GM Anon! The market is currently in a consolidation phase following a relatively subdued reaction to the ETF confirmation. Let's delve into it and explore where this is heading.

Bitcoin Updates & Metrics

• Bitcoin has a larger market cap than Bank of America and Bank of China combined.

• Bitcoin becomes the second largest ETF commodity in the US, surpassing silver.

• BlackRock now holds 25,067 BTC worth over $1.06B for their spot Bitcoin ETF.

• Samson Mow believes Bitcoin will surge to $1M ‘within days or weeks’ once supply crunch hits.

• Direxion joins the leveraged Bitcoin ETF filings with 5 funds

• Hong Kong firm targets spot Bitcoin ETF launch in first quarter.

• Argentina sees first Bitcoin rental agreement.

• SEC opens comment period on proposal that would allow options trading on BlackRock's spot bitcoin ETF

• VanEck is delisting their BTC futures ETF.

• Ark sells $BITO, and buys $15M of its own ETF.

• SEC delays decision on Fidelity’s spot ETH ETF to March.

• Michael Saylor sounds alarm on deepfake Bitcoin scams.

• MicroStrategy’s Saylor sold shares daily in the runup to ETF launch.

• Hong Kong firm targets spot Bitcoin ETF launch in first quarter.

• Jamie Dimon equates Bitcoin to Pet Rock, while Howard Marks compares it with gold 

• Tether now owns $2.8B worth of Bitcoin after a recent $380M buy.

• Monetary Authority of Singapore (MAS) blocks Bitcoin ETFs in Singapore.

• BitMEX founder Arthur Hayes suggests that the success of the BTC spot ETF could lead to a shift in price discovery from East to West, with growing trading volumes as global fund managers launch their distribution networks. 

Flowdesk, a crypto market maker and liquidity provider for Grayscale's Bitcoin ETF, has successfully raised $50M in a Series B funding round.

• The funding round was led by Cathay Innovation, with contributions from Cathay Ledger Fund, Ripple, Eurazeo, ISAI, Speedinvest, and BPI.

• Flowdesk plans to utilize the funding to expand its over-the-counter offerings, hire additional personnel, and enhance its regulatory coverage in both Singapore and the United States.

• Aside from being a liquidity provider for Grayscale's Bitcoin Trust, Flowdesk also functions as a market maker for Societe Generale's euro-based stablecoin, EUR CoinVertible (EURCV).

ETF Updates

The market has experienced a noticeable cool-off period following the launch of the ETF. However, this slowdown can be attributed to various factors, but it's essential to recognize that the fundamentals supporting the market's potential recovery remain intact. To gain a deeper understanding, let's delve into the latest updates.

ETF inflows and Outflows

• IBIT reached $1B in assets after four days of trading, while FBTC achieved this milestone on its fifth trading day.

• Both IBIT and FBTC had approximately $1.2B and nearly $1.1B in net inflows, respectively, after eight days of trading, with each fund accumulating over $2B in trading volumes since their launch.

• Bitwise's spot Bitcoin ETF was closing in on $400M in inflows, and a product by Ark and 21Shares had garnered inflows of over $300M.

• The Invesco Galaxy Bitcoin ETF (BTCO) had roughly $190M in assets after five days on the market.

• Grayscale Investments' Bitcoin Trust ETF experienced significant outflows, totaling about $2.2B, due in part to its 1.5% fee, higher than other ETFs with fees between 0.19% and 0.39%.

• WisdomTree, despite managing about $100B in assets and launching a blockchain-native app, has struggled to attract investor capital to its Bitcoin ETF, ranking last among the 10 US spot Bitcoin ETFs in trading volumes and flows.

• The wealth management channel is expected to play a more significant role in allocating to Bitcoin ETFs, with some issuers guaranteeing initial flows from their own allocations or distribution channels.

• Brazil-based Hashdex has not yet entered the market for offering spot Bitcoin ETF exposure.

Grayscale Offloading BTC: One pivotal factor contributing to Grayscale's BTC sales is the weighty burden of high fees, coupled with the surge in investor withdrawals. Notably, Grayscale's flagship product, the Grayscale Bitcoin Trust (GBTC), imposes a substantial 1.5% annual fee, a rate significantly higher than that of other available ETFs within the market.

