Newsletter Volume 67
THE MARKET THIS WEEK
Bitwise’s Chief Investment Officer (CIO), Matt Hougan, anticipates a significant influx of institutional capital into spot Bitcoin exchange-traded funds (ETFs) once major wirehouses, such as Bank of America’s Merrill Lynch and Wells Fargo, offer these ETFs to their wealth clients. Hougan believes that the initial wave of interest in Bitcoin ETFs has primarily come from retail investors, hedge funds, and independent financial advisors, but the entrance of major wirehouses will attract a new wave of institutional capital to the market, likening it to Bitcoin’s “IPO moment.”
Indeed, Bank of America’s Merrill Lynch and Wells Fargo have reportedly begun offering spot Bitcoin ETFs to their wealth clients, with Morgan Stanley also said to be considering offering such ETFs on its brokerage platform. However, access to these ETFs is currently limited to clients who specifically request them. This move marks a significant step in the mainstream adoption of Bitcoin ETFs within the traditional financial sector.
Hougan emphasizes that the introduction of Bitcoin ETFs has sparked a new era of price discovery in the cryptocurrency market. He notes the supply-demand dynamics, highlighting the increasing demand for Bitcoin ETFs relative to the daily supply of Bitcoin mined, as well as the upcoming halving event, which is expected to further impact market dynamics. This heightened interest from institutional investors is expected to drive further growth and development in the cryptocurrency market.
In contrast, speculation research firm Citron, led by well-known Wall Street short-seller Andrew Left, has advocated for shorting Coinbase (COIN) stock following the exchange’s temporary outage on February 28. Citron views the outage as an opportunity for a trade involving going long on bitcoin through an ETF while shorting Coinbase, anticipating a divergence in value between the two assets. However, despite Citron’s negative stance, their past market predictions, such as calling for shorting Ether in 2022, have not always been accurate, indicating the complexity and unpredictability of market dynamics.
KEY METRICS
Total Crypto Market Cap : $2.41 T
Bitcoin Market Cap : $1.22 T
Ethereum Market Cap : $411.69 B
ETH/BTC Ratio : 0.06
Ethereum Gas Price : $un.de T
DeFi TVL : $102.24 B
Fear and Greed Index : 80 (Extreme Greed)
Federal Reserve Balance Sheet : $7.63 T
Weekly Spotlight on IC15
The global cryptocurrency market experienced a mixed start to the week, with the IC15 Index showing a slight decline of 122 points to 66,552 by 4 p.m. Most of the coins in the index were trading lower, with notable losses seen in XRP, Cardano, Dogecoin, and Chainlink, while BNB, Polygon, and Ethereum recorded gains in the 1–3% range. Despite the minor setback, the market remained active, with various developments observed across different sectors.
One notable development was the significant funding flowing into crypto and blockchain-based projects, totaling over $90 billion this month. Additionally, the Saudi Arabian Ministry of Culture announced the launch of the world’s most extensive National Social Metaverse Platform, in collaboration with droppGroup, offering users immersive experiences and historical tours. Moreover, the global metaverse healthcare industry is projected to reach around $500 billion by 2033, driven by advancements in telemedicine and surgical techniques.
The cryptocurrency market witnessed a significant surge amidst inflows into Bitcoin ETFs and increased Bitcoin purchases by companies like MicroStrategy. The IC15 Index saw its largest one-day jump, gaining 6,001 points to reach 72,553 by 4 p.m. Major contributors to the index’s gains included Dogecoin, Bitcoin, Shiba Inu, and Solana, with gains ranging from 8–13%. Bitcoin reclaimed the $57,000 mark for the first time since November 2021, signaling renewed bullish sentiment in the market.
Regulatory developments also played a crucial role in shaping the cryptocurrency landscape, with various countries unveiling plans to introduce regulatory sandboxes for stablecoin issuers and exploring the development of central bank digital currencies (CBDCs). Additionally, the International Monetary Fund (IMF) highlighted the potential of digital currencies to address the needs of Pacific Island countries (PICs) with careful design, while expressing caution against the use of unbacked cryptocurrencies. As the market continued its bullish run for the sixth consecutive day, Bitcoin crossed the $62,000 mark for the first time in 27 months, fueled by strong investor demand and institutional interest in spot Bitcoin ETFs.
BATTLE OF THE BULL AND BEAR
Bitcoin’s recent performance has been remarkable, with the cryptocurrency eyeing a challenge on its all-time highs after successfully defending the $60,000 mark. Marking a significant milestone, the monthly close on February 29 demonstrated a clear victory for Bitcoin bulls, with February delivering the largest gains for BTC/USD since December 2020, reaching a staggering 43.55% increase, according to CoinGlass data. Additionally, the month saw the largest monthly USD candle ever, nearing a $20,000 high, as reported by Glassnode’s lead on-chain analyst, Checkmate, in a post on social media platform X.
