced recovery following regulatory developments and positive sentiment around Bitcoin ETF approvals. Initiatives from countries like India and Indonesia exploring CBDCs contribute to the broader adoption of digital currencies. The approval of spot Bitcoin ETFs by the US SEC triggered a surge in the IC15 Index, with notable gains in various cryptocurrencies. Discussions in Hong Kong about introducing spot crypto ETFs and progress in Turkey’s crypto regulations further highlight the evolving regulatory landscape and global interest in cryptocurrency markets.