• This stark contrast in fee structures has prompted a notable portion of investors to explore alternative avenues. 

• Compounding the situation, a substantial number of investors initially acquired GBTC at a significant discount, with discounts reaching up to 40% at certain points in time. 

• However, this discount has progressively dwindled to zero, prompting investors to reevaluate their positions and seek more cost-effective investment options.

• It's worth noting that Grayscale played a pivotal role in accumulating a substantial amount of BTC, effectively becoming one of the significant holders of BTC, alongside the enigmatic Satoshi Nakamoto. Nonetheless, maintaining this position has become increasingly challenging, particularly in the face of the growing popularity of low-fee ETFs within the market.

• Consequently, this confluence of factors has triggered a wave of investors opting to exit GBTC, leading to a surge in redemption requests for their shares. 

• To honor these redemption demands, Grayscale finds itself compelled to sell portions of its BTC holdings. 

• This divestment process, anticipated to span several weeks, has the potential to introduce fluctuations in the Bitcoin market as the assets are redistributed.

Furthermore, a situation is emerging as there's a risk of billions worth of Bitcoin futures contracts being liquidated if the price drops below the $34K mark. It’s likely with the right catalyst we see a pullback to these levels.

In other ETF-related developments,

BTC-USD spreads have become more volatile since the ETF trading began, meaning that the difference in price between buying and selling BTC has become less stable and more unpredictable since the start of trading for the BTC ETFs.

Concerning how all these developments will shape the ETH ETF.

• the anticipation of ETFs may boost Ethereum, but history shows that ETH futures-based ETFs have struggled with low trading volume, unlike Bitcoin ETFs. 

• ETH ETFs like EETH, AETH, and EFUT had minimal trading volume upon launch, significantly lower than BTC ETF BITO's successful launch. 

• This lackluster volume is partly due to investors forgoing potential staking yield for ETH futures ETFs while incurring higher expense ratios. The regulatory uncertainty surrounding ETH in the U.S. adds another layer of complexity to the approval of spot ETFs.

General Metrics

General crypto inflows and outflows: Digital asset investment products received inflows of $1.18B last week.

• These inflows did not break the previous record set by futures-based Bitcoin ETFs, which saw $1.5B in inflows in October 2021.

• Trading volumes for digital asset investment products reached a record high of $17.5B last week, significantly higher than the 2022 weekly average of $2B.

• The US dominated the inflow activity, with $1.24B of inflows, while Switzerland received $21M in inflows.

• Europe and Canada experienced minor outflows, possibly due to basis traders shifting assets from Europe to the US.

• Bitcoin attracted significant inflows of $1.16B, representing 3% of total assets under management.

• Ethereum received inflows of $26M, XRP saw $2.2M in inflows, but Solana had only $0.5M in inflows.

• Blockchain equities witnessed large inflows of $98M, bringing the total inflows over the last 7 weeks to $608M.

Bitcoin is consistently generating substantial fees, now ranking second only to Ethereum. 

• The growing ecosystem on the Bitcoin network is leading to more frequent higher fees. As a result, many are endorsing the adoption of Ordinals and BRC-20 tokens in response to this trend.

BTC's on-chain volume in USD terms is notably higher than Ethereum, as is the number of newly registered addresses.

• This trend has persisted even during the bear market. It is likely that when activity in the market picks up again, Ethereum may see a surge in dominance. 

• These metrics should be kept in mind as we will revisit them later in the cycle.

THORChain is a decentralized liquidity protocol that facilitates direct swaps between various layer-1 tokens from different blockchains. 

• It currently supports nine layer-1 blockchains and has the potential to accommodate even more in the future. THORChain enables users to exchange native assets across different chains, allowing, for instance, the swapping of ETH for BTC or AVAX for LTC. 

• Recently, THORChain achieved its highest weekly trading volume ever, surpassing the previous record set in November.

• Many use this protocol to swap between ETH and BTC, and is a favored option amongst users who wish to avoid CEXs.

Bitcoin Ecosystem Update

Solana collections have regained their top position on the Magic Eden charts. NodeMonkes remains within the top 5, and the recent rise of the new project, Bitcoin Puppets, has propelled it into the top 10.