Despite the excitement surrounding Bitcoin’s price action, the monthly close had been a source of tension among market participants due to its potential to trigger volatility as futures contracts expire. This volatility could pose challenges for Bitcoin, especially in terms of liquidity needed for bid support. However, a snapshot of BTC/USDT order book liquidity on Binance showed $59,000 as the nearest potential safety net, providing some reassurance amidst the market fluctuations.
Meanwhile, Bitcoin miners have maintained stable reserves of around 1.82 million BTC in February, despite significant outflows from mining pools to crypto exchanges totaling $40 billion. These outflows coincided with fluctuations in BTC price, triggering substantial selling from miners, with approximately 40,000 BTC sold on February 26 alone as the cryptocurrency’s price broke above $52,000, according to data from CryptoQuant.
As the next Bitcoin halving event approaches, expected around April 19, 2024, miners are adjusting their strategies to capitalize on the reduced block rewards. The halving event, which occurs approximately every four years, reduces the rate at which new BTC is created, impacting miners’ revenue. In anticipation of this event, miners typically sell more of their BTC reserves to maximize profits before the block reward decreases. However, some companies, such as CleanSpark, are implementing in-house trading desks to manage and trade their Bitcoin holdings internally, aiming to reduce associated trading costs.
Overall, market sentiment remains bullish, supported by inflows from exchange-traded funds (ETFs) and anticipation of the upcoming halving event. With Bitcoin’s price continuing to hover around $61,600 at the time of writing, volatility remains moderate, providing opportunities for both investors and miners to navigate the evolving landscape of the cryptocurrency market.
Weekly Spotlight
Bitwise’s Chief Investment Officer (CIO), Matt Hougan, foresees a significant influx of institutional capital into spot Bitcoin exchange-traded funds (ETFs) with the anticipated entry of major wirehouses like Bank of America’s Merrill Lynch and Wells Fargo into the market. Hougan notes that while the initial interest in Bitcoin ETFs came from retail investors, hedge funds, and independent financial advisors, the involvement of major wirehouses will attract a new wave of institutional investors, likening it to Bitcoin’s “IPO moment.” The move by Bank of America’s Merrill Lynch and Wells Fargo to offer spot Bitcoin ETFs to their wealth clients, along with Morgan Stanley’s potential consideration, marks a notable step in the mainstream adoption of Bitcoin ETFs within the traditional financial sector.
Hougan underscores the introduction of Bitcoin ETFs as a catalyst for a new era of price discovery in the cryptocurrency market. He highlights the supply-demand dynamics, indicating the increasing demand for Bitcoin ETFs relative to the daily supply of Bitcoin mined, and the upcoming halving event, expected to further impact market dynamics. This heightened interest from institutional investors is poised to drive further growth and development in the cryptocurrency market.
In contrast, speculation research firm Citron, led by Wall Street short-seller Andrew Left, advocates for shorting Coinbase (COIN) stock following the exchange’s temporary outage on February 28. Citron views the outage as an opportunity for a trade involving going long on bitcoin through an ETF while shorting Coinbase, anticipating a divergence in value between the two assets. However, past market predictions from Citron, such as calling for shorting Ether in 2022, have not always been accurate, indicating the complexity and unpredictability of market dynamics.
The worldwide cryptocurrency market experienced a mixed start to the week, with the IC15 Index showing a slight decline of 122 points to 66,552 by 4 p.m. Most coins in the index traded lower, with notable losses seen in XRP, Cardano, Dogecoin, and Chainlink, while BNB, Polygon, and Ethereum recorded gains in the 1–3% range. Despite this minor setback, the market remained active, with various developments observed across different sectors. One significant development was the substantial funding flowing into crypto and blockchain-based projects, totaling over $90 billion this month. Additionally, the Saudi Arabian Ministry of Culture announced the launch of the world’s most extensive National Social Metaverse Platform, offering users immersive experiences and historical tours. Moreover, the global metaverse healthcare industry is projected to reach around $500 billion by 2033, driven by advancements in telemedicine and surgical techniques.
The cryptocurrency market witnessed a significant surge amidst inflows into Bitcoin ETFs and increased Bitcoin purchases by companies like MicroStrategy. The IC15 Index saw its largest one-day jump, gaining 6,001 points to reach 72,553 by 4 p.m. Major contributors to the index’s gains included Dogecoin, Bitcoin, Shiba Inu, and Solana. Regulatory developments also played a crucial role in shaping the cryptocurrency landscape, with various countries unveiling plans to introduce regulatory sandboxes for stablecoin issuers and exploring the development of central bank digital currencies (CBDCs). As the market continued its bullish run for the sixth consecutive day, Bitcoin crossed the $62,000 mark for the first time in 27 months, fueled by strong investor demand and institutional interest in spot Bitcoin ETFs.
