February 4th, 2025
Market Overview:
Digital assets experienced a mixed week of trading, as Bitcoin pulled back slightly from international macroeconomic chaos, whilst Ether and altcoins lagged.
- Bitcoin performed well in early trading, before being hit hard during weekend trading whilst other markets were closed during uncertainty around Donald Trump’s tariff threats
- Bitcoin fell from a Thursday high of $106,220 to a Sunday low of $92,260, before staging a brief recovery back above $100,000 on Monday
- However, Ether and other altcoins suffered more than Bitcoin, as digital assets with smaller market capitalisation bore the brunt of risk-off behaviours, experiencing their worst week in over two years
- Ether’s dropped from a Friday high of $3,430 to a Monday low of $2,327 amidst cascading liquidations
- Overall industry market capitalisation lost $250bn, dropping to $3.25tn
- According to industry monitoring site DeFi Llama, total value locked in DeFi fell nearly $10bn to $109.9bn
Digital assets faced challenges this week, as their 24/7/365 trading hours exposed them to greater uncertainty over international tariff policy whilst other markets were closed for the weekend. Despite market chaos, adoption news remained encouraging; the Czech central bank’s governor advocated for the country to seek Bitcoin exposure, ETFs performed strongly, stablecoin issuer Tether reported a record profit, Trump Media declared plans to invest up to $250m in digital assets, and political perceptions continued to shift positive internationally.
What happened: Czech central bank explores 5% Bitcoin allocation
How is this significant?
- On Wednesday, the Financial Times reported that Czech National Bank (CNB) governor Aleš Michl is pushing for the country to be the continent’s first to adopt Bitcoin reserves as a matter of policy
- He told the FT that the CNB could eventually allocate up to 5% of its €140bn reserves in Bitcoin. According to CNB data, if it had held 5% of its foreign reserves in Bitcoin over the past decade, its annual returns would have increased by 3.5 percentage points (albeit with an increased volatility profile)
- If allocated at the maximum 5% threshold, Czechia's Bitcoin reserves would be larger than its gold reserves; further proof of "digital gold's" appeal in an increasingly digital world
- When asked about the rationale behind this proposal, the central bank governor explained "For the diversification of our assets, Bitcoin seems good... I think the trend would be an increase without those [Trump] guys as well, because it’s an alternative [investment] for more people"
- This would make the Czech Republic first in the EU to officially adopt Bitcoin as a reserve asset, although the list of other countries, states, and municipalities is growing by the day (reserve bills have recently been proposed and advanced in Texas, Arizona, and Utah, amongst others)
- However, there was opposition voiced by major figures in European and national finance; ECB chief Christine Lagarde and Czech Finance minister Zbynek Stanjura both spoke out against the plan, citing concerns over volatility
- Lagarde in particular was adamant that Eurozone central banks would not seek Bitcoin exposure—but although Czechia is an EU state, it maintains the Korun a as its national currency rather than the Euro
- Michl acknowledged concerns about volatility, but told the FT "Of course, if you compare my position with other bankers, then I’m the one entering the jungle, or the pioneer. I used to run an investment fund, so I’m a typical investment banker I would say, I like profitability"
- On Thursday, the CNB board released a statement approving the proposal "to assess whether it would be appropriate in terms of diversification and return to include other asset classes in the reserves"
- Czechia has progressive pedigree in the digital asset space; it is home to both the first Bitcoin mining pool (Slush Pool), and the first major hardware wallet manufacturer (Trezor)
- Trezor's Bitcoin analyst Lucien Bourdon commented "If approved, this decision could mark a turning point—not just for the Czech Republic, but for the global adoption of Bitcoin as a tool for national economic strategy".
- He added "As inflation erodes fiat’s purchasing power and Bitcoin continues to grow, the question isn’t whether central banks should hold Bitcoin—but whether they can afford not to"
What happened: ETF News
How is this significant?
