November 29th, 2024
Market Overview:
Digital assets consolidated after several weeks of explosive growth, as a pullback from Bitcoin was counteracted by strong momentum for several major altcoins.
- Bitcoin cooled off after several weeks of explosive growth, which saw it gain nearly 50% since the US election, as it surged from $68,000 on November 5th to a new record high of $99,660 last Friday the 22nd
- After proving unable to break through $100,000 at the first attempt, widespread profit-taking and de-risking dropped Bitcoin down to a weekly low of $91,100 on Tuesday (still over $23,000 above its pre-election levels), before rallying to regain some lost ground
- Ether outperformed Bitcoin, breaking through both $3,500 and $3,600 for the first time since June
- Ether peaked at $3,678 on Thursday, up from a weekly low of $3,270 on Tuesday
- Overall industry market capitalisation reached a new record of $3.3tn, as strong Ether performance was backed by large increases for several other major (top 20) altcoins, including Ripple’s XRP (+10.2%), Cardano’s ADA (+17.6%), Avalanche’s AVAX (+18.2%), and most impressively Stellar’s XLM (+72.3%)
- At the time of writing, the vast majority of the top 100 digital assets by market capitalisation exhibited growth over the last seven days, with many in the double-figures
- According to industry monitoring site DeFi Llama, total value locked in DeFi grew by over $7bn, for a current value of $123.5bn
The digital asset market continued performing strongly, as altcoins grew whilst Bitcoin consolidated and took a breather. Ether outperformed “digital gold” this week, posting consistent ETF inflows and hitting its highest levels since June. Political reporting continued to dominate, as Trump nominated more pro-crypto appointees to his cabinet and outgoing regulators faced yet another legal loss. The idea of a Bitcoin reserve continues to gather steam on national, local, and corporate levels, stablecoin adoption soared to new heights, and much more.
What happened: ETF News
How is this significant?
- Digital asset ETFs once again showcased mixed performance—albeit with Ether ETFs showcasing inflows whilst Bitcoin products cooled off after last week’s record performance
- According to CoinShares data published on Monday, digital asset investment product inflows experienced record inflows in the trading week ending November 22nd
- In total, they added $3.13bn, further increasing this year’s record inflows to $37bn
- Bitcoin’s recent all-time highs led to Bitcoin products (predominantly spot ETFs) dominating said week’s flows, adding $3bn—or an average $600m per day
- That was equivalent to around ten times the Bitcoin mined last week, indicating the effects of potential supply versus demand dynamics in a post-halving landscape
- However this week, spot Bitcoin ETFs experienced net outflows at the time of writing, in a trading period truncated by America’s Thanksgiving holiday
- Monday witnessed $435m outflows, as no fewer than four funds (Fidelity’s FBTC, Bitwise’s BITB, ARK Invest’s ARKB, and Grayscale’s GBTC) posted nine-figure outflows
- Despite this, BlackRock’s IBIT still managed nine-figure inflows on Monday, with $268m
- Tuesday also saw outflows, albeit at a lower level ($123m), dominated almost entirely by FBTC ($96m)
- Before Thursday’s trading break, the ETFs moved back into inflow mode as Bitcoin’s price recovered after sell-offs ahead of the milestone $100,000 mark
- In total, the ETFs added $103m on Wednesday, as ARKB and BITB made back some of their earlier losses, adding around $40m and $48m respectively
- Ether ETFs were buoyed by the underlying asset’s positive performance this week, responding to last week’s outflows with four consecutive days of inflows
- This included the addition of $91m last Friday, followed by around $3m, $41m, and $90m from Monday to Wednesday
- The big winner within Ether ETFs was BlackRock’s ETHA, which added nearly $100m on Friday, and $50m on Tuesday
- Other significant increases were posted by Fidelity’s FETH and Grayscale’s 0.15% fee mini-ETF, with inflows of $38m and $37m each
- Elsewhere in the digital asset spot ETF complex, filings currently stand at four proposed Solana funds, three for Ripple’s XRP, and one each representing Litecoin and Hedera’s HBAR
- Some such products already exist in Europe; Bitwise renamed its Deutsche Börse Xetra-traded Ripple fund to GXRP, announcing Ripple as an investor for the $80m AUM product
- Bloomberg ETF analyst James Seyffart noted that he and his colleague Eric Balchunas “expect this list [of altcoin ETF filings] to grow exponentially in the next year”
- Additionally, Bitwise joined Hashdex in filing for a combined Bitcoin/Ether ETF, featuring exposure weighted by market capitalisation
- Bitcoin bears also benefited from ETF exposure this week, as the ProShares short and “ultrashort” ETFs both notched their highest inflows of the year as Bitcoin rested and recuperated after its recent record run
What happened: Political news
How is this significant?
