Newsletter Volume 64
THE MARKET THIS WEEK
The Australian Federal Court has differentiated between crypto-yield products in Australia, ruling that those promising managed yield require a financial services license, while “pass-through” products do not. Block Earner faced penalties for its “Earner” product offering yield for loans denominated in USDC, BTC, ETH, and PAXG, being mandated to obtain an Australian Financial Services License.
BlackRock and Fidelity’s spot Bitcoin exchange-traded funds (ETFs) have amassed more assets in their first month of trading than any ETF launched in the US over the last 30 years. Bloomberg Intelligence data reveals that both IBIT and FBTC garnered over $3 billion in assets within the first 17 trading days, outshining a list of over 5,500 ETFs, positioning them uniquely in the market.
Criticism from Republicans on the Senate Banking Committee targets the US Securities and Exchange Commission (SEC) regarding its enforcement practices, particularly following missteps in the Gensler court case against a crypto firm. The agency’s admission of misrepresenting evidence in a lawsuit against the blockchain project DEBT Box has raised doubts about its broader enforcement practices, prompting scrutiny from lawmakers.
Polygon Labs, the developer behind the Polygon blockchain, introduced a “Type 1 prover,” enabling any network compatible with Ethereum’s EVM standard to become a layer-2 network powered by zero-knowledge proofs. This release is hailed as a significant breakthrough, with Ethereum co-founder Vitalik Buterin endorsing it as crucial for making auxiliary layer-2 networks almost equivalent to the base blockchain. With the emergence of spot Bitcoin ETFs, questions arise about Wall Street’s approach and whether regular investors will embrace this new opportunity for Bitcoin exposure.
KEY METRICS
Total Crypto Market Cap : $1.83 T
Bitcoin Market Cap : $907.63 B
Ethereum Market Cap : $294.77 B
ETH/BTC Ratio : 0.05
Ethereum Gas Price : 48 gwei
DeFi TVL : $102.24 B
Fear and Greed Index : 72 (Greed)
Federal Reserve Balance Sheet : $7.67 T
Weekly Spotlight on IC15
The global cryptocurrency market showed mixed trading patterns following the US Federal Reserve’s decision to maintain its benchmark lending rate. The IC15 Index experienced fluctuations, with the first session closing 1,095 points higher at 55,133. Leading the gains were Chainlink, with a remarkable 15.47% increase, followed by other major cryptocurrencies like Avalanche, Cardano, and Solana, showing gains in the range of 4–6%.
Regulatory developments in various countries contributed to market dynamics. The Reserve Bank of India (RBI) expressed caution in developing its Central Bank Digital Currency (CBDC), the digital rupee, emphasizing the exploration of privacy risks. Meanwhile, the Bank of Russia expanded its CBDC pilot program, involving 17 additional banks and 30 trading services firms in testing. The introduction of educational initiatives, like Tether’s Tie Edu, aimed at enhancing digital skills development, demonstrated the industry’s commitment to fostering innovation and adoption.
Regulatory actions in jurisdictions such as Hong Kong and South Korea aimed to enhance transparency and reduce risks in the crypto industry. Hong Kong introduced discussions on regulating over-the-counter (OTC) crypto trading platforms, while the South Korean Financial Supervisory Service (FSS) sought insights from the US SEC Chair Gary Gensler on spot Bitcoin ETFs and digital assets. Additionally, Spain’s fintech firm Monei initiated beta testing of EURM, a euro-backed stablecoin, under the oversight of the Bank of Spain.
The global cryptocurrency market witnessed increased investor interest following MicroStrategy’s acquisition of 850 Bitcoins in January. The IC15 Index surged by 2,022 points to 57,392, with notable gains observed across various cryptocurrencies. Regulatory efforts, such as the US SEC’s adoption of new rules to extend oversight to crypto and DeFi, aimed at enhancing investor protection. Moreover, countries like Thailand and South Korea advanced initiatives to promote digital asset adoption and regulate the crypto market, signaling ongoing developments in the regulatory landscape. Additionally, institutional investment infrastructure in the Middle East expanded with the launch of a $250 million crypto platform in Abu Dhabi by Deus X Capital and Bridgetower Capital, catering to institutional investors in the region.
BATTLE OF THE BULL AND BEAR
Bitcoin experienced a $1,300 surge in a single day, reaching around 3% higher on February 8, bringing its price close to $44,700. This surge marked Bitcoin’s highest levels in nearly a month, alleviating concerns about its stagnant performance since mid-January. While the move may seem modest in percentage terms, it provided much-needed optimism for traders, with some analysts highlighting the defined range within which Bitcoin continues to operate.