- Digital asset ETFs performed strongly this week, bypassing the weekend’s broader crypto market meltdown by virtue or their limited trading hours
- According to CoinShares data published on Monday, digital asset investment products experienced $527m inflows in the week ending Friday the 31st
- Bitcoin dominated this figure, accounting for $486m, whilst XRP product inflows exceeded Ether’s
- Total January inflows for Bitcoin amounted to $5.25bn, up from $4.53bn the previous month
- BlackRock’s IBIT accounted for $3.23bn, followed by Fidelity’s FBTC ($1.28bn)
- Spot Bitcoin ETFs exhibited several muted trading days well below the average range, but moved back into comfortable nine-figure territory after Tuesday witnessed one of the smallest inflow figures since the ETFs launched more than a year ago, as the products added $18.4m in total; well below the average daily inflows of $152.8m
- This was followed by $92m inflows on Wednesday, which included (very) rare outflows for IBIT, which shed $28.4m
- However, heading into the weekend, normal form was resumed, with net daily flows of $588m and $319m
- IBIT constituted the bulk of this recovery, accounting for around $322m and $364m respectively
- The week’s other major gainers were Grayscale’s 0.15% fee mini ETF on Wednesday ($106m), and FBTC on Thursday ($209m)
- In the wake of the weekend’s crypto crash, Bloomberg’s chief ETF analyst Eric Balchunas provided some perspective on performance from a TradFi investor’s perspective; “Bitcoin’s one year return is now down to +110%. The horror!... For context, I'm a 60/40 investor and I expect maybe 7% a year, am thrilled with 10-15% a year. Think about that”
- Spot Ether ETFs had mixed performance, as Tuesday and Wednesday sported net zero and minor outflows (-$4.7m), before delivering $68m and $28m inflows the following days
- BlackRock’s ETHA fund once again dominated, mitigating outflows from Grayscale by adding $80m and $57m
- In other ETF news, the SEC approved a combined Bitcoin-Ether ETF from Bitwise, weighting the assets by their relative market capitalisation
- Bitwise and Grayscale both filed for DOGE ETFs, attempting to leverage the popularity of the oldest and most popular “memecoin” in the space (which also influenced the naming of Elon Musk’s new Department of Government Efficiency)
- 21Shares filed for a Polkadot ETF in the US
- Additionally, Purpose Investments filed for the first XRP-based ETF in Canada
- The firm hopes to launch the first XRP ETF in the world, counting on Canadian regulators to move quicker than their neighbours to the south
- CME Group launched options on Bitcoin Friday Futures, priced at 1/50th of a Bitcoin
- Giovani Vicioso, group head of crypto products, stated “Building on the success of our Bitcoin Friday Futures, the smaller size of these contracts, along with daily expiries, offer market participants a capital-efficient toolset to effectively adjust their Bitcoin exposure”
What happened: Tether reports $13bn annual profit
How is this significant?
- Leading stablecoin issuer Tether released its latest financial attestations this week, revealing a record $13bn annual profit
- The attestations from BDO—which unlike full audits reflect just a snapshot of time—are released quarterly, with the latest statement claiming Q4 issuances of $23bn USDT, and more than $7bn in excess reserves
- Bloomberg notes that the latest attestations indicate the firm is more profitable than major Wall Street institutions; Goldman Sachs reported net income of $14.3bn last year on revenue of $53.5bn, but features far higher headcount than the stablecoin issuer
- Tether recently moved its corporate headquarters to El Salvador, one of the most pro-crypto administrations in the world
- On Thursday at a Bitcoin conference in San Salvador, Tether announced it was expanding its USDT stablecoin onto the Bitcoin blockchain and its Lightning Network scaling solution
- Elizabeth Stark of Lightning Labs commented “Millions of people will now be able to use the most open, secure blockchain to send dollars globally. Bringing USDT to Bitcoin combines the security and decentralization of Bitcoin with the speed and scalability of Lightning”
- In other sector news, stablecoin development platform Cedar Money closed a $9.9m seed round this week, aiming to scale payment infrastructure “and tackle the inefficiencies in international payments with this funding”
- The firm views cross-border transactions as a key factor for a growing product-market fit for the asset class, noting that “Businesses across Africa, the Middle East, and South America need US Dollars to pay for imports, even when buying from countries like China… getting USD can be a struggle due to weak local currencies like the Naira or the Argentine Peso”
What happened: Tesla gains $600m Bitcoin boost thanks to accounting changes
How is this significant?
- Electric car giant Tesla recently reported a $600 million mark-to-market benefit on its Bitcoin holdings, after new accounting regulations allowed them to be recorded at more contemporary values
- The Financial Accounting Standards Board regulations requiring assets to be logged at fair value don’t fully come into effect until later this year, but earlier adoption is permitted
- Chief Financial Officer Vaibhav Taneja revealed in the latest quarterly earnings call that Tesla’s digital asset holdings were valued at $1.08bn; up from $184m across the previous four accounting periods and standards
- Last week featured another recent accounting victory for the industry, as the SEC revoked SAB 121—a controversial accountancy guideline that required banks to record custodied digital assets as liabilities on their own balance sheets
- This thus made custody of such assets prohibitively costly for many institutions, leading several banks to voice interest in industry entry since the repeal
- In other digital asset accounting news, industry accounting platform Cryptio concluded a $15m funding round to “provide traditional financial (TradFi) entities with back-office operations and infrastructure that allow them to offer digital asset products such as stablecoins, crypto-backed loans and crypto savings”
What happened: Trump Media to invest up to $250m across DeFi through Charles Schwab
How is this significant?