- The post-election landscape in the USA—and expectations of a crypto-friendly Republican regime—continued to impact reporting this week
- Following Trump’s recent nomination of Cantor Fitzgerald head Howard Lutnick as future Commerce Secretary; another digital asset advocate was earmarked for another key cabinet role; hedge fund boss Scott Bessent to lead the Treasury
- As the BBC and CNBC point out, Bessent has showcased open support for the asset class; “Bessent has been a strong proponent of Trump’s embrace of the crypto industry. Such support would make him the first treasury secretary to openly champion crypto assets, sending a clear signal that Trump is serious about establishing the US as the ‘crypto capital of the planet’.”
- The potential creation of a “Crypto Czar” role to lead industry legislation continued to dominate speculation, although at the time of writing it remains unconfirmed
- Presumed “Czar-elect” (and former CFTC chair) Chris Giancarlo told industry publication TheBlock that crypto is a “considerable priority” for the new administration; “Trump has been very specific in laying out a series of initiatives to make the United States the crypto capital of the world”
- Prominent VCs (including co-founders of pro-crypto Andreessen Horowitz) could join digital asset advocates Elon Musk and Vivek Ramaswamy in the newly-formed Department of Government Efficiency (DOGE)
- Trump also reportedly identified another crypto asset proponent as his chosen SEC chair; former SEC commissioner Paul Atkins
- During his time on the commission, Atkins was known for his balanced regulatory approach, and crypto expertise
- However, despite industry-friendly appointments (or rather, nominations), Bitcoin experienced its longest post-election losing streak this week, pulling back sharply after failing in initial attempts to scale the $100,000 mark
- Industry analysts remained calm in the face of the price movements; Valentine Fournier of BRN explained “Such profit-taking is natural after a strong accumulation phase, and we anticipate these outflows will not last more than 2–3 days before institutional demand returns”, and Bloomberg’s Eric Balchunas saw fit to joke about an inverse relationship between a certain pundit’s hype and usual market response
What happened: “Bitcoin Reserve” concept gathers support among legislators
How is this significant?
- The idea of national, and local, strategic Bitcoin Reserves gained more attention this week, as debate grew around the idea of supplementing traditional gold with the so-called “digital gold” developed by Satoshi Nakamoto
- The Washington Post reported “crypto leaders offer a series of rosy predictions about the fiscal benefits of a new federal crypto cache—claiming, for example, that the projected rise in bitcoin prices could help the government pay down its debt, now around $36tn”
- S&P Global MD Andrew O’ Neill explains this rationale, saying “The case for it is, if it behaves as proponents say it will, and the purchasing power of the fiat U.S. dollar continues to decline relative to Bitcoin over time, ... [you can use it] to pay off a significant chunk of national debt. You break that spiral of ever-increasing indebtedness”
- Acknowledging the potential economic effects of a US Reserve accumulating up to one million Bitcoin, other locations are now proposing their own reserves before American buying power enters the market
- Brazilian lawmaker Eros Biondini submitted a bill to create an $18.6bn “Sovereign Strategic Reserve” (RESBit) to “modernise the technological and finance management in Brazil”
- This would equate to around 5% of the country’s international reserves
- Biondini’s bill argues that “Although volatile, data indicates that crypto is consolidating as a legitimate asset class. Countries that adopt strategies to integrate them economically will sow significant benefits in the medium and long terms… The formation of RESBit is a strategic measure that positions Brazil at the leadership of the new digital economy, reducing economic risks and amplifying the technological and financial development opportunities”
- Brazil appears as likely a candidate as any for such an endeavour, currently ranking 10th in the global crypto adoption index
- On a more local level, Vancouver mayor Ken Sim outlined plans for a Bitcoin reserve, believing that “Bitcoin offers a unique opportunity to protect against the erosion of value”
- Titled “Preserving the city’s purchasing power through diversification of financial resources: Becoming a Bitcoin-friendly city”, the motion will be debated at a city council meeting in mid-December
- deVere Group CEO Nigel Green advocated for the UK to follow suit, stating “The benefits of a Bitcoin reserve extend beyond simple asset appreciation. By holding Bitcoin, the UK government could diversify its reserves, reduce reliance on traditional fiat currencies, and increase fiscal flexibility”
- In a blog post, the investment advisor declared “Bitcoin’s deflationary nature and its ability to appreciate over time make it a natural candidate for a sovereign wealth asset. Unlike gold, Bitcoin is easily transferable, inherently digital, and rapidly gaining acceptance as a store of value among institutions and individuals worldwide”
- Green added “The establishment of a strategic Bitcoin reserve would be a bold, visionary step that aligns with the growing momentum in digital finance worldwide”
What happened: Deutsche Bank invests in blockchain payments network
How is this significant?
