There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Bitcoin

$98,661.24



0.79%

Ethereum

$3,468.19



1.60%

Tether

$1.00



0.04%

XRP

$2.29



2.65%

Solana

$198.26

陋

0.31%

Dogecoin

$0.33



1.71%

See the latest prices

MARKET UPDATE

Bitcoin hit a new all-time high as markets continue to surge

If you bought one bitcoin exactly a year ago, you would have paid less than $24,000. As of Wednesday morning, that same bitcoin would have increased in value by a staggering 200% as prices climbed back above $73,000 for the second day in a row, reaching a new all-time high around $73,700.

ETH hasn’t quite reached new peaks — though on Monday it crossed the $4,000 mark for the first time in two years. 

But the combination of a new network upgrade (see second story below) and the potential arrival of exchange-traded funds from Wall Street firms including BlackRock has some market watchers feeling bullish. (That said, the odds of near-term SEC approval for ETH ETFs fell from 70% to 30% this week, at least according to Bloomberg analysts.)

What’s driving the rally, and what might happen next? Here’s what you need to know. 

BlackRock’s BTC ETF reached $10 billion in record time.

Less than two months after spot BTC ETFs launched in the U.S. on January 11, BlackRock’s IBIT product — the biggest ETF after Grayscale’s GBTC — has crossed the $10 billion mark faster than any ETF in history. 

How did it accomplish this feat? Impressive inflows across the spot BTC ETF category have helped drive BTC prices up, and the combination of some $7 billion in capital flowing into IBIT and BTC’s rising values resulted in BlackRock’s fund breaking the record previously held by Invesco’s QQQ fund, which took over a year to hit the $10 billion milestone.

2024 inflows into crypto investment products are on track to break records.

The new ETFs have transformed crypto markets by making BTC more accessible to a wide range of traders — from hedge and pension funds to individuals saving for retirement.

Here’s just one notable example: Across all of 2021 (when crypto markets last peaked), inflows to crypto investment products totalled $10.6 billion, according to CoinShares. In a little over two months this year, inflows have already totaled $10.3 billion. 

“I had high expectations, and [the new ETFs] vastly surpassed them,” Bloomberg Intelligence analyst James Seyffart told the Financial Times. “Demand is being pulled forward much quicker.”

U.K. regulator opens the door to crypto exchange-traded products. 

As covered in a recent edition of Bytes, regulators in other regions have been watching the U.S. BTC ETF rollout with interest.

On Monday, the U.K.’s Financial Conduct Authority said it would allow cryptocurrency products to be traded on exchanges. As CNBC reports, “Specifically, the FCA said it would not object to requests from recognized investment exchanges to create a U.K.-listed market segment for crypto-backed exchange-traded notes, or ETNs.” 

The London Stock Exchange will start accepting applications for both BTC and ETH ETNs in the coming months.

South Korea saw crypto trading volumes race past stock trading volumes.

As crypto prices have spiked, crypto exchanges in South Korea have begun to see trade volumes surge past those of stock exchanges. 

In one example, Sunday’s crypto volumes (across the five busiest exchanges) totaled around $9 billion, while stock exchange volumes on Friday totalled $8.7 billion. 

“Koreans favor high-risk, high-return investments because they experienced a rapidly growing economy,” Ki Young-Ju, founder of onchain provider CryptoQuant, told CoinDesk. “More people are turning to such investments, with altcoins being the preferred choice over major assets like BTC or ETH.”

What do analysts think will happen next?

On Monday, Bernstein analysts doubled down on their report from last October predicting that BTC is headed to $150,000. Specifically, the firm’s latest prediction calls for bitcoin to hit $150,000 by mid-2025, with prices breaking out following next month’s halving event. 

Cathie Wood, whose ARK Invest launched its ARK 21Shares BTC ETF in January, has long argued that institutional capital will drive bitcoin’s price to $1 million by 2030. In an interview with the New Zealand Herald, Wood declined to specify the firm’s new target, but said that it’s “well above that.”

The bottom line…

A week or two after the new ETFs began trading, crypto prices took a brief dip, with many assuming that the launch had been a “buy the rumor, sell the news” moment. 

But as capital flooded into the new investment products, crypto prices began to ramp up again by early February, ultimately sending BTC to a series of new all-time highs and pushing a wide variety of other tokens to levels not seen since the last bull cycle. 

