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For just a minute yesterday, Bitcoin traded above $69,000, setting a new all-time high. However, this milestone triggered a massive profit-taking wave, leading to a series of liquidations. Just a few hours later, its value had dropped by up to 15%, temporarily falling below $60,000. This kind of volatility is characteristic of Bitcoin and has not been observed for a long time. Those who panicked and sold are probably regretting their decision now, as the price has significantly rebounded overnight. As of this morning, the price is virtually the same as it was 24 hours ago.
Long-time investors may recall a strikingly similar scenario from late 2020 when the price finally surged past $20,000, only to drop by 10% immediately afterward. Two weeks later, it broke through this level permanently and began a climb to $65,000. With the halving approaching in about forty days, a bullish scenario seems entirely plausible. Last night’s rebound demonstrates how the supply shock is genuinely taking shape, at least at the current price levels.
On March 5, BlackRock’s iShares Bitcoin Trust recorded a record inflow of $788 million, marking a notable acceleration of Bitcoin’s bull market. This figure surpassed the previous record of $612.1 million set on February 28. Amidst this positive momentum, Bitcoin reached a new all-time high and saw a significant increase in investments in spot Bitcoin ETFs in the US, with total inflows of $648.3 million that day. Among the ten approved ETFs, only Grayscale Bitcoin Trust and Invesco Galaxy Bitcoin ETF saw net outflows.
The day’s net inflows were primarily driven by BlackRock’s iShares Bitcoin Trust and supported by several other funds, including the Fidelity Wise Origin Bitcoin Fund and ARK 21Shares Bitcoin ETF, among others. In contrast, the Valkyrie Bitcoin ETF recorded no inflows. To date, the Bitcoin ETF ecosystem has attracted a total of $8.5 billion in inflows, despite ongoing outflows from GBTC. Historical data reveal that IBIT and FBTC have been significant contributors to the ecosystem’s inflows, raising billions of dollars without ever reporting net outflows. In contrast, GBTC’s Bitcoin holdings have decreased by 33%. These substantial investments and the current upward trend have propelled the combined transaction volume of US-based spot Bitcoin ETFs to over $10 billion.
Remarkably, for the first time since Bitcoin’s inception in 2009, both Bitcoin and gold reached new all-time highs on the same day. Bitcoin broke a new record by exceeding $69,200, while gold also set a new peak at $2,130, surpassing its previous record set in December. This concurrent record-setting is seen by the community as a repudiation of fiat currency value, with gold and Bitcoin often viewed as hedges against inflation and currency devaluation. This phenomenon occurs in a context where several factors, such as risk appetite, persistent inflation, record debt levels, and geopolitical tensions, are driving investors toward alternatives to traditional currencies. For Bitcoin, the excitement is amplified by anticipation of the upcoming mining reward halving and significant inflows into spot Bitcoin ETFs in the US.
Investment giant BlackRock has filed a prospectus with the US Securities and Exchange Commission (SEC) outlining its intent to incorporate new Bitcoin exchange-traded funds into its strategic portfolio. Named the Strategic Income Opportunities Fund, this fund plans to include Bitcoin investments among its diverse assets, while highlighting the associated risks of each investment. BlackRock intends to invest only in Bitcoin ETFs that are listed and traded on national securities exchanges and might also engage in Bitcoin futures contracts.
The US SEC has recently postponed, for the second time, its decision on a BlackRock application to create an Ethereum-based ETF. The initial application for the iShares Ethereum Trust was filed in November, and the SEC had already extended the deadline in January, citing the need for more time to review the application. Another extension until March 10 has been set but has been postponed again. This SEC hesitation affects not only BlackRock but also other cash Ethereum ETF applications from major firms like Fidelity, Invesco, and Galaxy Digital. Interest in cash Ethereum ETFs is soaring, particularly due to the resounding success of cash Bitcoin ETFs and Ethereum approaching its all-time high. Futures-based Ethereum ETFs have been available since October, but the market eagerly anticipates the approval of cash ETFs, especially as Ethereum’s upcoming Dencun network upgrade is viewed as a bullish signal. Analysts expect SEC decision delays to continue until the end of May, a critical period for ongoing applications, underscoring the strong demand accumulated for these investment products.
The Dencun update is heralded as a significant revolution for the Ethereum ecosystem, eagerly awaited by developers and marking a profound shift in how to design and build on this blockchain. Scheduled for March 13, this update generates considerable excitement among Ethereum enthusiasts, although its media buzz is less pronounced than the 2022 merge that
transitioned Ethereum to a more eco-friendly proof-of-stake model. Developers of major layer 2 networks built on Ethereum predict that Dencun will drastically reduce gas fees on these networks. The key innovation of Dencun is the introduction of proto-danksharding, a new temporary data storage system on Ethereum intended to replace costly permanent storage. This change should significantly lower gas fees, especially for transactions on layer 2 networks, theoretically benefiting users. Developers anticipate an immediate 75% reduction in gas fees on layer 2 networks post-Dencun implementation. Ultimately, this update could transform Ethereum from a country road to a multi-lane highway, greatly facilitating and accelerating traffic. Additionally, this evolution could lead to a future where gas fees are so negligible that crypto companies might cover them to attract users, making user experience on layer 2 networks virtually free of gas fees, while the Ethereum mainnet continues to play a crucial but less visible role in securing data and facilitating network communication.
Over 31.5 million ethers, valued at $115 billion, are now staked on Ethereum’s Beacon Chain, representing more than 26% of the total supply. This significant amount underscores the economic security of the blockchain, crucial for networks operating on a proof-of-stake basis, particularly after Ethereum’s transition to Proof-of-Stake during the merge. Compromising the network would require controlling a stake amount equivalent to half the total, about $57 billion, making any attack financially unfeasible. The substantial increase in ether staking was spurred by the April 2023 Shapella update, which allowed users and validators to withdraw their staked ether, leading to an additional influx of over 11 million ETH. Furthermore, the development of liquid staking solutions like Lido and Rocket Pool has simplified the staking process by enabling the staking of amounts less than 32 ETH and using staked assets as collateral in decentralized finance (DeFi), with Lido Finance validators representing over 31% of the total ETH staked.
MicroStrategy plans to raise $600 million through the private sale of convertible bonds to acquire more Bitcoin, thereby increasing its already substantial investments in this cryptocurrency. Holding the largest Bitcoin amount among public companies, with 193,000 BTC valued at over $13 billion following Bitcoin’s recent appreciation, MicroStrategy has also seen a significant rise in its stock price. Founded by Michael Saylor, a staunch Bitcoin advocate, the company began its Bitcoin acquisitions in 2020 and has continued investing even during market downturns. With an initial investment of $6.1 billion in Bitcoin, the value of its assets has more than doubled, reflecting a strategy firmly focused on increasing its Bitcoin holdings, despite market fluctuations.
As the price continues to flirt with record highs, the Rivemont crypto fund remains fully exposed to Bitcoin’s price.
The presented information is as of March 6th, 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.
