Category: Cryptocurrency

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This week witnessed a notable shift in the momentum of two of the most successful exchange-traded fund launches in history. BlackRock’s (NYSE:BLK)spot Bitcoin ETF, IBIT, renowned for its remarkable performance, experienced zero inflows on Wednesday and Thursday, marking the end of its 71-day streak of fresh investments totaling approximately $17.24 billion in assets under management since its trading approval on January 11. Additionally, Fidelity’s FBTC, the current runner-up in the ETF race, reported losses of $22.6 million on Thursday, marking its first reported outflow and reducing its assets under management to around $9.9 billion, according to CoinGlass data.

The waning interest in the leading Bitcoin ETFs, excluding Grayscale’s GBTC, serves as a significant indicator of the cryptocurrency market’s recent cooling and suggests that the initial ETF frenzy, which propelled Bitcoin to new heights, has subsided. With Bitcoin currently trading around $63,500, down approximately 12% from its all-time high of $73,000 in March, only one of the 10 trading spot Bitcoin ETFs, Franklin Templeton’s EZBC, reported inflows on Thursday.

Disappointing inflation data has tempered hopes for Federal Reserve interest rate cuts, and the prospect of higher borrowing costs typically diminishes the market’s appetite for riskier, more volatile investments like crypto. Meanwhile, Bitcoin has remained relatively stagnant since early March, partly reflecting ETF stagnation and the anticipation surrounding the network’s recent “halving” event on April 19, as investors adhered to the “buy the rumor, sell the news” strategy, liquidating their holdings.

Nate Geraci, president of the ETF Store, noted that ETF flows often mirror the performance of the underlying asset, suggesting that a pause in Bitcoin’s price may lead to a temporary hiatus in inflows. However, Geraci emphasized that these products are still in the early stages of adoption, with many large institutions yet to permit their brokers to solicit purchases of spot Bitcoin ETFs, and registered investment advisors cautiously entering the category.

Despite the recent slowdown, these funds are widely regarded as a resounding success, accumulating over $54 billion in assets in just over three months of trading, thereby integrating Bitcoin-tracked assets into the portfolios of millions of mainstream investors.

Highlighting their success, Hong Kong’s Securities and Futures Commission recently granted approvals for three spot Bitcoin and Ether ETFs, set to commence trading on Tuesday, with additional countries expected to follow suit. Issuer Harvest is waiving a management fee for its funds, sparking expectations of a fee war akin to the heated competition in the U.S., where Grayscale introduced a Bitcoin Mini Trust with ultra-low fees of 0.15% in an effort to capture some of the outflows from GBTC, which charges 1.5%.

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Total net outflows from 11 U.S. spot bitcoin ETFs reached $120 million on Wednesday, with eight products recording zero flows, a trend deemed normal by analysts.

Grayscale’s GBTC witnessed $130.42 million exiting the converted bitcoin ETF, while Fidelity and Ark Invest’s funds were the sole recipients of inflows, totaling approximately $10 million. Among the eight funds with zero flows were BlackRock’s IBIT and Bitwise’s BITB, with IBIT ending its 71-day positive streak on Wednesday.

According to Rachael Lucas, a crypto analyst at BTC Markets, days with zero inflows are typical and do not necessarily indicate product failure. She suggests that such occurrences often align with market performance and geopolitical tensions, underscoring the complexities beyond ETF flows.

Joe Caselin, head of institutional marketing at BIT crypto exchange, echoes this sentiment, stating that zero flows in an ETF are not unusual but may signify a cooling down of ETF excitement. He emphasizes the gradual integration of fiat into the Bitcoin narrative, anticipating fresh inflows to occur intermittently as traditional finance gradually merges with crypto.

Bloomberg ETF Analyst James Seyffart previously explained that ETF shares are created or destroyed in units, a process triggered by significant disparities in supply and demand. This phenomenon explains why zero flows are commonly observed in such products.