- In a press release this week, Trump Media announced the creation of a new fintech platform called Truth.Fi
- To diversify the current $700m of cash (and equivalent) reserves, the company board has approved $250m of investment, to be custodied by Charles Schwab
- This $250m allocation has the remit to be invested in SMAs (developed by Schwab), ETFs, and "Bitcoin and similar crypto assets or crypto-related securities"
- Trump Media chairman Devin Nunes commented “Truth.Fi is a natural expansion of the Truth Social movement… we’re moving into investment products and decentralised finance”
- Shares in the company jumped by 10% when the news was announced on Wednesday, and appear a further reflection of Trump’s support for digital assets in general
What happened: Political News
How is this significant?
- The Wall Street Journal noted a more conciliatory tone towards the digital asset industry since the new Republican administration entered power in the US, and events this week seem to reinforce that political shift
- Reports on Monday suggested that new government “Crypto Czar” David Sacks plans to hold a press conference on Tuesday to discuss United States leadership in the digital asset space
- Alongside Sacks, Senate Banking Committee chair Tim Scott and House Financial Services Committee chair French Hill are also expected to speak at the event
- Speaking to FOX News last week, Sacks confirmed that his working group was actively exploring the creation of a Bitcoin reserve, and noted the bill submitted by senator Cynthia Lummis of Wyoming
- Additionally, Donald Trump signed an executive order of a US sovereign wealth fund (to be deployed within a year), which could potentially hold Bitcoin
- In a conversation on his site X (formerly Twitter), Elon Musk confirmed that the Department of Government Efficiency (DOGE) was open to using blockchain in order to control Treasury spending
- Norway’s sovereign wealth fund increased its indirect Bitcoin exposure by 153% over the last year, through investments in crypto-native or -adjacent firms including Coinbase, MicroStrategy, and Bitcoin miners Marathon, Riot Blockchain, and Canaan
- K33 Research analyst Vetle Lunde however noted that “It is important to highlight that this exposure likely derives from rule-based sector weighting rather than a deliberate choice to prioritise Bitcoin exposure”
- Reuters reported regulators in India reconsidering industry rules in light of shifting international opinion
- Economic Affairs Secretary Ajay Seth told the news organisation that discussion papers may be delayed in order to capture changing circumstances; “More than one or two jurisdictions have changed their stance towards crypto assets in terms of the usage, their acceptance, where do they see the importance of crypto assets”
- El Salvador modified its Bitcoin legislation in order to comply with the terms of a recent $1.4bn IMF loan
- In practical terms, the changes are minimal and passed almost unanimously; Bitcoin acceptance is now voluntary within the private sector rather than mandatory, but the asset remains legal tender in the country
- South Korea’s pricing premium hit a ten-month high of 9.7% during the weekend’s mass liquidation events, thanks to the country’s strictly localised crypto exchange ecosystem
- Capital controls complicate any arbitrage attempts to Korean traders, generally leaving them paying more than counterparts in the rest of the world with access to international exchanges
What happened: MicroStrategy attracts over $560m for preferred stock sales
How is this significant?
- Enterprise software firm MicroStrategy recently approved a new system of preferred stock sales as a new means of funding Bitcoin purchases—and Micro’s strategy appears to have paid off handsomely, as it attracted $563.4m of buys
- The company intends to use this capital for “general corporate purposes”—which in MicroStrategy’s case predominantly means future Bitcoin purchases
- Founder and chairman Michael Saylor recently featured on the cover of Forbes as “The Bitcoin Alchemist”, in an article which opined that the company’s Bitcoin balance sheet approach “Isn’t just a giant Bitcoin bet; it’s a revolution in corporate finance”
- Meanwhile, Japan’s Metaplanet undertook the largest-ever raise by an Asian-listed company for the purposes of Bitcoin acquisition, accruing over $745m to fund future buys
- Effectively known as “Asia’s MicroStrategy”, the Japanese hotel operator has pivoted to a “Bitcoin first, Bitcoin only” approach for its reserves
What happened: Tokenisation news
How is this significant?
- Dutch banking giant ABN AMRO conducted an on-chain cross-border tokenised trade this week, exchanging tokenised assets for stablecoins
- The trade was conducted with Frankfurt-based 21x, and executed on Ethereum scaling solution Polygon’s Amoy testnet
- In a joint statement, the firms said “The deployment of 21x's on-chain order book smart contract enabled trading between tokenised cash and the tokenised asset in one single transaction”
- $730bn AUM firm Apollo has launched its own tokenised fund in conjunction with tokenisation specialists Securitize
- The Apollo Diversified Credit Securitize Fund (ACRED) is being launched across a variety of blockchains, including Solana, Ethereum, Avalanche, and Polygon
- Apollo’s digital asset and AI head Christine Moy told industry publication Coindesk ““For those that are trying to build a diversified portfolio on-chain, it serves as a higher yielding complement to stablecoins, tokenized treasuries and money market funds,” Moy said in an interview. “But it’s also a diversifier to the more volatile crypto native yield products that are out there. So it can help complete the picture of the different assets you would need in an on-chain diversified portfolio”
- Thailand’s SEC is currently developing a blockchain-based platform to allow tokenised debenture trading by securities firms