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As June started cautiously in traditional stock markets, Bitcoin’s outlook appears bright. At the time of writing, the price has surpassed the $71,000 mark. The key factor behind this newfound investor confidence seems to be the American Bitcoin ETFs registering their second-highest daily inflow of $886.75 million yesterday, according to the data analytics platform Sosovalue. Moreover, the total net inflow since the creation of Bitcoin ETFs is nearing $15 billion. Should we remind ourselves that only 450 bitcoins are created per day presently? A supply shock seems increasingly inevitable.
Three investment firms, Franklin Templeton, VanEck, and Invesco Galaxy, have made significant progress in the race to launch an Ethereum spot ETF. They recently submitted amended S-1 forms to the U.S. Securities and Exchange Commission. This move brings them closer to materializing a product that will allow investors to bet on the price of Ethereum without directly purchasing the cryptocurrency. Franklin Templeton stands out by announcing a management fee of 0.19% for its Ethereum ETF. This decision could trigger a price war among competing products, as it is the lowest fee in the market to date for a Spot ETH ETF. It is worth noting that Franklin Templeton already applies the same rate to its Bitcoin Spot ETF (EZBC), which is also the most affordable in its category.
Ethereum ETFs could attract $4 billion in the first five months: a sum proportional to Ethereum’s institutional dominance next to Bitcoin and the success of Bitcoin spot ETFs. According to K33 Research, Ethereum ETFs are expected to perform similarly to their Bitcoin-based predecessors, attracting $4 billion in inflows within five months of their launch. This estimation is based on Ethereum’s relative global assets under management (AUM) market share compared to Bitcoin, which is 28%. Currently, Chicago Mercantile Exchange (CME) ETH futures contracts represent 23% of Bitcoin’s, reflecting a similar market share in another institutionally focused market. Up to June 3, U.S. Bitcoin ETFs had absorbed $13.9 billion since their January launch. Globally, Bitcoin ETFs now control over 1 million BTC, comprising over 5% of the circulating BTC supply. Conversely, institutional funds currently control 3.3% of the circulating ETH supply. Based on this reference, K33 predicts Ethereum ETF flows ranging from $3.1 to $4.8 billion after launch, representing between 750,000 and 1 million ETH, or 0.65 to 0.85% of ETH’s circulating supply.
The SEC’s approval of ETFs directly tied to Ethereum last May could potentially undermine its own efforts to crack down on cryptocurrencies. Indeed, this decision implicitly recognizes Ethereum as a commodity rather than a financial security. However, commodity regulation falls under the jurisdiction of another federal agency, the Commodity Futures Trading Commission (CFTC), whose rules are generally less stringent than those of the SEC. This distinction has significant implications for ongoing legal actions initiated by the SEC against cryptocurrency exchanges like Coinbase and Kraken. If Ethereum and similar tokens are considered commodities, the SEC’s primary argument that they are financial securities would be invalidated. This could lead to the abandonment of lawsuits and deal a blow to the policy of Gary Gensler, the SEC chairman, who has been accused of stifling innovation in the cryptocurrency sector in the United States.
Bitcoin transaction volume reached an annual peak last May, exceeding $25 billion. This high activity did not result in a significant increase in the number of individual transactions, which remained stable compared to previous months. This potentially indicates that larger transactions occurred, possibly involving institutional investors or capital movements between exchanges. Despite this surge in activity, daily exchange volume on platforms remained typical.
Vitalik Buterin, the creator of Ethereum, revisits the Bitcoin block size war. He admits that the small block camp, which aimed to maintain a lightweight and decentralized blockchain, was right compared to supporters of big blocks who favored increasing transaction capacity. According to Buterin, advocates of big blocks lacked the technical skills to implement their vision effectively. Their proposals for radical changes to the Bitcoin code (hard forks) lacked rigor and could have led to absurd situations. In contrast, small blocks avoided technical missteps and successfully preserved Bitcoin’s decentralization by avoiding the influence of centralized groups. However, the debate on Bitcoin scalability is not closed.
Indeed, some developers, like Matt Corralo, fear that Bitcoin may not survive long-term without efficient scaling solutions that don’t involve intermediaries. Vitalik Buterin believes that the best way to address these issues is not through compromise but through technological innovation. He specifically mentions ZK-SNARKs, a scaling and transaction privacy solution absent from past discussions. This technology would enable processing a large number of off-chain transactions before aggregating them into a single ultra-efficient transaction on the Bitcoin blockchain. Projects like BitcoinOS leverage these technologies to create decentralized rollups on Bitcoin, capable of increasing the network’s transaction capacity tenfold. These solutions could render the debate on block size obsolete and pave the way for new applications built directly on Bitcoin.
El Salvador is doubling down on its efforts to promote Bitcoin adoption. The country recently welcomed a subsidiary of Bitcoin mining company Ocean, backed by Jack Dorsey, and ARK Invest CEO Cathie Wood met with President Nayib Bukele to discuss using Bitcoin and artificial intelligence to stimulate economic growth. Additionally, Argentina has expressed interest in collaborating with El Salvador on Bitcoin. It’s clear that the country’s efforts are not fading; quite the opposite. However, despite its enthusiasm, Bitcoin adoption in El Salvador remains mixed. Only a small fraction of expatriate fund transfers are conducted in cryptocurrency, and the country has faced criticism from international financial institutions and some US officials.
Analyst Willy Woo asserts that if the price of Bitcoin reaches $72,000, it could trigger a series of massive liquidations, paving the way for new historic highs. Woo shared this perspective in a post dated June 5 to his 1.1 million subscribers, explaining that this price level would serve as a “trigger,” liquidating around $1.5 billion worth of short positions until reaching $75,000 and a new absolute record. A possible rise above $72,000 could lead to the liquidation of $800 million worth of leveraged short positions across all platforms, according to CoinGlass. Beyond $72,500, over $1.2 billion worth of leveraged short positions would be liquidated. Although Bitcoin is currently down 3.4% from its previous historic high of $73,740 reached on March 14, analyst Rekt Capital indicates that the post-halving “danger zone” distribution phase of Bitcoin ended on May 6, confirming the end of the post-halving danger zone. Technically speaking, the daily chart depicts a classic “cup and handle” pattern, a bullish scheme that could propel the price substantially higher if historic highs are soon breached.
The Rivemont crypto fund is currently exposed to 88% BTC and 12% SOL.
The presented information is as of June 5th, 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.