The Block ETF data dashboard reports that the cumulative trading volume for all 11 spot Bitcoin ETFs is approaching $230 billion.

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A recent report from Fidelity Digital Assets highlights a substantial increase in the number of Bitcoin addresses holding at least $1,000 worth of Bitcoin (BTC). Fidelity’s analysts reveal that this segment soared to an unprecedented 10.6 million wallets in mid-March, marking a doubling from the 5.3 million addresses recorded in 2023.

The surge in Bitcoin addresses with smaller holdings suggests a widening distribution of the cryptocurrency and its growing adoption among the general populace, according to Fidelity’s analysts. Despite escalating prices, the data indicates that small addresses persistently accumulate and store Bitcoin, a trend Fidelity describes as positive growth.

Fidelity’s analysts offer an optimistic outlook for Bitcoin in the short term, based on various long-term data points. Out of the 16 metrics tracked, half were deemed positive, while a quarter were categorized as negative or neutral.

The report also delves into the amount of Bitcoin held on cryptocurrency exchanges, which continued its downward trajectory in the first quarter of 2024. The total amount plummeted by 4.2% to 2.3 million Bitcoin, approximately 30% lower than the peak of over 3 million Bitcoin held in 2020. However, Fidelity underscores that this decline in exchange-held Bitcoin does not necessarily imply an uptick in self-custody. Custodians like Fidelity are actively developing solutions that empower customers to retain control of their private keys while engaging in trading activities through exchanges.

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For 71 consecutive days, BlackRock Inc.’s Bitcoin fund experienced an impressive streak, accumulating nearly $18 billion in one of the most significant exchange-traded fund launches in history. However, investor interest has waned as the fervor surrounding cryptocurrencies subsided.

Data compiled by Bloomberg reveals that daily inflows into the ETF, identified by the ticker IBIT, dwindled to virtually zero on Wednesday. Throughout April, IBIT has garnered a net inflow of $1.5 billion.

IBIT’s achievement marks a notable shift in the crypto market sentiment, following the ETF-induced excitement that propelled Bitcoin to an all-time high of nearly $74,000 in March. Since then, the original cryptocurrency has declined by nearly 15%, and the much-anticipated “halving” event on April 20 failed to deliver an immediate boost.

Nevertheless, these new investment vehicles have left a significant mark on the crypto landscape. Collectively, they have attracted approximately $54 billion, introducing Bitcoin into the portfolios of potentially millions of investors. Hong Kong, positioning itself as a crypto-friendly jurisdiction, is preparing to debut its first listings of Bitcoin and Ether ETFs, with other markets likely to follow suit.

Despite the halt in net inflows, IBIT is swiftly closing the gap on Grayscale Bitcoin Trust, the current market leader. On Wednesday alone, approximately $130 million flowed out of GBTC, bringing total outflows for the year to $17 billion, according to Bloomberg data.

GBTC, identified by the ticker GBTC, imposes a management fee of 1.5%, the highest among the cohort of funds launched in early January. The launch of ETFs in Hong Kong may intensify the fee competition that has exerted pressure on GBTC.

Rebecca Sin, an ETF analyst at Bloomberg Intelligence, suggested that the launch of spot Bitcoin ETFs in Hong Kong, coupled with issuers waiving management fees, might lead to additional outflows, potentially indicating further changes in market dynamics.

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Bitcoin’s inflation rate has plummeted to a historic low of approximately 1.74% following the recent Bitcoin halving. With 93.3% of Bitcoin already mined, amounting to 19.6 million out of a possible 21 million BTC, the scarcity element is poised to escalate demand, potentially propelling the leading cryptocurrency’s price surge. In contrast, fiat currencies grapple with higher inflation rates due to governmental controls and economic policies. For instance, in 2023, countries like Argentina encountered exceptionally high inflation rates, hitting 161.0%, as per Inflation Data. The European Union reported more moderate levels, with the euro area’s annual inflation rate at 2.9% in December 2023.