- Finance titan Deutsche Bank was welcomed as a strategic investor in the Series B round of blockchain payments network Partior this week
- In total, the round raised $80m, and Deutsche joined other TradFi heavyweights in backing the firm, including Standard Chartered, JP Morgan, DBS, and Singapore sovereign wealth fund Temasek
- Deutsche will facilitate the settlement of Euro and US Dollar payments on the network as a strategic partner, according to a press release
- Partior currently supports settlements in Euros, USD, and Singapore dollars, using blockchain to address “longstanding industry inefficiencies in the industry, including settlement delays, limited transparency, and high operating costs”
- Patricia Sullivan, Deutsche’s global head of institutional cash management, commented “The payments business is currently undergoing an extensive period of disruption, primarily due to the rapid advancement of technology and drive for greater financial inclusion and transparency”
- Patriot CEO Humphrey Valenbreder stated “we will accelerate our mission to deliver seamless, secure, and instant cross-border transactions for financial institutions worldwide. We are also proud to announce that we have now processed over USD 1 billion in value worth of transactions, marking a significant milestone in our journey and the growing industry belief in our platform”
What happened: Stablecoin news
How is this significant?
- The overall market capitalisation of stablecoins reached a new record this week, eclipsing the $178bn it accrued before the collapse of the Terra Luna blockchain ecosystem (kicked off by its algorithmic stablecoin failing) kicked off crypto contagion in mid-2022
- Tether’s US Dollar-pegged USDT stablecoin accounts for the vast majority of this value; around 70% of the sector
- New Commerce Secretary Howard Lutnick appears to be deepening his involvement with the digital asset space before taking up his new role, according to Reuters reports
- His financial services firm, Cantor Fitzgerald, is currently in talks with leading stablecoin issuer Tether (which Cantor acts as custodian for) about a $2bn Bitcoin lending project
- A Tether spokesperson told Reuters “Tether Investments is looking to use part of the profits generated in the past years for different opportunities”
- Bloomberg alleges that “Funding for the program will start at $2 billion and is expected to eventually reach into the tens of billions”
- This news came soon after a Wall Street Journal article revealed a $600m investment into Tether by Cantor last year, amounting to a 5% ownership stake
- Tether CEO Paolo Ardoino promoted the firm’s diversification of services, saying its commodities liquidity pool could grow to $5bn within the next two years
- He stated “They [commodities traders] are very interested in using USDT for commodity trading because it creates a higher level of transparency and speed”
- However, Tether also announced the sunsetting of its Euro-pegged EURT stablecoin in a Wednesday press release, as the company lacks a required Electronic Money Institution (EMI) licence to comply with EU-wide MiCA regulations
- The move was somewhat expected, after the firm backed Dutch fintech Quantoz, which recently announced the development of regulatory-compliant Euro- and US Dollar-pegged stablecoins
- Meanwhile, analysts from Standard Chartered and Zodia Markets predicted further future growth for stablecoins, up to a potential ten-fold increase
- In a new report, Standard Chartered Global Head of Digital Assets Research Geoff Kendrick and Zodia Markets co-founder Nick Philpott called stablecoins “The First Killer App” of digital assets
- They praised stablecoins’ transparency and cross-border potential, writing that “At present, stablecoins are equivalent in size to only 1% of US M2 transactions and just 1% of FX transactions, but as the sector becomes legitimised, a move to 10% on each measure is feasible”
- Bloomberg sources reported that Bahrain-based Singapore Gulf Bank (a startup backed by the Whampoa Group family office) is raising $50m (for sub-10% equity) in order to purchase a stablecoin issuer
- According to the sources, “proceeds will primarily go toward accelerating product development, enhancing the bank’s payment network and hiring more staff”
What happened: Regulatory news
How is this significant?
