M6 Labs Bitcoin Weekly

ETF in three… two….one…MOON

GM Anon!  This is the last M6 Labs Bitcoin Weekly report of the year. We’ll be back the week of the 8th of January. It is likely that we’ll see each other in a new crypto world, the ETFs will have been confirmed and the market will have changed forever. Are you ready for what is coming? The money printers have been turned back on, and we’re likely to see a bull market unlike anything seen before. 

I hope you’re all set for what is coming. See you on the other side, Anon.

Bitcoin News & Metrics

ETF Updates

The landscape of Bitcoin spot ETFs has seen significant developments recently, marked by strategic moves and regulatory dialogues. BlackRock has revised its proposal for a spot Bitcoin ETF, now under the ticker IBIT. This update follows BlackRock's ongoing discussions with the SEC and includes a key amendment allowing cash redemptions.

  • The SEC recently delayed several ETH ETFs, while BlackRock and others continue to update their spot BTC ETF filings. 

  • VanEck's CEO predicts that the SEC will approve multiple ETFs simultaneously, a sentiment echoed by many.

Other updates include: Crypto asset manager 7RCC has submitted an application for a Bitcoin ETF, joining WisdomTree, which has updated its own application for a spot Bitcoin ETF. Meanwhile, the SEC has issued comment notices on ETF proposals from Grayscale, Hashdex, and Pando. 

  • Grayscale, in particular, is exploring the tax implications for its proposed spot Bitcoin ETFs.

In parallel, there have been important meetings between representatives from BlackRock, Nasdaq, and the SEC. These discussions focused on rule changes necessary for listing the Bitcoin ETF, specifically under Nasdaq Rule 5711(d), which outlines criteria for listing Commodity-Based Trust Shares on the Nasdaq Exchange. 

  • The inclusion of a surveillance-sharing agreement in these discussions indicates an effort to address market manipulation risks associated with crypto trading.

Michael Saylor, stated that the introduction of Bitcoin spot ETFs is a major development for Wall Street, potentially the biggest in 30 years. He compared it to the launch of the S&P 500 ETF. 

  • Saylor believes that the spot ETF will provide mainstream investors with a compliant channel to invest in Bitcoin. He anticipates a demand shock for Bitcoin, followed by a supply shock due to the upcoming halving event, potentially leading to a significant bull run for Bitcoin in 2024. 

  • Saylor also addressed the perception of MicroStrategy as a Bitcoin ETF proxy, highlighting its operational advantages and lack of ownership fees.

Pretty much in the bag at this point Anon. Source.

While most are celebrating these developments, it’s always advisable to consider other views. Interesting take from Max Keiser.

In Other News

  • Hashdex release Spot BTC ETF commercial, while Bitwise has already released second commercial in anticipation of ETF.

  • Adam Back, the founder of Blockstream, has expressed that stopping Inscriptions on Bitcoin is not feasible. He believes that higher transaction fees will naturally encourage the adoption of Layer 2  solutions and spur innovation in the Bitcoin ecosystem. 

  • Cipher Mining has revealed its partnership with Bitmain, with plans to buy 37,396 units of the newest Antminer T21 miners. These miners, totaling 7.1 EH/s, come at a cost of $99.5M, at a rate of $14 per TH. Delivery is anticipated during the first half of 2025. 

  • According to Bloomberg analyst James Seyffart, First Trust has presented an application for a Bitcoin Buffer ETF to the SEC. This particular fund employs an innovative and distinct strategy, offering exposure to Bitcoin while willing to trade some upside gains to safeguard against a specific percentage of potential losses on the downside.

  • OKX Ventures has made a strategic investment in bitSmiley, a stablecoin protocol within the Bitcoin ecosystem. Other significant investors in bitSmiley include ABCDE. This protocol enables users to over-collateralize BTC native to the Bitcoin network, allowing them to create the stablecoin bitUSD. Additionally, bitSmiley incorporates a lending protocol that involves bitUSD.

  • Tap Protocol has successfully concluded a funding round, raising $4.2M, with Sora Ventures taking the lead. The protocol is tailored to identify and monitor Ordinals, simplifying OrdFi applications without the need for intricate L2 solutions. 

  • On December 17th, during the mining of block 821484, the Bitcoin network recorded one of its highest block fees for the year. The block's total reward amounted to 13.405 BTC, which is roughly equivalent to $570K. This significant fee was earned by the mining group Braiins Pool.

  • Marathon Digital has finalized a deal to acquire two operational Bitcoin mining farms for $178.6M in cash. This acquisition, made with Generate Capital and a PBC subsidiary, will significantly enhance Marathon's mining capabilities, increasing its total capacity to approximately 390 megawatts.

  • NFT lending protocol BendDAO announced that it will embrace the BTC ecosystem, will provide BTC NFT lending business, and will support the wBTC liquidity pool as a loanable asset. 

  • Unblock Global has successfully raised $15M for its new initiative. The company plans to utilize the flash gas from Argentina's Vaca Muerta, known as the second-largest shale gas reserve globally, for Bitcoin mining operations. This financing round saw participation from major energy companies, including Crusoe Energy, Pampa Energia, and Petrocuyo, marking a significant collaboration between energy and crypto sectors.

The new Financial Accounting Standards Board (FASB) rules significantly change how cryptos are accounted for on corporate balance sheets. Under these rules, Bitcoin and other cryptos will now be classified as financial assets rather than intangible ones. 

  • This allows companies to report unrealized gains and losses in their financial statements, reflecting market value changes in their crypto holdings without needing to sell the assets. 