The recent halving event is anticipated to further diminish Bitcoin’s inflation rate, impacting both its scarcity and investor sentiment. The trend suggests that each halving event, which halves the reward for mining new blocks, tends to bolster buyer interest due to reduced supply growth.

According to a report from CoinGecko, historical data reveals a consistent trend of significant growth in Bitcoin prices following each halving event. Following the first halving in 2012, Bitcoin’s price surged by an impressive 8,858%. Subsequent halvings witnessed diminishing returns, with increases of 294% and 540% respectively, yet the pattern of price spikes post-halving remains discernible. These events not only affect Bitcoin but also resonate across other leading cryptocurrencies, such as Ethereum, albeit with varying impacts due to differing supply mechanisms.

The completion of the fourth halving has triggered speculation within the cryptocurrency community regarding short-term market dynamics. Recently, Bitwise noted that while the month immediately following the halving typically witnesses a modest price decline, the subsequent year often heralds exponential gains. After the 2012 halving, Bitcoin experienced a meager 9% increase in the month post-halving, only to soar by a staggering 8,839% over the following year. Similar patterns were observed after the 2016 and 2020 halvings, with Bitcoin’s price witnessing significant surges in the year following each event.

Bitcoin’s market cap fluctuations around halving events provide valuable insights into consumer behavior during these critical periods. Initially pegged at $123.3 million during the first halving, the market cap swiftly surged to $947.4 million shortly thereafter. 

Similar patterns were observed in subsequent halvings, reflecting a tendency among Bitcoin holders to speculate around halving events, often opting to hold onto their assets in anticipation of value increases. The analysis of pre-and post-halving periods suggests a strong inclination toward holding Bitcoin, deemed to become more valuable as future supply constraints tighten post-halving.

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Runes, resembling BRC-20s, emerge as a significant protocol utilizing the Bitcoin network, claiming a substantial 68% share in Bitcoin transactions since the halving. However, Bitcoin miners face diminishing returns amidst this surge.

Similar to BRC-20s, Runes operates by compensating fees in Bitcoin to mint new tokens. Differing from Ordinals’ “inscription” account model, Runes utilizes the Unspent Transaction Output (UTXO) framework to imprint new tokens on the Bitcoin network. This methodology enables users to allocate unique identification numbers to individual satoshis, embedding them with diverse data directly into the Bitcoin blockchain.

Since its inception on April 20th, Runes has processed over 2.38 million transactions, as per data from a Dune Analytics dashboard shared by Crypto Koryo, a blockchain research firm. Pitted against Ordinary peer-to-peer Bitcoin transactions, BRC-20s, and Ordinals, Runes accounts for a significant portion of the total Bitcoin transaction volume.

On April 23rd, Runes witnessed its peak transaction volume, exceeding 750,000 transactions. However, the subsequent day witnessed a notable decline, with transactions dwindling to 312,000.

Much of the initial fervor stemmed from the halving event at block 840,000, where users vied for prime digital real estate in Bitcoin’s history, utilizing the Runes protocol to imprint “rare satoshis” on the block. Consequently, Runes contributed over $2.4 million in miner fees, constituting over 70% of the total fees on halving day.

Amidst declining mining rewards post-halving, from 6.25 BTC to 3.125 BTC, Runes Protocol was initially touted as a lifeline for struggling miners, offering a new avenue for income. Pseudonymous Ordinals developer Leonidas stated, “Runes degens have single-handedly offset the drop in miner rewards from the halving.” However, the sustainability of this assertion has been questioned, given the fluctuating daily total fees post-halving, ranging between 33% and 69%.

Community sentiment remains divided regarding whether Runes can provide a stable revenue stream for Bitcoin miners. Notably, the Bitcoin Miners’ Position Index (MPI) fluctuated between -1 to -0.15 post-halving, suggesting no significant movement in miners’ Bitcoin holdings and indicating no imminent sell-off.

