Bitcoin is thriving. The new year brings even more excitement with long-awaited Bitcoin ETFs finally here. Get ready for a phenomenal year in the world of Bitcoin!
Summary:
- SEC approves Bitcoin ETFs: Historic decision on Jan. 11, 2024 opens Bitcoin to broader markets, including institutional investors.
- PayPal's PYUSD Stablecoin reaches market capitalization of $300,000,000: Becomes the 10th largest stablecoin and integrates into DeFi via Curve platform. Circle applies for IPO: Aims for public trading with strong financials by 2022, valued at $9 billion. - SEC Twitter account hacked: False tweet about Bitcoin ETF approval raises concerns about digital security.
- Bitcoin price reacts to ETF news: Initial spike followed by 15% drop, market now looking at 50-day moving average.
- Shift in investments from Bitcoin-related stocks to ETFs: Notable declines in stocks such as MicroStrategy and Bitcoin-mining companies.
- Analysis of Bitcoin transaction costs: Decline observed, but fees still above bear-market levels; high mempool volume indicates continued demand.
- Positive trend in mining revenues: Balance between decreasing block rewards and increasing transaction costs, in line with Satoshi Nakamoto's vision for Bitcoin's future.
Bi-Weekly Market Changes 30-12 / 14-01 |
Table of contents
News: Bitcoin ETFs: A Milestone for Crypto Investors
In a landmark decision on Jan. 11, 2024, the U.S. Securities and Exchange Commission (SEC) approved trading in Bitcoin exchange-traded funds (ETFs), marking a historic moment in cryptocurrency adoption. This long-awaited move, more than a decade in the making, signals a transformative step to make Bitcoin accessible to a wider range of investors, including large institutional players.
Bitcoin ETFs represent a crucial turning point. They offer a streamlined and cost-effective way for investors to access Bitcoin. The risk of buying Bitcoin on an exchange and then losing it because you sent it to the wrong wallet address or the exchange itself went bankrupt is a thing of the past. People can now buy Bitcoin and store it securely through their bank and save for their retirement accounts. Larry Fink, CEO of BlackRock, highlighted the clear customer demand that has driven their decision to apply for a Bitcoin ETF. The approval of these ETFs is not only a win for Bitcoin enthusiasts, but also a catalyst for possible regulatory changes in the U.S., making it more Bitcoin and crypto-friendly.
The launch of 11 spot BTC ETFs, amid record-breaking trading volumes, shows the immense market enthusiasm for this new investment opportunity. Despite a brief spike, the price of Bitcoin remained stable, indicating a mature and robust market.
Here are the 11 Spot Bitcoin ETFs approved by the SEC:
- ARK 21Shares Bitcoin ETF NYSE: $ARKB
- Bitwise Bitcoin ETF NYSE: $BITB
- Blackrock's iShares Bitcoin Trust NASDAQ: $IBIT
- Franklin Bitcoin ETF NYSE: $EZBC
- Fidelity Wise Origin Bitcoin Trust NYSE: $FBTC
- Grayscale Bitcoin Trust NYSE: $GBTC
- Hashdex Bitcoin ETF NYSEARCA: $DEFI
- Invesco Galaxy Bitcoin ETF NYSE: $BTCO
- VanEck Bitcoin Trust NYSE: $HODL
- Valkyrie Bitcoin Fund NASDAQ: $BRRR
- WisdomTree Bitcoin Fund NYSE: $BTCW
The SEC's approval of Bitcoin ETFs marks a monumental shift in the financial landscape, opening the doors for massive capital inflows and further legitimizing Bitcoin in the mainstream investment world. This is a pivotal moment for Bitcoin, and it paves the way for its integration into a broader financial ecosystem.
PYUSD: 10th Largest Stablecoin in Crypto Economy
PYUSD has become the 10th largest stablecoin in the crypto economy.
PayPal's move into decentralized finance with PYUSD is gaining momentum. The U.S. dollar-backed stablecoin is integrated into a liquidity pool on Curve, an automated market maker (AMM) platform. This pool has accumulated a total value locked (TVL) of $135,000,000, placing it third behind the well-known 3pool. Curve's activity acts as an indicator of the crypto market and often reflects trends among large-scale investors.
Although PayPal's PYUSD is making inroads into decentralized finance, it still lags behind giants such as Tether and Circle. In December, PYUSD's daily trading volume reached $9,000,000, a modest amount compared to Tether's USDT, which has a 24-hour trading volume of more than $55 billion.