- FOX Business reported this week that the incoming Trump administration will hand the digital assets purview to the CFTC, rather than the SEC which claimed authority over almost every asset under outgoing chair Gary Gensler
- Former CFTC chair Chris Giancarlo told FOX “With adequate funding and under the right leadership, I think the CFTC could hit the ground running to begin regulating digital commodities on day one of Donald Trump’s presidency”
- Following last week's legal defeat (where a Texas judge threw out unilateral changes to “broker” and “dealer” definitions to include crypto exchanges), US regulators once again were found to have acted unlawfully this week
- This time, the Fifth Circuit court found that US sanctions against smart contracts—as seen in the case against “mixing” service Tornado Cash—were unlawful and exceeded the authority of OFAC
- As explained by Coinbase chief legal officer Paul Grewal; “In particular, the Court ruled that while Treasury has the power to take action against ‘property’, the open-source, immutable smart contracts at the core of Tornado Cash *can’t* be owned by anyone and so are not “property” subject to sanctions”
- Meanwhile, UK regulators at the FCA confirmed plans to finalise digital asset rules, as director of payments and digital assets Mattew Long told Bloomberg that discussion papers and consultations to inform regulations are currently pending
- He commented “We’ve had many, many good conversations recently with industry about how we’re going to learn from regulation around the world”
- In Hong Kong, the government published a 20-page report on creating a “conducive environment” for hedge funds and family offices, including key breaks for digital asset investments
- According to the FT, new regulations within the finance hub will “exempt private equity funds, hedge funds and the investment vehicles of the super-rich from paying tax on gains from crypto assets”
- Patrick Yip of Deloitte China told the paper that “This is an important step in boosting Hong Kong’s status as a financial and crypto trading hub”, as family offices currently allocate a “not insignificant” amount of their capital (up to 20%) towards the asset class
- In Russia, the upper house approved amendments to a bill from the lower house setting a maximum 15% income tax on crypto transactions, whilst exempting them (and mining) from value-added tax
What happened: New long-term analysis reveals Bitcoin’s positive effect on portfolios
How is this significant?
- A new long-term historical analysis from Nickel Digital released this week revealed that “adding a small percentage of Bitcoin to a balanced portfolio can enhance returns without substantially increasing risk”
- The research, taking into account a dataset from December 2013 to September 2024 (i.e. before Bitcoin’s explosive post-election growth and new all-time highs) compared the outcome of 1%, 3%, and 5% Bitcoin allocations, and found that portfolios with Bitcoin delivered nearly 200% more returns compared to traditional 60/40 portfolios
- The statistical modelling—rebalanced daily to maintain desired portfolio allocations—revealed “A standard 60/40 portfolio produced cumulative returns of 199%, whereas a 59/40/1 Bitcoin portfolio returned 231%. A 57/40/3 Bitcoin portfolio saw cumulative returns of 306%, and a 55/40/5 Bitcoin portfolio reached 396%”
- Nickel co-founder and CEO Anatoly Crachilov commented that higher returns didn’t proportionally increase volatilty; “the allocation had a limited impact on portfolio volatility and drawdown profile, primarily due to a low correlation between digital assets and traditional assets over longer-term timeframes”
What happened: Publicly-traded Chinese firm pledges to build Bitcoin treasury
How is this significant?
- Chinese financial services firm and miner SOS this week announced the intention to build a $50m Bitcoin treasury, becoming the latest in a growing number of firms to pursue a corporate Bitcoin treasury
- In a press release, the firm emphasised its “belief in Bitcoin's role as a store of value and a strategic asset”
- Following on from the announcement, SOS shares jumped by 100%, before pulling back to settle around a 40% gain
- SOS chairman Yandai Wang commented “Bitcoin market performance is robust and supported by positive developments such as the launch of several Bitcoin-related ETF options and ongoing improvements in the U.S. regulatory environment for digital assets”
- Although the firm’s Bitcoin mining operations are located in Wisconsin, the firm itself is based in China; which makes the timing of this move interesting, following last week’s South China Morning Post report on a mainland China ruling that confirmed legality of crypto ownership in China
- Other firms also added to their Bitcoin treasuries in substantial ways this week; American mining firm Marathon Digital purchased $615m worth of Bitcoin, bringing its total holdings to just short of 35,000
- The company further said that it is holding $160m in reserve “for future Bitcoin dip purchases”
- Arcurx Pharmaceuticals’ board approved Bitcoin as a treasury asset, allowing the firm to purchase $1m worth
- CEO David P Luci stated “As demand for Bitcoin grows, and so does its acceptance as a major and primary asset class, we believe that Bitcoin will serve as a strong treasury reserve asset for cash not needed over the next 12 to 18 months”
- Nathan McCauley, CEO and co-founder of Anchorage Digital, told industry publication TheBlock; “Putting Bitcoin on the balance sheet was once a reality for only the crypto-native; it’s now going mainstream on the back of a promising post-election outlook… expect more and more publicly traded names to put excess treasury cash to work by looking toward Bitcoin as a reserve asset”
What happened: MicroStrategy continues large-scale Bitcoin acquisition
How is this significant?
- One week on from a record $4.6bn Bitcoin buy, corporate Bitcoin champion MicroStrategy once again deployed a record amount of capital towards the asset, purchasing $5.4bn worth
- Funds came from a combination of common share sales and a $3bn convertible note issuance, acquiring 55,000 Bitcoin between November 18th and 24th
- The firm has now purchased “386,700 tokens since [August] 2020 for an average purchase price of around 60% of the current value of its holdings”