While Runes may face challenges in sustaining its momentum, recent groundbreaking developments offer potential alternative revenue streams to mitigate the impact of the halving on miners.

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When news broke about the U.S. Federal Trade Commission’s decision to prohibit non-compete agreements, it brought back memories of my own experience leaving a blockchain startup to join another early-stage company. Upon my departure, my former employer sent a cease-and-desist letter alleging a breach of a non-compete clause in my employment contract.

Despite the weak legal grounds of their claim, I found myself entangled in a lengthy dispute, facing financial losses, emotional strain, and months of unemployment. My story is not unique. Nearly one in five Americans is bound by non-compete agreements, leading to unnecessary hurdles for both employees and employers.

The FTC’s move to ban non-compete agreements is a significant step forward, with Chair Lina M. Khan estimating it could spur the creation of 8,500 new startups through increased competition. As someone working in the blockchain and digital assets sector, I see this decision as aligning with the open-source ethos fundamental to our industry’s innovation.

It’s ironic that a blockchain startup, built on principles of decentralization and collaboration, would resort to enforcing restrictive non-compete clauses. Furthermore, the contrast between my experience and California’s long-standing ban on non-competes highlights the potential impact of such regulations on fostering innovation and entrepreneurship.

The FTC’s action signals a positive shift, not only for individual employees like myself but also for the broader crypto industry, where talent mobility and innovation thrive in an environment free from unnecessary constraints.

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Paystand (NASDAQ:PAYS) has made a strategic move by acquiring spend management software startup Teampay, aiming to establish a “no-fee B2B digital payment and spend powerhouse.”

While the financial terms of the deal were not disclosed, Teampay has successfully raised $65 million since its inception in 2016.

The merger brings together two entities servicing over 1 million businesses on a commercial blockchain, with a transaction volume exceeding $10 billion to date, representing close to 2% of annual U.S. business-to-business payments.

Jeremy Almond, CEO of Paystand, shared with TechCrunch that Teampay represents a new breed of fintech companies, offering innovative products to CFOs seeking to modernize their workflows. The acquisition aligns with Paystand’s vision of providing next-gen experiences to its customers amidst a significant modernization wave.

Maintaining the Teampay brand is a strategic decision due to its established reputation in the market, according to Almond.

The acquisition of Teampay marks Paystand’s second in two years, following the purchase of payment platform Yaydoo in 2022. With a valuation surpassing $1 billion and $98 million in venture capital funding since its inception in 2014, Paystand aims to leverage Teampay’s capabilities to enhance both accounts receivable and accounts payable processes.

Almond emphasizes the trend of consumerization in the enterprise space, aiming to replicate the seamless payment experiences seen in consumer finance apps like Venmo and CashApp within the B2B realm.

Despite fintech’s recent growth, the banking industry grapples with outdated payment rails, resulting in higher fees, increased intermediaries, and delays. Paystand addresses these issues by leveraging decentralized financial infrastructure powered by the Ethereum blockchain, offering zero-fee business-to-business payments through its Paystand Bank Network.

Almond believes that blockchain technology represents a paradigm shift away from traditional central banking systems, offering real value to businesses and finance teams. He asserts that the readiness of blockchain and decentralized finance networks lies in their ability to create tangible benefits for users.

In conclusion, Paystand’s acquisition of Teampay signifies a strategic move towards revolutionizing B2B payments within the decentralized finance landscape, offering businesses enhanced efficiency, reduced costs, and streamlined processes.

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Amidst a broader market crash, Ethereum experiences a 2.50% decline, fueling concerns of a potential drop to $3,000. Despite this setback, some investors maintain optimism for long-term gains, pointing to the possibility of a bullish trend triggered by Bitcoin Halving. However, ETH faces resistance even as it finds support at $2,850, with conflicting signals from technical indicators adding to market uncertainty.

