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The Hong Kong cryptocurrency ETF market had a rather subdued start, despite high expectations for the launch of Asia’s first spot bitcoin and ether ETFs. These funds only generated a transaction volume of $11 million on their first day, significantly below the anticipated $100 million. This poor performance immediately impacted the values of bitcoin and ether, with bitcoin’s price dropping over 2% and ether’s price decreasing by 3%.
This situation contrasts sharply with the reception of spot ETFs in the United States, where transaction volume on the first day reached an impressive $655 million. Since their introduction, these U.S. ETFs have attracted nearly $12 billion in investments. Spot ETFs, which allow investors to gain exposure to cryptocurrencies without directly owning them, are often preferred over futures-based ETFs, which involve rollover costs. However, a recent slowdown in fund inflows seems to now be hindering bitcoin’s upward trend.
The iShares Bitcoin Trust (IBIT) by BlackRock, one of the most dynamic Bitcoin spot ETFs in the U.S., experienced a halt in fund inflows for the first time since its launch, a stagnation that has persisted for four days with no new inflows since April 24. This fund, which started with 2,621 BTC, has seen its holdings grow to reach 274,462 BTC, marking a spectacular increase of over 10,378% since its launch. The cessation of this continuous inflow, after a continuous series of 71 days of fund inflows, has raised concerns among industry observers. Some experts express reservations about this interruption, perceiving it as a potentially negative signal for investors. However, other market players consider the 71-day period of continuous inflow as exceptional, not the recent four days without new inflows. Thomas Fahrer, co-founder of Apollo, explained that in the operation of ETFs in general, days without new fund inflows are common, given that additional inflows require a significant imbalance between supply and demand. Meanwhile, other ETF issuers, such as Grayscale Investments, continue to see outflows from their Bitcoin spot ETFs, highlighting a contrasting dynamic in the sector.
Bitcoin appears to be on track to close the month of April with a decrease compared to its price at the beginning of the month, thus marking the end of a series of seven consecutive months of gains. This bullish trend, which began in September 2023, has seen the price of bitcoin increase each month until now. This is the first monthly loss for bitcoin since August 2023, and the largest monthly drop since June 2022. This difficult period for bitcoin is influenced by several factors, including a slowdown in demand for spot exchange-traded funds, expectations of higher interest rates for longer than expected, and a general cautious sentiment in the equity markets. Aurelie Barthere, senior research analyst at Nansen, notes that the recent pullback in the cryptocurrency market has resulted in a predominance of negative returns, altering the optimism among traders. However, she anticipates a market recovery, supported by sustained activity in the crypto ecosystem, notably with an increase in cross-chain fees, which could indicate an imminent recovery.
Matt Hougan, Chief Investment Officer at Bitwise, has expressed the opinion that stablecoin legislation, which the U.S. Congress might adopt this year, could have a more significant impact than the launch of spot bitcoin exchange-traded funds on the adoption of cryptocurrencies. According to Hougan, this legislation would represent a major step towards the “mainstreaming of stablecoins” and could surpass in importance the ETFs of bitcoin in terms of crypto adoption. He highlighted that this legislative initiative already enjoys broad support, as indicated by Maxine Waters, a senior Democrat on the House Financial Services Committee, and Chairman Patrick McHenry. Hougan identified three main factors driving interest in stablecoins: their potential role in supporting the U.S. dollar as the world’s reserve currency, their significance as buyers of U.S. Treasuries, and the considerable financial opportunities they represent. For example, he compares the profits of Tether, the largest issuer of stablecoins, to those of Goldman Sachs, highlighting a remarkable efficiency in terms of profit/employee ratio. He also predicts that stablecoins could soon be commonly used for payments, citing new features like that of Stripe allowing payments in stablecoins and the increase in adoption according to Visa’s analyses. Hougan concludes that the widespread adoption of stablecoins would mark a major new phase for the crypto market, similar to the evolution observed after the launch of ETFs.
Coinbase announces the integration of the Bitcoin Lightning Network, offering its users a faster and less expensive option for Bitcoin transactions compared to the main Bitcoin network. This feature will be gradually available on both mobile and computer platforms. The Lightning Network, a second-layer protocol launched in 2018 and built on the Bitcoin network, allows transfers of BTC between wallets without requiring direct interaction with the Bitcoin blockchain. To facilitate this integration, Coinbase collaborates with Lightspark, a Los Angeles-based company founded in 2022, which develops
products for businesses for the Lightning Network. According to Viktor Bunin, protocol specialist at Coinbase, the company opted for a non-custodial integration to take advantage of the specific optimizations of the Lightning Network’s design. Coinbase users will be able to choose between the main Bitcoin network and the Lightning Network when sending bitcoins, simply adding a Lightning invoice address generated by the recipient. Bunin emphasizes that this integration allows users to benefit from Coinbase’s security and user experience without having to personally manage a node or a Lightning Network channel, these aspects being managed by Coinbase and Lightspark.