Will next month’s halving drive similarly durable gains? We’ll know soon enough.

FORK IT OVER

Ethereum’s Dencun upgrade has arrived

It’s a big week for ETH! Just as prices have risen to two-year highs, a major new upgrade arrived this week.

The “Dencun” upgrade, which went live Wednesday, is the latest step in Ethereum’s years-long product roadmap, and is primarily focused on improving the network’s scalability, with the eventual goal of lower fees, faster transactions, and greater security.

Here’s what you need to know.

What is the Dencun upgrade?

As a “hard fork” — a permanent change to the rules of the network — Dencun represents the most anticipated upgrade to ETH since last April’s “Shapella” upgrades, which added unstaking functionality to the blockchain, and is perhaps the biggest change to the network since 2022’s “Merge,” which saw Ethereum transition to an energy-efficient proof-of-stake blockchain.

Dencun’s headline feature is an innovation called “proto-danksharding,” which aims to improve Ethereum’s scaling issues by helping layer-2 blockchains like Optimism, Polygon, and Arbitrum move and store data more quickly while reducing fees. (Base, the Coinbase-incubated Ethereum L2, will support Dencun right as it rolls out on Wednesday.)

Layer-2 blockchains work kind of like HOV lanes on the highway, allowing some traffic to move off of the main Ethereum blockchain and onto a faster and typically lower-fee parallel chain. 

“They've become the primary venues for transacting on top of Ethereum,” according to CoinDesk, “amassing billions of dollars in deposits and consistently boasting higher transaction volumes than the main Ethereum chain.”

How much cheaper could fees get?

Developers estimate that the Dencun upgrade could reduce transaction costs on layer-2 networks by as much as 90%. But that doesn’t mean that fees on the main Ethereum blockchain will go down by similar amounts in the near-term.  

Instead, proto-danksharding represents an intermediate step towards the ultimate goal of “full danksharding,” which developers say will allow Ethereum to process around 100,000 transactions per second, compared to about 30 transactions per second today. Full danksharding is still expected to be years away.

What does Dencun mean for ETH’s future?

According to a new report from Fidelity Digital Investments, Dencun could usher in a major shift in Ethereum’s core functionality.

Instead of operating as a general-purpose blockchain that developers can build applications on top of, Dencun solidifies a new paradigm where the main Ethereum blockchain functions primarily as a database and security layer for layer-2 networks, which will eventually handle the bulk of transactions. 

“Each user added to the network exponentially adds to its value (due to network effects),” the Fidelity report notes. “The ability of L2 platforms to design for specific applications will improve the user experience and probably attract new and more consistent users and developers.”

The bottom line… 

High transaction costs at busy times might be the most common complaint Ethereum users have. While Dencun won’t necessarily result in lower fees right away, it’s a key step towards making Ethereum faster, cheaper, and easier to use.

“The Merge was super critical and super important, but users didn’t notice much,” Roberto Bayardo, a Base engineer at Coinbase, told Bloomberg. “From the perspective of the end user, this change is going to be much more dramatic and spur much more innovation on the application side.”

NUMBERS TO KNOW

6.7 million

The number of unique daily active users who used decentralized apps in February, a new all-time high, according to DappRadar. The dapp categories that saw the most growth in the past month were NFTs (24%), gaming (20%), and social (12%).

1.82 million BTC

Approximate number of bitcoins held by publicly-traded bitcoin mining companies, worth around $131 billion (as of Tuesday) — an all-time high. Surprisingly, mining stocks as a category fell to start the week, potentially due to investors’ concerns about how they’ll be impacted by April’s halving.

$84 million

The approximate amount, in profit, that El Salvador is sitting on from its bitcoin holdings. The country, which first bought the cryptocurrency in 2021, is up about 70% on its initial investment and holds 2,681 BTC at an average cost of roughly $42,600. 

.01 ETH

The cost of a starter pack for the sci-fi themed NFT card game Parallel, equivalent to roughly $40. The packs, which can be minted on Base, reveal NFT collectibles that can be used to assemble decks and battle other players.

$0

Cost of fees that VanEck will charge holders of its spot bitcoin ETF until March 31, 2025. VanEck’s ETF is lagging behind some competitors in attracting investors, and the fee reduction is seen as a way to encourage inflows.

TOKEN TRIVIA

What will Bitcoin’s block reward be after this year’s halving?

Find the answer below.

Trivia Answer