Bitcoin experienced a decline after wallets associated with the now-defunct Mt. Gox exchange transferred over $9 billion in BTC to an unknown wallet. This move, likely intended to repay creditors, has raised concerns about market volatility. On Tuesday morning, this wallet still held approximately $9.6 billion in Bitcoin. The previous day, Bitcoin had surpassed $70,000 following discussions between Argentina and El Salvador about adopting Bitcoin as legal tender.

Mt. Gox, founded in 2010 by Jed McCaleb and sold to Mark Karpelès in 2011, was one of the earliest and largest Bitcoin exchanges, handling up to 70% of global transactions at its peak. However, between 2011 and 2014, the platform faced hacks, service interruptions, and regulatory pressures. In 2014, after discovering the theft of 850,000 BTC, Mt. Gox went bankrupt. Approximately 200,000 BTC have since been recovered, but many creditors are still awaiting repayment. In September last year, Nobuaki Kobayashi, the trustee of Mt. Gox, extended the creditor repayment deadline to October 31, 2024.

The U.S. Securities and Exchange Commission (SEC) approved eight spot Ethereum ETFs on Friday, including those from BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton, in an omnibus order. This approval comes only four months after the first spot Bitcoin ETFs were approved. Although the 19b-4 forms have been validated, issuers still need to obtain the effectiveness of their S-1 registration statements before trading can begin. Discussions with the SEC on these statements have recently started, and it is uncertain how long this will take, though some analysts estimate it could last several weeks to several months.

The approval of the Ethereum ETFs was unexpected, as the SEC initially seemed reluctant to engage in discussions with issuers. However, the situation changed this week when the SEC suddenly requested the submission of 19b-4 forms. This turnaround has sparked speculation about political motivations. Bipartisan legislators had pressured the SEC to approve these ETFs, highlighting a natural progression after the approval of Bitcoin ETFs. As approval odds increased, the discount on the Grayscale Ethereum Trust narrowed from -24% to -6%. Analysts estimate that Ethereum ETFs could reach between $5 and $8 billion in assets, representing 10 to 15% of what Bitcoin ETFs have received.

Unlike Bitcoin ETFs, which began trading immediately after approval, Ethereum ETFs will have to wait several weeks or even months before trading can begin. This delay is due to the need for the U.S. SEC to approve the S-1 registration statements before trading starts. Although this might seem disappointing after the initial excitement, traders believe this delay could be beneficial. Zaheer Ebtikar, co-founder of Split Capital, explains that this delay allows market participants to prepare for the potential influx of funds into the ETFs, thus avoiding excessive price volatility. Simon Peters, an analyst at eToro, shares this view, emphasizing that this waiting period offers savvy investors an opportunity to buy Ethereum in anticipation of S-1 approval and the massive influx of capital. Peters recalls that Bitcoin’s price reached an all-time high after its ETFs were launched and wonders if Ethereum could see a similar rise, especially since it is currently 35% off its all-time high. Brian Rudick, an analyst at GSR Research, adds that this wait could increase publicity and anticipation around the ETF launch, thereby boosting initial flows and ETH prices. Ilya Paveliev, co-founder of Arete Capital, also notes a 26% increase in open interest, indicating that traders are looking to capture early momentum, although volumes should rise further at the ETF launch. Needless to say, the Rivemont Crypto Fund is among those looking to capitalize on any enthusiasm for ETH if it materializes in the coming weeks.

Bitcoin exchange-traded funds (ETFs) now hold over 1 million BTC. As of May 24, more than 30 Bitcoin ETFs collectively owned 1,002,343 BTC, or about 5% of the world’s circulating Bitcoin supply, with a total value of $70.5 billion. This information was shared by Michael Saylor, executive chairman of MicroStrategy. These holdings are almost five times larger than Saylor’s own holdings, which currently stand at 214,400 BTC, valued at $15 billion.

The majority of these Bitcoins are held in U.S. spot Bitcoin ETFs launched in January, which have broken all records for ETF launch performance. More than half of these funds are spread between the Grayscale Bitcoin Trust (289,040 BTC) and BlackRock’s iShares Bitcoin Trust (287,168 BTC). Other major funds include the Fidelity Wise Origin Bitcoin Trust (161,538 BTC), the Ark 21Shares Bitcoin ETF (48,444 BTC), and the Bitwise Bitcoin ETF (36,185 BTC). Internationally, the largest Bitcoin ETF remains Canada’s Purpose Bitcoin ETF, the first to be launched globally, with 27,110 BTC. Bitcoin ETFs allow investors to gain exposure to Bitcoin through a familiar ETF framework, including the asset among other securities in a retirement account or other tax-advantaged account. They also provide large institutions with a way to gain Bitcoin exposure when they cannot directly buy coins on a cryptocurrency exchange. In the first quarter, more than 20% of U.S. spot Bitcoin ETF exposure was held by large investors and institutions with more than $100 million in total assets, including major hedge funds, banks, and even the Wisconsin State Pension Fund.

