In Markets

With signs suggesting the great Grayscale Bitcoin Trust selloff is slowing, Bitcoin has started to recover and is up 8.6% on the same time last week to trade at around A$65,166 (US$43,104). Fun fact: January 28 saw the highest price of any January 28 in Bitcoin’s history. Ethereum was flat this week at A$3,494 (US$2,311). Solana surged 20.6%, with its Jupiter decentralised exchange flipping Ethereum’s Uniswap DEX in volume amid the WEN airdrop frenzy, XRP gained 1.7%, Cardano (9.7%), Avalanche (21.6%) and Dogecoin (1.7%). The Crypto Fear and Greed Index is at 55, or Greed.

Crypto market update 30-01-2024

From the IR OTC Desk

The theme of the week will be economic data.  The data itself, as well as the interest rate decision and statement by the US Federal Open Market Committee, will likely affect all assets, including cryptocurrencies.  While we have been receiving consistent economic data following the new year period, this week certainly represents the most critical data, year to date.  With global equity markets performing strongly, and inflation falling in all major jurisdictions, cryptocurrencies have the potential to again perform as a high beta risk asset.

Last week, we highlighted product switching and broad customer redemptions out of the Grayscale Bitcoin Trust (GBTC).  The speculation for the switching being based around high GBTC management fees versus the (now operational) US spot ETF providers, as well as the GBTC now trading near flat to net tangible assets.  This flow appears to have slowed, and with this reduction in on chain asset movements, BTC has now stabilised.  The result being positivity for the broader complex, with a particular emphasis on ETH and SOL tokens which have performed strongly since Q4 2023.

We continue to monitor USD spot ETF inflows, the ETH/BTC cross and USDT/USD pricing as good indicators of market participation and pricing forward guidance.

In macroeconomics, the economic calendar is certainly full this week.  Beginning with Australia, Wednesday at 11:30am AEDT delivers AU Q4 inflation data.  This is the most important data in the economic calendar and is sure to guide the Reserve Bank of Australia at their upcoming 5-6th February meeting.

In the US, highlights in the economic calendar includes:  US JOLTS (job openings) (Dec) on Wednesday at 2:00am AEDT; US employment cost index (ECI) (Q4) on Thursday at 12:30am AEDT; US Federal Open Market Committee interest rate decision (Feb) on Thursday at 6:00am AEDT; US ISM Manufacturing PMI (Jan) on Friday at 2:00am AEDT; US employment series (Jan) on Saturday at 12:30am AEDT.  Watch this space.

On the OTC desk, USDT has now moved back to 1:1 USD.  This has seen an abundance of selling, particularly out of our Singapore office.  The broad market has warehoused the softer pricing profile awaiting better levels, and now that they have arrived, the opportunistic seller has emerged.  This will most likely continue as a theme as pricing remains around these levels.  Opportunistic buyers of BTC have also emerged, although the market parcel has been relatively small. We await a more broad buying interest; this, however, may be FOMC dependent.

For any further information, please feel free to reach out.

In Headlines

Grayscale selling slows

The bleeding from Grayscale’s Bitcoin Trust appears to have lessened. Its ETF outflows saw a downward trend last week, and a dramatic 50% fall on Friday helped goose the BTC price on the weekend. According to BitMEX, they fell even further on Monday to US$192 million (A$290M), suggesting the trend is our friend. While Monday’s early figures saw that reverse with US$570M (A$862M) in GBTC volume (probably outflows) the nine new Bitcoin ETFs saw almost US$1B in volume between them (US$994.1M/A$1.5B, probably inflows) suggesting the trend could be our friend. JPMorgan analyst Nikolaos Panigirtzoglou believes GBTC profit taking “has largely happened already. This would imply that most of the downward pressure on Bitcoin from that channel should be largely behind us.” Grayscale still has half a million Bitcoin, however.