Changpeng “CZ” Zhao, founder and former CEO of Binance, will learn today the length of his prison sentence, if any. Zhao pleaded guilty last November for violating the Bank Secrecy Act, a crime that could normally lead to up to ten years in prison. However, due to his plea of guilt and his cooperation with the authorities, the sentencing guidelines suggest a reduced sentence of about 18 months. A pre-sentencing report recommends that he spend only five months in detention. The recommendations between the defense and the prosecution are profoundly divergent: the U.S. Department of Justice has requested that he be sentenced to three years in prison, double what was anticipated in his plea agreement, while Zhao’s defense has pleaded for there to be no prison sentence, suggesting instead house arrest and probation. In addition, Zhao has agreed to pay a fine of $50 million, a fraction of his estimated net worth of about $43 billion. Meanwhile, Binance agreed to pay a fine of $4.3 billion the day Zhao pleaded guilty, and he also resigned from the company he had founded in 2017.
The cryptocurrency exchange platform Crypto.com recently announced that Eminem, the global music superstar, will replace Matt Damon as the spokesperson for their latest advertising campaign. Eminem has already shared the new commercial on X, anticipating its first broadcast which will take place Saturday during the NBA playoff game of the Los Angeles Lakers, taking place at the Arena bearing the name of Crypto.com. This initiative marks a potential renewal of celebrities in the promotion of cryptocurrencies, after the involvement of public figures in this area strongly declined following the FTX scandal. The one-minute spot, which will also be broadcast during other sporting events such as the Formula 1 Grand Prix in Miami and an upcoming UFC event, uses the slogan “Fortune favors the brave”. This slogan had already been used in a Crypto.com advertisement featuring Matt Damon, who subsequently became the butt of jokes, including in an episode of South Park. Damon explained that he participated in the campaign to support a water charity. Eminem, taking over, seems ready to inject new energy into Crypto.com’s marketing strategy, leveraging his broad influence to capture a global audience.
The software company MicroStrategy continues to increase its stock of bitcoins. By announcing its financial results for the first quarter of 2024, MicroStrategy revealed that it had acquired an additional 122 bitcoins for an amount of $7.8 million between April 1 and April 26. Although this purchase is less significant than some previous ones, it nevertheless brings the company’s total holdings to a new historical peak. As of the closing date of the report, Friday, MicroStrategy held 214,400 bitcoins, representing a value of $13.5 billion at the current market price. This amount represents more than 1% of the total bitcoins that will ever be created, with nearly 19.7 million BTC in circulation out of the 21 million planned. Despite a significant drop in the price of bitcoin compared to its historic peak of $73,737 reached in March, the firm continues to see the value of its investment grow, the average acquisition cost of MicroStrategy’s bitcoins being $35,180 per piece, while the current price is $63,026.
A solo Bitcoin miner recently defied the odds by solving a block and winning an impressive reward of $218,544. This miner, who solved block number 841286, became the 282nd solo miner in Bitcoin history to achieve this feat out of more than 841,000 mined blocks to date. Con Kolivas, the lead developer of the mining software provider CKpool, explained that this miner had contributed at a rate of 12 petahashes, or about 0.02% of the total network power, giving him a minimal chance of 0.02%, or about one in 5,000, of solving a block before all other miners and mining pools. Solo mining is an extremely challenging task due to several key factors, including competition with the entire hash rate and difficulty level of the network, which increase as new miners join the network. Typically, Bitcoin mining is done in collaboration within mining pools, where miners share the rewards. However, solo mining depends heavily on luck, as the rewards are directly linked to the miner’s ability to solve complex cryptographic puzzles. This uncertainty contrasts with the more stable and consistent rewards seen in pool mining. Currently, the Chinese mining pool Antpool and the American mining pool Foundry USA control 49% of the total hash rate of the Bitcoin network.
The analysts at Bernstein consider the slowdown in incoming flows into bitcoin ETFs as a “short-term pause” before a resumption of the bullish trend of bitcoin, aiming for a target of $150,000 by the end of 2025. According to them, this temporary slowdown in flows into bitcoin ETFs does not represent a worrying trend, but rather a phase of adaptation before these products are more widely integrated on private bank platforms, by wealth advisors, and on other brokerage platforms. Despite a significant drop in inflows since the peak of March 12, when they reached $1.05 billion in one day, the analysts remain optimistic about the adoption of bitcoin as an acceptable allocation in investment portfolios. Furthermore, Bernstein maintains its forecast that the total market capitalization of cryptocurrencies could triple to reach $7.5 trillion in the next 18 to 24 months, supported by several promising crypto sectors and projects. They specifically cite the dominant position of Solana in USDC stablecoin volumes and its integrations with Visa, Shopify, and Stripe, which bode well for increased potential for mainstream payments. The analysts also consider Uniswap, GMX, and Synthetix as key representatives of the DeFi sector, and the Ronin blockchain, with 11 new games and a monthly active user base of around 3 million, as a proxy for crypto gaming. They also highlight the growing importance of the real asset market, with more than $700 million managed in tokenized money market funds by BlackRock and Franklin Templeton, and tokenized U.S. Treasuries accounting for $1.3 billion on the blockchain. Chainlink is seen by the analysts as a key component of the infrastructure for this niche thanks to its data oracle and tokenization platform.
Please note that the author of these lines will be absent during the coming week. This letter will resume its normal course of publication during the week of May 13.
The presented information is as of April 30th, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