  • This shift could encourage wider corporate adoption of crypto due to improved transparency and the ability to record market-based value changes more accurately.

Inflows & Outflows: Digital asset investment products experienced minor outflows of $16M, ending an 11-week streak of inflows. Despite the outflows, trading activity remained high for the week, totaling US$3.6B, significantly above the year average.

  • The outflows were mainly concentrated in the US, with $18M in outflows, while Germany saw minor outflows of $10M. 

  • However, Canada and Switzerland continued to receive inflows of $6.9M and $9.1M, respectively. These mixed regional flows suggest that the outflows were driven more by profit-taking than a shift in sentiment.

  • Bitcoin experienced the most significant outflows, with $33M leaving the asset. Short-bitcoin also saw minor outflows totaling $0.3M.

  • Ethereum and Avalanche saw minor outflows of $4.4M and $1M, respectively.

  • Blockchain equities continued to attract positive sentiment, with substantial inflows totaling $122M for the week. This brought the cumulative inflows over the past 9 weeks to a record-high of $294M.

Bitcoin transaction fees have seen a significant increase, currently reaching the highest levels in over two and a half years. Bitinfocharts data indicates that the average cost of a Bitcoin transaction is now around $37.58, a level not seen since April 2021.

  • Investor interest in Ordinals has led to more of them being minted, occupying block space that was previously used for regular BTC transactions. As a result, miners are charging higher fees due to the increased workload in processing these transactions.

  • Recently, Bitcoin's transaction fees hit a new high in USD, with a record single-day spike of approximately $24 million on Dec. 17, surpassing previous highs in May 2023 and 2017. 

  • Over the past week, Bitcoin's average daily fee revenue outpaced Ethereum's, yet when measured in satoshis, the recent spike represents a decrease compared to past records. Despite the surge in USD terms, Bitcoin fees, in Bitcoin terms, remain lower than the peaks of previous years.

BTC registered its lowest annualized volatility to date, measuring at 41.53%. This implies substantial consolidation, despite encountering regulatory hurdles and market fluctuations. The declining volatility of BTC may signify its evolution into a more mature asset class, building on developments seen in Q4 2022.

The Stablecoin Supply Ratio (SSR), which measures Bitcoin's market cap relative to major stablecoins, increased significantly from 2.36 in January to 6.74 by mid-December

  • This rise suggests a greater market cap for Bitcoin compared to stablecoins, reflecting changes in market liquidity and investor preferences. Bollinger Bands analysis of SSR indicates higher Bitcoin market cap growth versus stablecoins, with volatility observed in correlation with Bitcoin's price changes.

Bitcoin Ecosystem Update

Bitcoin NFTs have gained dominance, outperforming Ethereum with $426M in sales compared to Ethereum's $80M over 7 days. This surge is attributed to Inscriptions and Ordinals driving Bitcoin fees. BRC-20 tokens, notably SATS, RATS, and MICE, contributed significantly with $200M, Ordinals also performed impressively, generating $40m over the last 30 DAYS.

OKX's NFT marketplace has recently surged ahead of Blur and OpenSea in daily trading volumes, largely driven by the trading of Bitcoin Ordinals NFTs. OKX recorded over $50M in 24-hour trading volume, surpassing both Blur and OpenSea. 

  • This rise is attributed to OKX's support for BTC Ordinals NFTs, which other platforms have not yet enabled. The overall NFT trading volume on the Bitcoin network also saw a significant increase, further highlighting the growing market interest in Bitcoin-based NFTs and their impact on trading platforms.

Source: The Block.

The BRC-20 ecosystem continues to experience dynamic price action, with SATS leading in market capitalization closely followed by ORDI. Binance Futures announced the introduction of a USDⓈ-M 1000RATS Perpetual Contract, providing up to 50x leverage, a significant development considering RATS is not yet available for spot trading on Binance. 

  • This follows Binance's previous move to launch SATS, indicating a growing interest and expansion in the BRC-20 space.

Top BRC-20 tokens by MC. Source

The majority of Bitcoin network inscriptions are text-based, often linked to the BRC-20 token standard. Peak daily inscriptions have surpassed 300k, outdoing image-based inscriptions. These inscriptions significantly boost miner fee revenue, at times exceeding the 6.25 BTC block reward. 

  • Inscriptions account for about 50% of transactions but only 10-15% of block space, thanks to small file sizes and the SegWit data discount. They contribute 15-30% to miner fee revenue, enhancing miner economics, especially with the upcoming fourth Bitcoin halving.

Top Ordinals collections over the last 7 days. Source.

Stacks (STX) has shown a notable price increase, defying the broader market’s recent bearish trend before the pump. This surge in STX's value coincides with a new project that aims to integrate Ordinals and Stacks, leading to higher network fees and congestion. 

  • Despite market challenges, Stacks’ transaction volume spiked, particularly with STX20 inscription activities, marking a record-high number of transactions in a single block.

The Bitcoin inscriptions trend is expanding across various blockchain networks, sparking increased activity and innovation. 

  • Metaplex on Solana introduced a new standard for immutable digital assets, allowing full on-chain storage of metadata and media content. 

  • Polygon leads in inscriptions among EVM chains with a staggering 161M, far outpacing BNB's 78M. 

  • Meanwhile, Arbitrum recently experienced a temporary outage due to a surge in Bitcoin Ordinals-inspired inscriptions, underscoring the growing influence of this trend across multiple blockchains.

  • Phantom, initially known for its association with Solana, has now broadened its scope by adding support for Bitcoin, Ordinals, and BRC-20 tokens. This move is a significant step towards enhancing cross-chain interoperability.

Inscriptions across chains. Source: Dune.

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