Where will BTC ETFs launch next?
Australia is already home to a spot BTC ETF, but some analysts expect more approvals this year. [Jamie Davies via Unsplash]
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
Bitcoin slipped under $43K after the Fed held rates steady. BTC remained up from last week’s sub-$40K lows.
Where in the world could crypto ETFs get approved next? A closer look around the globe for the next spot bitcoin ETFs.
This week in numbers. The amount of BTC that “whales” have added this year, January’s transaction volume for Solana-based tokens, and more stats to know.
MARKET UPDATE
Bitcoin slides slightly from two-week highs after Federal Reserve holds interest rates steady
Last week, bitcoin prices dipped after many traders seemingly took a “buy the rumor, sell the news” approach to the long-awaited arrival of spot BTC exchange-traded funds.
Thankfully, the down market was brief, and by Tuesday of this week, BTC had climbed back above $43,000 as market watchers waited for the Federal Reserve to announce the next phase of its fight against inflation.
Here’s what you need to know.
The Fed held interest rates at current levels.
As was widely expected, at this week’s meeting the Federal Open Market Committee (FOMC) once again kept rates steady at their current 5.25%–5.5% level, a 22-year high. But traders looking for firm signs about when rates might begin to fall were left disappointed.
In recent months, with a “soft landing” looking more likely, the FOMC had halted increases and signaled that rates could begin heading downward this year — with optimistic traders hoping that the Fed might start cutting rates as soon as March.
Instead, as Fed Chief Jerome Powell put it in his Wednesday speech, “We want to see more good data. It’s not that we’re looking for better data, we’re looking for a continuation of the good data we’ve been seeing.”
In the hour after Powell’s speech, BTC dipped back below $43,000.
Why are interest rates so important to crypto markets?
Low interest rates make it cheaper for individuals and businesses to borrow money. They tend to be especially positively correlated with riskier growth asset classes like crypto and tech stocks.
As the head of research at asset management firm CoinShares told Reuters: "What popped the bitcoin [bull run] was rising interest rates, and what will probably help spur the next rally ... will be interest rates being cut.”
What do analysts think might happen next?
There are a wide range of predictions from veteran market watchers.
One bullish take, from Skybridge Capital founder Anthony Scaramucci, predicts that BTC will rise to $170,000 following the next “halving,” which is set for April. “Go back and look at Bitcoin halving cycles,” Scaramucci said on a podcast. “The day that Bitcoin halves, multiply it by four [and] 18 months later and it’s been uncanny that that’s been the price of Bitcoin.”
A more cautious take comes from Chris Burniske, partner at venture firm Placeholder (and former crypto lead at ARK Invest), who predicts short-term volatility could precede longer-term gains. As CoinDesk put it, “He sees the price dropping to at least the $30,000–$36,000 range and wouldn't be surprised if the mid-high $20,000 area were tested prior to an eventual move towards a new all-time high.”
“As always, patience is your friend,” said Burniske. “The path to get there will be volatile – expect fakeouts – and will take months to play out.”
What’s happening with BTC ETFs?
On Friday, BlackRock’s IBIT became the first of the new investment products to hit $2 billion in assets under management (AUM), making it the third-biggest ETF (out of 600) that launched in the last 12 months, according to ETF Store president Nate Geraci.
Meanwhile, Grayscale’s GBTC saw more than $2.2 billion in outflows last week, although the outflows appear to be slowing.
As Bloomberg explains, “The fund’s 1.5% management fee — the highest of any of the spot bitcoin ETFs on the market — is partially responsible for recent outflows. Other short-term factors include FTX’s sale of at least $600 million in GBTC shares and profit-taking from investors who took advantage of the fund’s discount in recent years, according to Kaiko Research.”
The bottom line…
There’s a growing consensus that economies in the U.S. and beyond will achieve a soft landing — and that the Fed will eventually cut rates in 2024.
“High real interest rates have weighed on Bitcoin’s valuation, so we expect rate cuts to help support crypto markets,” said Grayscale managing director of research Zach Pandl. “A soft landing for the U.S. economy, Fed rate cuts, and a potentially contentious presidential election should all be macro tailwinds for Bitcoin in 2024.”
