M6 Labs Bitcoin Weekly

GM, Anon! The market continues to trade in a range, but it appears that selling pressure is decreasing. There are also numerous developments within the Bitcoin ecosystem. Let's dive in!

Bitcoin Updates & Metrics

• Nayib Bukele secures re-election as President of El Salvador.

• ARK Invest has divested from its Bitcoin futures ETF and purchased $65M worth of its own spot Bitcoin ETF in a strategic move.

• Argentina's President, Javier Milei, has decided to abandon plans for a crypto tax.

• Donald Trump calls CBDCs and artificial intelligence 'dangerous.'

• Invesco and Galaxy Asset Management have lowered the fee for their spot Bitcoin ETF to 0.25% in an effort to attract more investors.

• A WisdomTree executive has downplayed the company's delayed Bitcoin ETF launch.

• Robert F. Kennedy, the first US presidential candidate to accept Bitcoin campaign donations, pledged to end the US push for a central bank digital currency if elected.

• Marathon Digital plans to oust competitor Bitcoin miner Hut 8 from recently acquired locations.

• South Korea's regulator plans to discuss a spot Bitcoin ETF with Gary Gensler.

• Coinbase drops support for BitcoinSV(BSV).

• Bitdeer has appointed Mr. Jihan Wu, the company's Founder and Chairman, as its new Chief Executive Officer, effective March 1, 2024.

• Google is revising its ad policies to permit the advertising of specific cryptocurrency products, potentially opening the door to crypto ads on the platform.

• Amazon is producing a film centered on the $3B Bitfinex hack, exploring the psychology of a crypto hustler connected to the incident.

• The Hong Kong Securities and Futures Commission (SFC) has set a minimum insurance requirement of 50% for licensed crypto exchanges handling customer assets.

• German authorities have made their largest Bitcoin seizure, totaling $2.17B, in connection with a $2.17B fraud case.

• FTX has been liquidating crypto assets and accumulating cash, with its cash reserves growing to $4.4B by the end of 2023.

• A company that emerged from the bankruptcy estate of Celsius has initiated a Bitcoin mining operation.

• Bitcoin miner GRIID has made its debut on Nasdaq under the ticker symbol 'GRDI.'

• Charles Schwab, the largest personal finance brokerage in the US, allows clients to purchase approved Bitcoin ETFs but has not launched its own.

• The US Department of Energy requests consumption statistics from Bitcoin miners.

• YieldMax has applied to the US SEC to launch a Bitcoin options income strategy ETF (YBIT) listed on the NYSE, based on other spot Bitcoin ETFs.

• An EU agency has stated that crypto firms can sometimes serve non-European users.

• Efforts to establish a climate-conscious spot Bitcoin ETF continue.

• The Inverse Cramer ETF, designed to profit from shorting Jim Cramer's stock tips, will shut down after posting a negative 15% return.

• Harvest Hong Kong, one of China's largest fund managers, has submitted a spot Bitcoin ETF application to the Hong Kong SFC, aiming to launch the first Hong Kong spot Bitcoin ETF after the Chinese New Year on Feb. 10.

The Federal Reserve announced its decision to maintain interest rates at 5.5%. In their statement, the Fed mentioned, "The committee does not anticipate reducing the target range until it has a stronger belief that inflation is steadily progressing towards the 2 percent mark." 

• This unexpected decision led to a minor market downturn, as many had anticipated a rate cut. 

• However, the second interest rate decision scheduled for March indicates a 47% probability of a 25bps rate reduction. 

Coinbase analysts believe that the downward pressures on Bitcoin and the broader crypto market are diminishing, potentially creating a more supportive trading environment. 

• Factors contributing to this include the completion of FTX's bankruptcy estate selling its substantial GBTC holdings and substantial net inflows into U.S. spot Bitcoin ETFs. 

• The report suggests that macroeconomic factors will become more relevant for the digital asset class in the coming weeks. 

• Additionally, the report mentions the U.S. Federal Reserve's rate decision and the possibility of a soft landing for the U.S. economy, along with the Bitcoin halving, which could boost Bitcoin and other tokens in Q2, 2024. 

Inflows & Outflows: Digital asset investment products experienced significant outflows on a global scale, amounting to $500M. 

• The United States, Switzerland, and Germany were the regions with the most substantial outflows, totaling $409M, $60M, and $32M, respectively. 

• Grayscale witnessed outflows of $2.2B last week, although these outflows appear to be tapering off gradually.

• In contrast, newly launched US ETFs received inflows totaling $1.8B last week and have attracted $5.94B in inflows since their launch on January 11, 2024. When considering Grayscale's inflows since the launch, the net total of inflows amounts to $807M. 

• These positive inflows did not prevent price declines, which were likely influenced by the acquisition of Bitcoin seed capital before January 11.

• Bitcoin experienced significant outflows of $479M, while short-bitcoin products received inflows totaling $10.6M. 