OKX’s NFT marketplace for ordinals is seeing substantial volume for NodeMonkes and Bitcoin Puppets as well. 

Read this interesting take on Bitcoin Puppets by SN. Click here to read the whole write-up. 

With all this activity, let’s check in on how ordinals are assisting in generating fees for the Bitcoin network. 

• As can be seen below, fees are forming a substantial part of the network’s fees at different periods.

A mysterious message recently appeared on the Bitcoin blockchain, specifically in Ordinals inscription 55,365,041, containing the enigmatic phrase, "10,000 sats, side by side. A single UTXO, untouched inside. Born together, cursed at heart. Built with code, Bitcoin Art." 

• This cryptic message has puzzled members of the Ordinals community, sparking speculation about a potential Ordinals art project. 

• However, details about the project remain scarce, leaving Bitcoin enthusiasts to speculate and search for clues. The message references UTXO, indicating a connection to Bitcoin and possibly hinting at a unique NFT collection.

SatoshiVM, a Bitcoin ZK Rollup Layer 2 solution, has suddenly emerged with a significant presence, catching the attention of the crypto community. 

• The project was launched amid suspicions of extensive manipulation involving the founders and individuals associated with them.

• These individuals allegedly engaged in entry manipulation by exploiting their prior knowledge of the contract deployment and the contract itself. Read about recent developments in this thread.

Former US President Donald Trump has ventured into the world of Bitcoin NFTs. 

• Trump's latest Mugshot Edition Collection has made its way to the Bitcoin blockchain. This collection offers collectors the opportunity to own a "one-of-one Bitcoin Ordinal digital trading card," with only 200 cards in total. 

• Out of these, 101 are part of a promotional giveaway, and the remaining 99 can be purchased.

• To qualify for an immutable Mugshot Edition Bitcoin Ordinals card, collectors must purchase 100 Mugshot Edition NFTs using wrapped ETH. 

• The offer is limited to the first 101 buyers (though the website mentions the first 200 buyers). The total cost is $9,900, with additional incentives like a gala dinner with Trump and physical items related to his viral mugshot.

Commoners, a playful and punky 10,000 PFP collection, is coming to Bitcoin Ordinals. Tthese characters bridge art and "rare sats" on Bitcoin, with no specific utility or roadmap. 

• Minting for Commoners begins on Monday, January 22nd, at 2 PM Pacific. To participate, consider stocking up on uncommon sats using an XverseApp wallet.

The Shadows and Shadow Hats

• Magic Machine, the masterminds behind the Forgotten Runes Wizard's Cult ecosystem and the Runiverse game, have introduced two collections on Ordinals: The Shadows and Shadow Hats.

• The Shadows collection comprises 666 animated pixel art ghosts, creatively crafted by an anonymous co-founder of Forgotten Runes. An auction for 600 Shadows swiftly concluded, achieving a top price of 0.2 BTC and raising $5.5M.

• Inspired by the enigmatic realm of magic and secret societies, The Shadows and Shadow Hats collections have become an integral part of the Runiverse.

• Ordinals owners will also benefit from exclusive privileges within the Forgotten Runes community.

• These collections provide an intriguing case study of an Ethereum-based project's expansion into Ordinals, bridging connections with the Bitcoin-based community and extending the project's universe onto a different blockchain.

• Magic Machine's grand vision involves constructing a collaborative legendarium with its community, aiming to establish a fantasy franchise on par with the likes of "Game of Thrones" or "Lord of the Rings."

• Even though the auction is over, it might be worth picking up some of these NFTs here. 

• Read this guide if this collection interests you. 

The potential of BRC-20 airdrops are heating up. Be sure to check out this guide for Gelios. 

• Gelios is a community-owned decentralized application  layer that operates on the Bitcoin blockchain. 

• Its core function is to enable the smooth transfer of information, data, and assets between the Bitcoin network and the Ethereum and Arbitrum networks. 

• In a recent announcement, they have revealed plans for an upcoming airdrop aimed at testnet participants.

Enjoyed this article?

1. Subscribe to Crypto Pragmatist by M6 Labs newsletter for crypto-native industry insights and research read by 30k+ subscribers

2. Follow us on Twitter for Tweets providing top-notch insights and bridging the gap between users, builders, and leaders in the crypto space