ETF WATCH
Where in the world will spot BTC ETFs launch next?
Now that the U.S. has finally joined countries including Canada, Brazil, Germany, and Switzerland in approving spot BTC ETFs, market watchers are eyeing which regions could be next on the list, with crypto hubs in and around Asia generating especially loud buzz.
Here’s what you need to know.
BTC ETFs will likely debut on Australia’s main stock market.
Australia has actually had a spot BTC ETF since 2022, but the product (the Global X 21Shares Bitcoin ETF) has less than $40 million (AUD) in AUM — potentially because it trades on CBOE Australia, an alternative to the nation’s primary ASX exchange.
This year, analysts are expecting the approval of one or more spot ETFs that will trade on ASX, which could bring far more liquidity into the products.
The public doesn’t yet know how many firms have applied, but according to Brisbane-based lawyer Liam Hennessy, approval is expected by the “first or second quarter of 2024.”
Hong Kong regulators are warming to BTC ETFs.
Despite China’s broader crypto crackdown, regulators and lawmakers in Hong Kong are becoming increasingly vocal about their support for spot crypto ETFs.
After adopting a “professional-investors only” approach to digital assets in 2018, the Securities and Futures Commission and Hong Kong Monetary Authority acknowledged that the market has changed significantly.
Now, the agencies say they’re “prepared to accept applications for the authorisation of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds.”
In the hours after spot ETFs were approved for trading in the U.S., Hong Kong lawmaker Johnny Ng wrote on X that Hong Kong should “take the lead in implementing relevant policies and products in Asia.”
South Korea and Singapore remain cautious.
Some analysts believe that U.S. approval of spot ETFs would influence more skeptical regulators in countries like South Korea and Singapore. But approvals of ETFs in those jurisdictions might still be an uphill battle.
In South Korea, officials seem to be divided. Following approvals in the U.S., the nation’s top financial regulator warned local firms against brokering foreign ETFs.
But, promisingly, Korea’s office of the presidency urged the agency to “reconsider the possibility of approving a local spot bitcoin exchange-traded fund.”
In Singapore, where the official policy is to promote blockchain technology without encouraging speculation, a spokesperson for the Monetary Authority of Singapore reiterated that spot ETFs aren’t approved for retail investors and that institutional investors who trade BTC ETFs in foreign markets “must exercise extreme caution.”
The bottom line…
The approval of spot BTC ETFs in the U.S. could make similar moves in other regions more likely. Meanwhile, some of the Wall Street firms behind the U.S.’s new products are also seeking to launch spot ETH ETFs.
What might the impact be on ETH prices? Analysts at British bank Standard Chartered predict that ETH prices would “track, or outperform, bitcoin” during the runup to SEC approval, which the bank anticipates will come in May.
NUMBERS TO KNOW
$952 billion
Approximate transaction volume that Solana-based tokens saw in January — a 30% gain on December and a multi-year high. Much of the activity can be attributed to trading on decentralized exchanges built on Solana.
$3 billion
Amount of BTC accumulated by “whales” in January. Wallets possessing at least 1,000 BTC added more than 76,000 BTC to their holdings, bringing their collective holdings to nearly 7.8 million BTC.
20,623
Number of bitcoin mining machines owned by the newly public mining company GRIID Infrastructure, per its most recent filing. GRIID, which began trading on the NASDAQ Monday, operates one mining facility in New York and three in Tennessee.
10,000
Number of daily active users gained by the decentralized social media app Farcaster over the weekend, after it debuted a new feature called “Frames.” As the Defiant notes, Frames lets developers incorporate interactive “experiences” into Farcaster posts, such as allowing users to mint NFTs, play games, and make purchases via instant-checkout links.
20%
Share of a new $315 million fund raised by Uncorrelated Ventures that will be dedicated to investing in crypto startups. Previously, Uncorrelated Ventures has invested in projects including Compound, Cosmos, dYdX, Helium, and Uniswap.
TOKEN TRIVIA
What is Uniswap?
A
A centralized exchange
B
A decentralized exchange
C
A decentralized autonomous organization
D
Ethereum’s next upgrade
Find the answer below.
Trivia Answer
B
A decentralized exchange
