Newsletter Volume 62
THE MARKET THIS WEEK
On January 17, Bitcoin miners sold more than 10,000 BTC, marking the most substantial daily decline in miner reserves in over a year. According to on-chain analytics from CryptoQuant, the miner reserves decreased by 10,233 BTC, equivalent to approximately $450 million at current prices. The selling phase is a common practice among miners, who tend to accumulate during periods of lower prices and profitability, switching to selling when prices and profitability rise. Historical patterns show that miners often sell coins to replenish cash flow or capitalize on higher prices during a market rally.
Former U.S. President and current presidential candidate, Donald Trump, has expressed strong opposition to the creation of a central bank digital currency (CBDC) by the Federal Reserve in the United States. Trump vowed to “never allow” the development of a CBDC, signaling his stance against introducing a digital version of the national currency. This statement adds to the ongoing debate and discussions surrounding the potential issuance of CBDCs by central banks worldwide.
The newly approved spot Bitcoin exchange-traded funds (ETFs) in the United States have seen net inflows of about 21,000 BTC, equivalent to $894 million at the current BTC price of $42,600. BlackRock’s iShares Bitcoin Trust (IBIT) leads in terms of inflows, adding 16,362 BTC, followed by Fidelity’s Wise Origin Bitcoin Fund (FBTC) with 12,112 BTC. Notably, significant outflows from Grayscale’s Bitcoin Trust (GBTC), losing approximately 25,000 BTC, impacted the overall industry inflow. The market is now observing the capital these new ETFs will attract, with potential funds from other crypto products anticipated to contribute.
MetaMask, one of the largest Ethereum wallets, is testing a “transaction routing” feature that could transform it into an “intent-centric” protocol. This feature would enable users to leverage third-party services to determine the optimal path for their transactions. The goal is to provide enhanced execution and an improved user experience. The routing technology is developed by Special Mechanisms Group, a company acquired by MetaMask owner ConsenSys. While the specifics of fresh capital attracted by the newly approved Bitcoin ETFs remain uncertain, J.P. Morgan notes that substantial funds from other crypto products are expected to flow into these ETFs, following the SEC’s approval.
KEY METRICS
Total Crypto Market Cap : $1.71 T
Bitcoin Market Cap : $811.15 B
Ethereum Market Cap : $296.26 B
ETH/BTC Ratio : 0.06
Ethereum Gas Price : 30 gwei
DeFi TVL : $104.17 B
Fear and Greed Index : 51 (Neutral)
Federal Reserve Balance Sheet : $7.68 T
Weekly Spotlight on IC15
The global cryptocurrency market experienced a decline, with the IC15 Index down by 727 points to 59,275 at 4 p.m. Major contributors to the downturn were Polkadot, Solana, Toncoin, and Cardano, each registering losses in the 2–5% range. However, Litecoin and Tron emerged as the leading gainers, posting increases of 5.98% and 0.59%, respectively. The market correction was attributed to profit booking and macroeconomic factors, signaling the inherent volatility in the cryptocurrency space.
The European Central Bank (ECB) expressed its commitment to developing a Central Bank Digital Currency (CBDC). The ECB plans to allocate $700 million from its $1.3 million budget to establish an offline payment facility for the retail digital euro. Additionally, European Financial Power officials sought public and industry feedback as part of rulemaking for stablecoin issuers under the Markets in Crypto Assets (MiCA) regulation, showcasing ongoing efforts to bring regulatory clarity to the stablecoin market.
The introduction of spot Bitcoin exchange-traded funds (ETFs) in the United States marked a significant milestone, with BlackRock, Grayscale, and Fidelity’s ETFs leading in trading volumes. The first day of trading recorded $4.6 billion worth of shares exchanged. Additionally, 2023 witnessed substantial growth in Web3 applications, with a 124% increase, according to DappRadar data, highlighting the continued evolution and adoption of decentralized applications.
Regulatory developments in different jurisdictions were notable during the period. A bill titled “Monetary Authorities (Various Revisions) Bill 2024” was introduced in the Singapore parliament, aiming to expand the Monetary Authority of Singapore’s (MAS) oversight in crypto and issue directions to capital markets services license (CMSL) holders. In Nigeria, fintech firms reportedly offered exposure to spot Bitcoin ETFs to local investors following the approval by the U.S. Securities and Exchange Commission (SEC). Additionally, the Reserve Bank of India Governor, Shaktikanta Das, highlighted the increasing interest in the Indian CBDC, the digital rupee, from other countries, emphasizing the potential of CBDCs for cross-border payments.