Michaël van de Poppe, founder and CEO of MN Trading, noted Bitcoin’s resurgence towards $45,000, emphasizing the ongoing range-bound movement. However, some traders remained cautious, attributing the recent gains to leverage-driven factors. J. A. Maartunn, a contributor to the on-chain analysis platform CryptoQuant, cautioned that the sustainability of the surge might be limited, as significant increases in open interest over short periods have historically led to abrupt price movements.
Despite the cautious sentiment, there are indications of increasing bid liquidity and diminishing sell-side pressure, potentially mitigating any sudden market downturns. The upcoming block reward halving event, scheduled for around April 17, is contributing to bullish price predictions, including forecasts of Bitcoin surpassing $60,000 before mid-April. This sentiment is echoed by various industry figures, including former BitMEX CEO Arthur Hayes, who cited the resurgent volatility in the US regional financial sector as a contributing factor to potential record-high Bitcoin prices.
In parallel with Bitcoin’s price surge, BlackRock’s IBIT fund emerged as a leader among spot Bitcoin exchange-traded funds (ETFs), recording a substantial trading volume of $341.2 million on February 7. This volume, along with contributions from other ETFs like Fidelity’s FBTC, propelled total daily trading volume for spot Bitcoin ETFs to over $1 billion. Despite this milestone, analysts noted that crossing the $1 billion mark is not unprecedented and highlighted ongoing net inflows into spot Bitcoin ETFs, outpacing outflows from traditional funds like Grayscale Bitcoin Trust (GBTC).
Fred Krueger, an investor and author, observed that the combined Bitcoin holdings of the newly launched nine ETFs are on track to exceed those of MicroStrategy, the largest corporate holder of the asset. These ETFs collectively hold approximately 187,000 BTC, while MicroStrategy owns 190,000 coins. Additionally, it was reported that Fidelity is now allocating spot Bitcoin to its All-In-One Moderate ETF, signaling growing institutional interest in Bitcoin as an investment asset class. Overall, these developments underscore the increasing integration of Bitcoin into traditional investment portfolios through ETFs.
Weekly Spotlight
In recent developments, the Australian Federal Court has established a distinction in the regulation of crypto-yield products within Australia. It ruled that while products offering managed yields require a financial services license, “pass-through” products do not. This decision came as Block Earner faced penalties for its “Earner” product, which provided yield for loans denominated in various cryptocurrencies, mandating it to obtain an Australian Financial Services License.
Meanwhile, the launch of spot Bitcoin exchange-traded funds (ETFs) by BlackRock and Fidelity has marked a significant milestone in the US market. These ETFs have amassed over $3 billion in assets within their first month of trading, surpassing the performance of any ETF launched in the US over the past three decades. This achievement underscores the growing institutional interest and confidence in Bitcoin as an investment asset.
However, criticism has been directed at the US Securities and Exchange Commission (SEC) from Republicans on the Senate Banking Committee regarding its enforcement practices, particularly in light of missteps in the Gensler court case against a crypto firm. The SEC’s admission of misrepresenting evidence in a lawsuit has raised doubts about its broader enforcement practices, prompting scrutiny from lawmakers.
In the technological realm, Polygon Labs introduced a significant breakthrough with the release of a “Type 1 prover,” enabling any network compatible with Ethereum’s EVM standard to become a layer-2 network powered by zero-knowledge proofs. This development, endorsed by Ethereum co-founder Vitalik Buterin, is seen as crucial for enhancing the scalability and efficiency of auxiliary layer-2 networks.
On the market front, Bitcoin experienced a notable surge of $1,300 in a single day, reaching close to $44,700 on February 8. While this surge provided much-needed optimism for traders, some remained cautious about its sustainability, attributing it to leverage-driven factors. Nonetheless, increasing bid liquidity and diminishing sell-side pressure hinted at potential mitigations against sudden market downturns.
In regulatory news, the global cryptocurrency market showed mixed trading patterns following the US Federal Reserve’s decision to maintain its benchmark lending rate. Regulatory developments in countries like India, Russia, Hong Kong, South Korea, and Spain have contributed to market dynamics, with initiatives ranging from cautious CBDC development to discussions on enhancing transparency and reducing risks in the crypto industry. Additionally, increased investor interest following MicroStrategy’s acquisition of 850 Bitcoins in January has spurred further market activity and regulatory attention.