Bitcoin ETF scorecard

On the latest figures (delayed due to TradFi reporting), the nine new spot Bitcoin ETFs have bought 140,000 Bitcoin between them in 11 trading days, while Grayscale has sold 122,607 Bitcoin. The net Bitcoin purchased so far is 17,571 BTC. BlackRock’s iShares Bitcoin ETF has already surpassed US$2 billion (A$3B) in assets under management, while Fidelity is pretty close. Unlike other commodities ETFs, you can verify the Bitcoin holdings yourself, with Bitwise releasing its BTC address and Arkham Intelligence zeroing in on the addresses of the other major ETFs. BlackRock, VanEck, and Franklin Templeton have this week started ad campaigns on Google after the search giant changed its policy, and leading brokerage firm Charles Schwab is reportedly on the verge of launching its own spot Bitcoin ETF.

Ethereum ETFs grow less likely

The SEC has delayed BlackRock’s application for an Ethereum ETF to May and has invited public comment on Grayscale’s Ether ETF, which pushes that deadline back another 35 days.  The final deadline for Ark-21 Shares and VanEck’s ETFs expires on May 23, but the SEC can simply say no. Investment bank TD Cowen thinks that’s exactly what will happen and believes the SEC will make a “political call” to not approve an ETF before late 2025 or early 2026. Bloomberg ETF analyst James Seyffart has also dropped his 70% estimate of an ETH ETF approval by May to 60%. “There’s plenty of ways they can delay,” he said. But Van Buren Capital general partner Scott Johnsson says approval in the long term is “highly likely”.

Ethereum and Polygon most popular chains in 2023

New research from Flipside Crypto shows the Ethereum ecosystem dominated new user acquisition in 2023. Ethereum picked up 15.4 million new users, Polygon added 15.2M, Bitcoin saw 10.7M new users, Arbitrum 7.4M, Optimism 3.3M, Avalanche 2.5M and Base picked up 1.9M. Polygon, Arbitrum, Optimism and Base are all Ethereum scaling solutions.

Polygon’s interoperability layer

Polygon, which operates an Ethereum zkEVM (zk stands for zero knowledge (proof)) sidechain, and has a variety of new ZK solutions coming online, has announced a new interoperability solution that uses ZK technology to connect different blockchains and rollups. Called Agglayer, it does away with the need for bridges (where the big hacks occur) and will reportedly make users feel like they are using a single chain rather than multiple ones. Meanwhile, Polygon’s legal team has also put out new research proposing a legal framework to address illicit finance in DeFi that would see genuinely decentralised projects treated as “critical infrastructure” rather than “financial institutions.”

The halving will play out in 5 stages

The date of the halving (when the Bitcoin block reward for miners is halved) has been revised to the 20th of April. Analyst Rektcapital took followers through a Bitcoin halving history lesson today, stating that just 77 days remain and any pullback in the Bitcoin price should be over within the next two weeks. That is normally followed by a pre-Halving rally where traders try and “buy the hype”,… and then they tend to “sell the news” a few weeks before the event. Historically this has been followed by a five-month reaccumulation period after the halving, where investors often get shaken out by boredom, and then there’s a parabolic uptrend as Bitcoin surges to new highs. There’s no guarantee any of that will actually happen, of course, but as Mark Twain said, “History doesn’t repeat itself, but it often rhymes.”

Bits and pieces

China property giant Evergrande was ordered to liquidate by Hong Kong’s high court, which has uncertain implications for the global economy. Various pundits, including Chris Burniske and Arthur Hayes, believe the Bitcoin price could drop to US$30,000 (A$45.3K). Zhu Su, co-founder of Three Arrows Capital, has been talking up his time in a Singapore jail as a “really enjoyable experience” and spinning the fact he had to sleep on the floor due to the lack of a bed as “really good for decompressing your…spine.” Major Chinese asset management company Harvest Global Investments has applied to run a spot Bitcoin ETF in Hong Kong. Ethereum’s Dencun upgrade, which will dramatically lower L2 costs, hits the Sepolia testnet today.

Until next week, happy trading!