Ethereum, the leading altcoin by market capitalization, has not escaped the recent market downturn, witnessing a 2.50% decline in price. Worries about a potential descent to $3,000 have emerged following this setback and amid broader concerns of a significant market correction.

Nevertheless, despite the current downturn, certain investors remain hopeful about Ethereum’s long-term trajectory. The historical precedent of Bitcoin Halving sparking an altcoin season hints at the potential for a future uptrend.

With a market capitalization of $382 billion, Ethereum has experienced an 18% drop over recent weeks. However, the ETH price has found support around the 50% Fibonacci level, approximately $2,850.

The consolidation on the weekly chart between the 50% and 61.80% Fibonacci levels has been prolonged by the latest downturn. The smaller rejection from the 50% Fib level suggests a possible bullish breakout, potentially leading to sustained levels above $3,000.

Can Ethereum Regain Momentum?

At its current trading price of $3,140, Ethereum displays an intraday Doji candle, highlighting the altcoin’s volatile nature. The resumption of an upward trend for Ethereum may occur if the market manages to avoid further losses.

Technical indicators offer a mixed outlook for Ethereum. The bearish crossover in the MACD and signal lines on the weekly chart reflects the recent pullback phase. However, a rebound from the 50% Fib level in ETH price could reignite positive momentum.

A potential breakout above the $3,265 resistance level may signal an entry opportunity for a bull run continuation. Such a scenario could test the formidable $4,000 resistance level, potentially resulting in a 25% increase.

However, while the likelihood of a drop to $3,000 remains minimal, it still concerns investors amidst the current market conditions. The prevailing uncertainty prompts investors to carefully evaluate the potential outcomes for Ethereum’s price movement.

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Industry insiders anticipate the Securities and Exchange Commission (SEC) will reject proposals for exchange-traded funds (ETFs) linked to the price of ether in the coming month, according to sources familiar with the matter.

Several firms, including VanEck and ARK Investment Management, have submitted applications to the SEC seeking approval for ETFs that would mirror the spot price movements of ether, the second-largest cryptocurrency by market capitalization. The SEC is slated to make decisions on VanEck’s and ARK’s applications by May 23 and May 24, respectively.

Meetings between these firms and the SEC in recent weeks have reportedly been disheartening, with agency staff offering little insight into the concerns surrounding the proposed ETFs. This stands in stark contrast to the extensive deliberations that preceded the approval of bitcoin-based ETFs earlier this year.

Led by crypto skeptic Gary Gensler, the SEC had historically rejected bitcoin ETFs due to concerns over market manipulation. However, pressure mounted after Grayscale Investments successfully challenged the SEC’s stance in court, leading to the recent approval of spot bitcoin ETFs. Despite arguments from ETF issuers citing precedents set by bitcoin ETFs and ether futures-based ETFs approved last year, the SEC appears poised to deny the current filings, signaling a setback for the cryptocurrency industry.

While some issuers intend to submit additional documentation to the SEC to prolong discussions, expectations of a rejection have already impacted ether’s price. Although the cryptocurrency has seen a modest increase in value this year, it has lagged behind bitcoin, which reached new all-time highs recently.

The SEC’s scrutiny of ether ETFs has been limited thus far, with only a few meetings reported, including one with crypto exchange Coinbase. Coinbase argued that the rationale behind approving bitcoin ETFs should extend to ether products, given the correlation between ether futures and the spot market.

If the SEC rejects the ether ETFs, it may be due to concerns regarding the availability and reliability of statistical data on the ether market. Some observers speculate that the SEC may require more time to assess the impact of ether futures trading before greenlighting spot ETFs.

Despite the anticipated rejection, some industry insiders believe that legal challenges could eventually pave the way for ether ETFs. However, for now, the prospect of approval remains uncertain, leaving the cryptocurrency market in a state of flux.

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