The growing liquidity in decentralized finance is a positive sign. PayPal is actively expanding the usability of PYUSD beyond payments within the app, and venturing into broader crypto trading activities to make crypto mainstream. However, competition is fierce, especially from USDT, which dominates most crypto transactions, and Circle's USDC, which recently announced its plans for an IPO.
Circle's USDC Begins Journey to Public Markets
Circle, the company behind the widely used USDC-stablecoin, is paving the way to become a publicly traded entity. Circle has filed a draft registration statement, the "S-1" form, with the SEC. This filing marks an important step in Circle's transition to a public company, a goal originally set for 2021.
With an impressive valuation of $9 billion as of 2022, Circle's journey to the public markets is attracting attention. The company stated, "The initial public offering is expected to occur after the SEC review process, depending on market and other circumstances."
Insights from an interview with CEO Jeremy Allaire reveal Circle's robust financial health. The company reported revenue of $800 million and profit of $150 million in 2022, with projections of about $1.5 billion in revenue and about $300 million in profit for 2023.
Circle's IPO efforts highlight their commitment to improving trust and transparency in the rapidly evolving world of digital finance.
SEC Twitter Hack: False Approval Warning for Bitcoin ETF
The SEC's official Twitter account was recently hacked, leading to the false announcement of the launch of a Bitcoin ETF. Gary Gensler, the SEC's chairman, quickly addressed the situation and clarified that the information was false. This security breach, confirmed by Twitter Safety, occurred when an unauthorized person gained control of a phone number associated with the @SECGov account. It is troubling that the SEC, an organization responsible for protecting the public from market manipulation and other risks, was itself susceptible to such manipulation. The lack of simple two-factor authentication on their account, a basic security measure, raises questions about their digital security practices.
Technical Analysis
Bitcoin market dynamics after ETF approval
Following the much anticipated approval of Bitcoin ETFs, the market experienced a classic scenario of "buy the rumor, sell the news. Initially, there was a rebound in the price of Bitcoin, but it quickly retreated and resulted in a 15% dip after the announcement. This downturn reflects modest selling pressure from investors capitalizing on the news.
Despite this setback, Bitcoin's rapid recovery is remarkable. Heading toward the $50,000 mark, the performance is impressive, especially given the recent price trend. Currently, attention is shifting to the 50-day moving average, which is considered a potential support level. This recent market activity highlights Bitcoin's volatile but resilient nature, highlighting its rapid adaptability to key market events.
Bitcoin Exposed Shares
With the adoption of spot Bitcoin ETFs comes a notable shift in investment strategy. Previously, many funds seeking exposure to Bitcoin had limited options, primarily investing in Bitcoin miners or companies such as MicroStrategy. However, the introduction of Bitcoin ETFs offers a more direct and less risky investment avenue. This development has led to a capital rotation away from Bitcoin-related stocks. While these companies remain relevant and likely to perform well as Bitcoin's value rises, the market is currently adjusting to these new investment alternatives, reflecting a significant change in the cryptocurrency investment landscape.
In the chart below, we see a significant drop in Microstrategy and Bitcoin mining companies CleanSpark, Marathon and RIOT.
Chain Analysis
Transaction costs
Bitcoin on-chain transaction costs have recently declined, but they remain noticeably higher compared to bear market lows. Currently, transactions are processed in the range of 20-40 sat/vByte, indicating continued demand for on-chain transactions. Despite this drop in cost, the Bitcoin mempool, where unconfirmed transactions are stored, is near its all-time high. This sustained volume suggests that significantly lower costs may not be imminent. Moreover, the emergence of extremely low costs seems uncertain, especially if new drivers for on-chain settlement emerge.
The following graph illustrates the percentage of mining derived from costs, indicating a positive trend in the mining sector: Another graph shows total transaction costs, which, although declining, are still above bear market levels. This data indicates the continued robustness of the Bitcoin network: A third graph presents the total amount of fees in the mempool. Unlike the previous chart, which represents the cost of transactions added to the blockchain, the mempool can be thought of as a waiting list for blockchain blocks. An increase in the total cost in the mempool is a positive indicator, indicating growing demand for the Bitcoin blockchain:
We can conclude that the landscape for mining is evolving positively. As Bitcoin block rewards decrease over time, mining increases - just as Satoshi Nakamoto designed it to do. This balance between decreasing block rewards and increasing transaction costs shows that Bitcoin has a future even after all Bitcoin blocks are mined.