• Most altcoins saw outflows last week, with Ethereum experiencing $39M in outflows, and Polkadot and Chainlink seeing $0.7M and $0.6M in outflows, respectively. 

• Blockchain equities, on the other hand, received inflows totaling $17M during the same period.

The decrease in stablecoin flows to exchanges over the last week suggests reduced trading activity and potential caution among investors. This trend might also indicate decreased demand for crypto in the short term.

In the latest developments on the spot Bitcoin ETF front, there's been a significant shift with $14.8M in daily net inflows, marking the first net inflow since January 19th. This signals renewed interest in spot Bitcoin ETFs. 

• Additionally, Bitcoin futures premiums on CME are rising, reflecting a shift to contango. 

• In a competitive move, Invesco and Galaxy have slashed their Bitcoin ETF fee from 0.39% to 0.25%, challenging market leaders.

• Meanwhile, new spot Bitcoin ETFs have managed to accumulate 150,000 BTC, while the market share of GBTC has fallen to 36%, indicating a shift in investor preferences towards these ETFs. 

• The approval of a spot Ethereum ETF is anticipated, with the potential for it to materialize in May, although according to analyst TD Cowen's speculations suggest a much later timeline. 

BlackRock's iShares Bitcoin Trust (IBIT) and ProShares' Bitcoin Strategy ETF (BITO) have surpassed the Grayscale Bitcoin Trust's (GBTC) daily trading volume, marking the first time since their launch on Jan. 11. 

• IBIT led with $301M in volume, followed by BITO with $298M, while GBTC came in third with $292M in trades. 

• However, total trading for these ETFs fell below $1B for the first time, reaching $924M. 

• Despite GBTC's initial dominance, its outflows and high fees have caused a decline in its performance, with JPMorgan analysts suggesting that the profit-taking phase is behind them, potentially easing pressure on Bitcoin's price.

Furthermore, BlackRock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin ETF have ranked among the top 10 ETFs with the largest January flows, totaling around $4.8B. 

• IBIT had $2.6B in net flows, ranking eighth, while FBTC landed in tenth place with $2.2B in net flows. 

• Meanwhile, Grayscale Bitcoin Trust experienced the second-highest outflows among ETFs in January, with an estimated $5.7B exiting the fund. 

• The United States has over 3,100 ETFs as of December 31, 2023. This data indicates the growing popularity of Bitcoin ETFs as they compete for investor attention.

Over the past seven years, Bitcoin has delivered an impressive annualized return of approximately 44%, outperforming most other major assets, which have averaged a considerably lower return of 5.7%. 

• This stark contrast highlights Bitcoin's potential as a high-return investment option compared to traditional assets like stocks, bonds, and commodities. 

• Investors are increasingly drawn to Bitcoin's potential for substantial gains and its role as a hedge against inflation and economic uncertainties, making it a prominent asset in modern investment portfolios.

Bitcoin mining has seen a significant 7.33% increase in difficulty, marking the most substantial surge in 2024, following a 3.90% decrease earlier in the year. 

• As the countdown to the fourth halving event continues with less than 11,500 blocks remaining, Bitcoin's mining reward is set to halve. 

• The recent spike in difficulty has pushed it to an all-time high of 75.50 trillion, indicating the level required for a valid block hash. 

• The current collective hashrate remains stable at 536 exahash per second, just below the peak of 566 EH/s on January 29, 2024. 

• Foundry USA and Antpool together dominate over 60% of Bitcoin's hashrate, with Foundry USA leading at 31.94%, contributing 173.53 EH/s, and Antpool closely behind with 29.30%, holding 159.17 EH/s. 

• The next mining difficulty adjustment is scheduled for February 15, 2024.

Bitcoin Ecosystem Update

After experiencing a decline in Ordinals inscriptions in October of the previous year, inscriptions have been on a remarkable upward trajectory ever since. 

• Despite occasional pullbacks, this trend shows no signs of slowing down, as the total number of inscriptions continues to increase significantly.

During May and December of 2023, Ordinals experienced some of its highest daily fee periods. 

• While fees may have subsided since then, data suggests that fees generated from Ordinals transactions still play a crucial role in the broader BTC ecosystem.

Sotheby's recently made history by conducting its first-ever individual poem sale using Bitcoin Ordinals Inscription. On the other hand, the 'Quantum Cats' sale by Taproot Wizards faced another delay, pushing the auction date to February 5th after a tumultuous initial launch. Meanwhile, Magic Eden has introduced a multi-chain wallet to enhance its services and user experience, among the features is extended support for the Bitcoin ecosystem. 

Binance has launched an in-app Inscriptions Marketplace within the Binance Web3 Wallet. 

• This marketplace allows users to inscribe and trade inscriptions, including Bitcoin BRC-20 tokens like ORDI. 

• The Inscriptions Marketplace aims to be user-friendly and accessible to both BRC-20 enthusiasts and newcomers to Web3, enhancing the decentralized web experience. 