According to a Bernstein report, Bitcoin and Ether exchange-traded funds (ETFs) could see inflows of over $100 billion over the next two years. Analysts Gautam Chhugani and Mahika Sapra predict that the Bitcoin and Ether ETF markets will reach a total value of $450 billion, based on their cryptocurrency price forecasts. They anticipate a cycle peak for Bitcoin at $150,000 in 2025, with a price target of $90,000 by the end of the year. The report highlights that the classification of Ether as a commodity rather than a security has resolved the biggest controversy surrounding this cryptocurrency. Ether thus becomes the first proof-of-stake token to be approved as a spot ETF, paving the way for the evolution of a blockchain asset from a token sale. This approval has positive implications for other blockchain tokens, which could follow this precedent, and Solana (SOL) could benefit. Bernstein predicts that the approval of a spot ETF on Ether will have favorable repercussions for rival tokens like Solana.

Semler Scientific, a NASDAQ-listed company under the ticker SMLR, announced that it had acquired 581 Bitcoins for $40 million, including fees, adopting Bitcoin as its primary treasury reserve asset. Eric Semler, the company’s chairman, emphasized that this decision reflects their belief that Bitcoin is a reliable store of value and an attractive investment capable of generating significant returns as it gains acceptance as “digital gold.” Following this announcement, SMLR’s stock price jumped 33%, reaching $31.08, marking a strong recovery after continuous losses since its annual high of $51 in February. The company’s total market capitalization now stands at $216 million. This move is part of a growing trend among small businesses adopting Bitcoin to spur growth, inspired by the success of MicroStrategy, whose market value has increased by more than 1000% since its first Bitcoin purchase in 2020. Similarly, Metaplanet, a Japanese company that pivoted to Bitcoin, nearly tripled in value after announcing its Bitcoin strategy less than two months ago. Semler views Bitcoin as a rare and limited asset, surpassing gold as a safe haven and store of value, especially after the institutional success of Bitcoin ETFs launched in January. Bitcoin will become Semler Scientific’s primary cash reserve, subject to market conditions and anticipated liquidity needs.

Riot, a major Bitcoin mining player, announced its intention to acquire Bitfarms, a smaller miner, in a hostile takeover. This merger would create the largest publicly traded Bitcoin mining company. Riot revealed that it made a private proposal last month, which was rejected by Bitfarms. Currently, Riot holds 9.25% of Bitfarms, becoming its largest shareholder, and proposes to buy all shares for $2.30 each. Following this announcement, Bitfarms’ shares rose nearly 8%, reaching $2.18. Riot’s executive chairman, Benjamin Yi, expressed disappointment with Bitfarms’ board of directors for not engaging in substantive discussions. He is convinced that Bitfarms shareholders will find their proposal more attractive than the company’s independent trajectory. Riot’s CEO, Jason Less, criticized Bitfarms’ management, particularly after the firing of former Bitfarms CEO Geoffrey Morphy, who has filed a lawsuit for breach of contract, claiming $27 million in damages. Less expressed concerns about the interests of Bitfarms’ founders, Nicolas Bonta and Emiliano Grodzki, for shareholders, due to this legal dispute.

Ryan Salame, former co-CEO of FTX Digital Markets, was sentenced to seven and a half years in prison after pleading guilty to criminal charges last year. Judge Lewis Kaplan of the Southern District of New York delivered the sentence on Tuesday. In addition to the prison term, Salame will serve three years of supervised release, pay a $6 million forfeiture, and over $5 million in restitution, according to the U.S. Department of Justice. Prosecutor Damian Williams stated that Salame contributed to FTX’s rapid and illegal growth by leading an illicit political influence campaign and operating an unlicensed money transmission business, thereby undermining public trust in U.S. elections and the financial system’s integrity. Salame had hoped for a maximum prison sentence of 18 months, arguing that he did not play a central role in the fraudulent activities and lost much of his personal fortune during FTX’s collapse in November. However, prosecutors sought a five to seven-year sentence, asserting that Salame committed serious crimes to favor FTX’s growth and enhance Sam Bankman-Fried’s image. Other former FTX executives, including Caroline Ellison, Gary Wang, and Nishad Singh, have also pleaded guilty and testified during Bankman-Fried’s trial, who was sentenced in March to nearly 25 years in prison for criminal fraud.

QCP Capital’s analysis indicates that Bitcoin’s price strength is not threatened by the Mt. Gox sell-off, with several factors aligned to boost crypto markets. They argue that these declines are mere “accidents” in a general upward trend. According to the analysts, these supply anxiety episodes are minor interruptions in a broader bullish trend towards the end of the year. QCP Capital highlights three reasons why investors should remain optimistic. First, the good performance of U.S. stocks could spill over into cryptocurrencies. Second, there is growing political support in the U.S., with legislative initiatives to clarify digital currency regulations and a positive SEC turn regarding Ether ETFs. Third, the imminent adoption of spot ETFs on Ether should strengthen the market. Technically speaking, the outlook remains positive, especially when focusing on the long term, notably with the weekly price chart for BTC.

The presented information is as of May 29th, 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.