BATTLE OF THE BULL AND BEAR
The recent $9,000 drop in Bitcoin’s price may be attributed to a single whale, as suggested by on-chain analysis. James Van Straten, an analyst at crypto insights firm CryptoSlate, pointed out a significant BTC sale by an unidentified entity who had acquired 100,000 BTC during Bitcoin’s 2021 all-time high, valued at $4.8 billion. The whale, having held onto the investment through subsequent market fluctuations, finally broke even during the recent BTC price surge to $49,000, leading to a substantial sell-off. This theory challenges the widely accepted narrative of a “sell the news” event following the U.S. approval of spot exchange-traded funds (ETFs).
Former U.S. President Donald Trump has publicly opposed the creation of a central bank digital currency (CBDC) by the Federal Reserve in the United States. Trump vowed to “never allow” the development of a CBDC, adding to the ongoing discussions surrounding the potential issuance of digital currencies by central banks worldwide.
The newly approved spot Bitcoin exchange-traded funds (ETFs) in the United States have witnessed net inflows of about 21,000 BTC, equivalent to $894 million at the current BTC price of $42,600. Significant inflows were observed in ETFs such as BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), while outflows from Grayscale’s Bitcoin Trust (GBTC) offset some of the industry inflow. The focus is now on how much capital these new ETFs will attract, with potential contributions from other crypto products expected.
Ethereum’s native token, Ether (ETH), has outperformed Bitcoin by 19.5% since January 8, following a 20% surge. This outperformance, unusual in the past two years, is attributed to increased on-chain activity, anticipation of Ethereum network upgrades, and the possibility of an Ethereum spot exchange-traded fund (ETF). However, concerns arise among Ether investors about whether the $2,500 support level will hold, considering uncertainties related to the ETF and network upgrades. The gap between Ether and Bitcoin performance in a week is noteworthy, marking a departure from the typical correlation between the two cryptocurrencies.
Analysis of Ethereum’s network activity, including decentralized applications (DApps) and scaling solutions, becomes crucial in understanding its potential price support at $2,500. Despite concerns over high gas fees, on-chain metrics show strong activity, with Ethereum DApps experiencing a 41% increase in volume over the past few days. Additionally, the “Dencun” hard fork, aimed at enhancing data availability and reducing costs for rollup transactions, is scheduled to begin test implementations on January 17. Bloomberg ETF analysts suggest a 70% probability of an Ethereum ETF approval by May, further contributing to bullish momentum and reinforcing the $2,500 price support.
Weekly Spotlight
1. Bitcoin Market Dynamics:
Bitcoin experienced a notable decline on January 17, with miners selling over 10,000 BTC in a single day, marking the most significant daily drop in miner reserves in over a year. This substantial sell-off amounted to approximately $450 million at current prices. The selling behavior aligns with historical patterns where miners transition between accumulation and selling phases based on market conditions and profitability. Furthermore, a post-ETF market downturn triggered mass liquidations among traders, emphasizing the impact of institutional participation in Bitcoin markets.
2. Trump’s Opposition to CBDC:
Former U.S. President Donald Trump strongly opposed the idea of the Federal Reserve creating a central bank digital currency (CBDC) in the United States. Trump’s public declaration adds a significant voice to the ongoing debate surrounding the potential issuance of CBDCs by central banks globally. This political stance introduces an additional layer of complexity to discussions about the future of digital currencies within the U.S. financial landscape.
3. Spot Bitcoin ETFs and Market Inflows:
The approval and subsequent trading of spot Bitcoin exchange-traded funds (ETFs) in the United States garnered significant attention. The first day of trading saw $4.6 billion worth of shares exchanged, with BlackRock’s iShares Bitcoin Trust (IBIT) leading in inflows, adding 16,362 BTC. This development is crucial for the cryptocurrency market, and the focus has shifted to assessing the capital these ETFs will attract. Notably, outflows from Grayscale’s Bitcoin Trust (GBTC) impacted the overall industry inflow.
4. MetaMask’s Transaction Routing Feature:
MetaMask, a major Ethereum wallet, is testing a “transaction routing” feature designed to enhance user experience by allowing third parties to determine optimal transaction paths. This technological advancement, developed by Special Mechanisms Group, has the potential to turn MetaMask into an “intent-centric” protocol. While the impact on the market remains uncertain, this innovation underscores the ongoing efforts to improve transaction efficiency within the Ethereum ecosystem.
5. Ether’s Outperformance and Network Developments:
Ethereum’s native token, Ether (ETH), exhibited a noteworthy outperformance compared to Bitcoin, with a 19.5% surge since January 8. This divergence is attributed to increased on-chain activity, anticipation of Ethereum network upgrades, and the potential approval of an Ethereum spot exchange-traded fund (ETF). However, concerns arise regarding the sustainability of the $2,500 support level amid uncertainties related to the ETF and network upgrades. The market will closely monitor Ethereum’s network activity and scaling solutions, including the “Dencun” hard fork, to assess its impact on maintaining support and potentially decoupling from broader cryptocurrency market trends.