In a major update, three independent verifiers have reached a consensus on an updated list of 113,376 Ordinals addresses eligible to receive 1 Runestone. 

• Additional verifiers are still working on consensus, but the current list is considered accurate based on eligibility criteria. 

• The effort is supported by volunteers and is transparent and decentralized. Eligible addresses don't need to claim, as they will automatically receive a free Runestone inscription if on the list.

• Check your eligibility here.

Gate.io has introduced an innovative Inscription Launchpad and Navigation service. 

• This service caters to blockchain innovators and investors, offering an easy-to-use platform for launching and subscribing to inscription projects, including Bitcoin NFTs, BRC-20 tokens, and Ethscriptions. 

• It prioritizes transparency, low technical barriers, and fair distribution mechanisms. Additionally, Gate.io's Inscription Navigation provides comprehensive information about inscription trends in various blockchain ecosystems. 

The Babylon team is working on BTC staking to enhance the security of PoS chains. They aim to create a decentralized verification layer for rollups secured by BTC, improving latency and interoperability.

• Ethereum's rollup-centric roadmap requires auxiliary services for cross-domain messaging and verification. While popular rollups have ecosystem participants verifying transactions, less popular ones need a decentralized verification network.

• Babylon Protocol allows users to stake BTC securely on the Bitcoin network, which can be used to secure external networks. This trustless staking method doesn't require bridging BTC and uses extractable one-time signatures for slashing malicious behavior.

OKX is expanding its support for various blockchain token standards, including Atomicals (ARC-20), Stamps (SRC-20), Runes, and Dogecoin's Doginals (DRC-20). 

• The platform plans to introduce a marketplace in the near future to facilitate transactions involving these tokens. OKX is set to integrate the SRC-20 standard for Bitcoin token viewing and transfers on February 5, followed by the integration of ARC-20, DRC-20, and Runes standards later in February. 

• Currently, OKX Wallet's inscription tool supports minting on 23 different networks, including Bitcoin, Dogecoin, Ethereum, Polygon, BNB Chain, Avalanche-C, and Arbitrum One, among others.

• OKX's Chief Innovation Officer, Jason Lau, emphasized that inscriptions are purely Web3 products and will endure as long as the underlying blockchain exists. Lau views inscriptions as a new canvas for Web3 creators, offering flexibility and permanence. 

• He highlighted the importance of selecting the appropriate blockchain for different NFT projects based on factors like block space and demand, emphasizing the need to store art and data immutably on-chain. 

BitLight Labs has successfully closed a seed-stage investment round led by Gate.io Ventures and HV Capital, with participation from notable venture capital firms like MH Ventures, Fundamental Labs, MEXC Official Ventures, and others, although the exact amount raised and valuation remain undisclosed. 

• BitLight Labs is focused on developing infrastructure for a new smart contract ecosystem within the Bitcoin network, utilizing the Lightning Network Bitcoin scaling platform. 

• They plan to offer a Bitcoin self-custody wallet and have hinted at an upcoming $BIT token airdrop, promoting a sustainable token economy, though specific details on how to participate are yet to be revealed.

The Open DID Protocol for Bitcoin Socialverse, known as BRC-137, has successfully secured $2.50 million in a Seed funding round. 

• This funding was led by Basics Capital, Digital Finance Group, Gate Labs, and Jsquare. BRC-137 is an innovative protocol in the Bitcoin ecosystem, facilitating the creation of composable Decentralized Identifiers (DIDs) in a fully decentralized manner. 

• It empowers users to monetize their digital identities, promoting on-chain value exchanges and social ecosystems. 

• Notably, it utilizes assets like BRC137-DID (fungible token) and BRC137-TLD (non-fungible token) for resolving names on the blockchain.

• Other noticeable fundraisers include Bitmap Tech. They have achieved milestones such as developing the BRC420 asset protocol and pioneering NFT Blue BOX. Bitmap Tech's primary focus is on Bitcoin Layer 2 solutions, including Merlin Chain, and they are involved in ventures like Bitmap Game, Bitmap Metaverse, and Recursiverse, particularly Project M.

The Stacks Nakamoto upgrade for Bitcoin has a confirmed launch window from April 15 to April 29, 2024. 

• This decision was made to align the launch with the goal of occurring before the Bitcoin halving, although the exact halving date is uncertain due to varying block activity projections. 

• The narrowed window ensures better coordination among key stakeholders, vendors, contributors, and the community.

•  It also allows network Signers and testers to prepare for the Nakamoto testnet leading up to the final launch date. 

Ready Layer 2 has begun the Bitcoin Builder Competition, an initiative aimed at fostering innovation within the Bitcoin ecosystem. 

• It invites individuals and developers to participate in building projects for the world's most liquid digital economy. 

• Registration is open for those who are eager to contribute to Bitcoin's growth. 

• Click here to register and get involved.

Learn about the first inscription protocol on Metis, Nuvo, with the following thread.

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