ETPs: Bank of America’s Merrill, Wells Fargo Offer Bitcoin ETF Products for Clients

Derivatives: Euro-denominated Bitcoin futures will bolster institutional adoption — CME director

Sovereign: El Salvador and pro-Bitcoin businesses reaping rewards after years of skepticism

Miners: Bitcoin halving will benefit publicly listed miners: JPMorgan

Exchanges: Crypto Exchange Gemini to Return $1.1 Billion to Customers in Regulator Settlement

A massive week for digital assets swung the cumulative market capitalization of all cryptocurrencies from under $2.0 trillion at last week’s close to a more than two-year high above $2.34 trillion by Thursday. That surge helped the unit price of the largest cryptocurrency, Bitcoin (BTC), jump out to $64,000 for a short time on Wednesday. This latest move is rivaled only by Bitcoin’s run to an all-time peak of nearly $69,000 in November 2021. Momentum was derailed by a Coinbase outage, however, which played a role in sending BTC back to $62,000 by Friday morning. Coinbase is the leading US cryptocurrency exchange and, per CEO Brian Armstrong, traffic on the platform exceeded the 10x spike they had modeled for and load tested.

A 44% gain throughout February made it the best month for BTC since November 2020 and marked a sixth consecutive monthly gain. This level of consistency has not been achieved since early 2021 and is tied for the longest ever string of green months in Bitcoin’s history, going back to 2011. In USD terms, February’s appreciation of more than $19,800 per BTC was the strongest monthly increase in Bitcoin history. Though this record run might suggest BTC prices are due for a pullback after half a year of nonstop momentum, MRP noted last week that the on-chain data has continued to flash some of the hallmarks of a sustained bull market. In particular, we highlighted the tendency for accumulation and distribution periods among long-term adopters to run inverse to the boom and bust nature of Bitcoin’s price action.

Additionally, price continues to appreciate while the balance of Bitcoin held on exchanges has been spiraling lower for years. MRP noted last week that the balance of Bitcoin held on more than 30 exchanges tracked by Glassnode appeared to be making another leg down, slipping to an almost six-year low on February 22 at 2.314 million BTC – but that figure had slumped even lower by February 27. Less than 11.8% of BTC’s circulating supply is now held on exchanges, the lowest share since December 2017. Earlier this morning, during Asia trading hours, CryptoSlate noted that approximately 16,000 BTC ($992 million) was withdrawn from Coinbase in one of the largest withdrawals from the exchange in history.

Chart provided by Glassnode

Net inflows to exchanges would be significant, as they’d indicate prices have risen to such a level where most investors are preparing to sell their BTC. By contrast, declining exchange balances typically indicate greater demand for digital assets among long-term adopters of the asset who plan to self-custody their digital assets over the long-term in a privately-held wallet device or other form of personal storage solution.

One differentiating factor in this cycle that was not present in past Bitcoin bull markets is the existence of spot ETFs. Though the initial launch of the ETFs turned out to be a "sell the news" event, as MRP predicted would likely be the case, increasingly aggressive inflows to these funds show that demand for BTC among a more traditional class of investors is beginning to take off. This morning, BlackRock’s iShares Bitcoin Trust (IBIT) became the fastest ever ETF to reach $10 billion in AUM. Only 152 of around 3,400 listed ETFs (under 5.0%) have surpassed this threshold.

Between February 26 – 29, the ten sponsors of spot-backed Bitcoin ETFs acquired a net 32,417 BTC ($2.0 billion) on behalf of their customers, while only 3,600 new BTC were mined throughout that time – equivalent to 900 BTC per day. New supply will be further constrained by the halving in April, when the amount of Bitcoin mined per block will be cut in half. This hardcoded change to Bitcoin’s distribution schedule occurs once every 210,000 blocks (roughly four years’ time) and will reduce daily issuance to just 450 BTC.

February 12, 2024: Bitcoin Rebound Revives Miner Shares Ahead of Highly-Anticipated Halving, Hash Rate Touches All-Time High →

January 17, 2024: New BTC Funds See Strong Net Flows in First Few Trading Days, Interest May Shift to Potential ETH ETFs →

January 9, 2024: Bitcoin ETF Decision on Deck as Optimism Builds, Level of Inflows Could Steer Crypto’s Course Ahead →

December 4, 2023: Gold and Bitcoin Break Out, Greenback Stagnant on Rising Expectations for Earlier Rate Cuts →

October 24, 2023: BlackRock Reaches Breakthrough Milestones in Bid to Launch Spot-Backed Bitcoin ETF →

October 16, 2023: Bitcoin Now Worth More Than Half of Crypto Market Cap, ETF Prospects Keep Majority of Supply Unspent →

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ABOUT THE DIBS AND MCALINDEN RESEARCH PARTNERS

McAlinden Research Partners (MRP) publishes daily and other periodic reports on the economy and the markets.

MRP focuses on identifying change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP's compilation of articles and data from multiple sources on subjects reflecting change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics.

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