 | 3/29/24 |
Thailand will allow institutional and high-net-worth investors to invest in spot bitcoin ETFs. [Deejpilot via Getty Images]
What’s up? It’s Coinbase Bytes
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
- Bitcoin revisited $71K. How Bitcoin’s halving, BTC ETF volumes, and venture capital funding are shaping market expectations.
- Global crypto headlines in focus. The latest updates from Thailand, El Salvador, the U.K., and the U.S.
- This week in numbers. A record setting crypto insurance product, the size of a new onchain gaming venture fund, and more stats to know.
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Price changes are for the past week, ending on Mar 28, 2024 at 11:58 PM UTC
 | MARKET UPDATE |
Is crypto’s 2024 rally heating back up?
After slumping slightly in recent weeks, crypto’s 2024 rally has picked up steam, with BTC prices ticking back above $71,000 on Thursday, and a wide variety of other tokens posting gains. With new inflation data dropping on Friday, BTC’s next halving due in April, and continued debate over the likelihood of the SEC approving an ETH exchange-traded fund (ETF) in the near future, what might happen next? Let’s dig in.
Prices bounced back after BTC ETFs saw net outflows for the first time in seven weeks.
One of the biggest drivers of the current rally has been billions of dollars that has poured into the new spot BTC ETFs that began trading in January — a staggering $12 billion poured into the funds during a seven-week period in February and March. The ETFs use the funds to buy bitcoin, which has helped demand, and prices, spike.
But last week, as the ETFs collectively saw a record $900 million outflow, prices only saw a modest decline. According to Bloomberg, traders took advantage of momentarily lower prices to “buy the dip,” helping to drive prices back up for a wide range of cryptocurrencies.
The ETFs were again seeing net inflows by the beginning of this week. Meanwhile, an eleventh spot BTC fund began trading on Wednesday, with Hashdex’s BTC futures ETF shifting its focus to holding BTC directly.
VC funds are flowing to crypto startups again.
As crypto markets have surged, a major influx of venture capital investment has begun pouring into crypto startups. According to analytics firm Cryptorank, crypto VC fundraising has increased each month this year, totalling nearly $2.2 billion so far.
According to CNBC, major fundraises this quarter have included a $225 million investment in Wormhole (“an open-source blockchain development platform company”) and $102.5 million in Together.ai (“a decentralized cloud platform for large foundation models”).
As the Wall Street Journal reports, “a jump in the price of bitcoin makes limited partners [LPs], which invest in venture funds, more comfortable with crypto exposure. That, in turn, gives venture fund managers more confidence in their ability to raise subsequent funds, unlocking fresh capital for startups.”
Or as Rob Hadick, general partner at crypto venture firm Dragonfly, put it, “What’s clear is that LPs are starting to feel more comfortable about the space. That’s speeding up venture fund deployment.”
Bitcoin’s next halving is expected in about two weeks.
The most anticipated crypto milestone of 2024 after the BTC ETF approvals is Bitcoin’s next halving, which should happen on or around April 19.
So what is the halving and why is it such a big deal?
Bitcoin is designed to be a scarce, inflation-resistant asset. One mechanism it uses to achieve this is the halving, in which the amount of BTC generated by mining is reduced by half roughly every four years.
Historically, a lot of bitcoin’s gains came in the 12 to 18 months after a halving, when newly diminishing supply accompanied surging demand. At the time of 2020’s halving, for instance, one BTC cost less than $10,000. By the peak in 2022, prices had climbed to more than $67,000. (Remember: Past performance is not indicative of future results.)
Got it. So what do people think will happen this time?
There are a wide range of theories, and the economics of bitcoin mining are complicated. But some analysts believe the halving will drive a long-term rally while others say the effect has likely been priced in by savvy traders.
Coinbase Institutional noted in its 2024 outlook that while many consider the halving a direct catalyst for BTC, “we think that causality is less precise than some may believe.” The halving’s greater significance, Coinbase Institutional said, is its ability “to raise media attention around what makes bitcoin unique.”
The bottom line…
So what’s next? The Federal Reserve is widely expected to reduce interest rates starting this summer, but some fear that inflation data that’s coming on Friday could change those plans. (In general, lower interest rates are good for risk assets like growth stocks and crypto.)
That said, many analysts are big-picture bullish. Asset management giant Bernstein, for instance, has raised its 2024 price target for bitcoin from $80,000 to $90,000 while analytics firm 10x Research sees BTC hitting a new all-time high around $83,000. And as Goldman Sachs reported recently, their clients have had “a resurgence of interest” in crypto products ever since the introduction of BTC ETFs.
| GLOBAL SCENE |
The latest regulatory headlines in the U.K., El Salvador, and beyond
The U.S. has been making plenty of headlines with crypto regulatory narratives in 2024. In January we saw Bitcoin ETF approvals, and on Wednesday, the judge in the SEC's enforcement action case against Coinbase dismissed claims against Coinbase Wallet, while allowing other claims to move to discovery. Coinbase CEO Brian Armstrong called this development a “huge win for self-custodial wallets.”
But crypto also extends far beyond the headlines in the U.S. There are nearly 600 million crypto users around the world — with popular global use-cases including savings and investment, remittances, financial services in places with limited banking access, and hedge assets for residents of nations experiencing extreme inflation.
And while crypto regulations continue to evolve in the U.S. and internationally, some governments have pioneered initiatives designed to foster crypto adoption within their borders.
Here’s what you need to know about recent moves in the U.K., El Salvador, and Thailand.
The London Stock Exchange plans to list BTC and ETH “exchange-traded notes” for professional investors in May.
On Monday, the U.K.’s Financial Conduct Authority gave tentative approval for the London Stock Exchange to create a marketplace for BTC and ETH exchange-traded notes (ETNs) to begin trading on May 28, with issuer applications opening up in early April. Only professional investors will be allowed to trade the ETNs.
The move marks a reversal for the FCA, which had previously banned crypto ETNs in 2021. ETNs are structured a little differently from ETFs, but both are designed to mirror the price movements of an underlying asset.
U.K. prime minister Rishi Sunak’s government has long sought regulations that would help the nation become a global crypto hub.
El Salvador plans to buy one bitcoin every day.
Since becoming the first country to recognize bitcoin as legal tender in 2021, El Salvador has continued to double down on plans to make the cryptocurrency central to the nation’s future.
Last week, president Nayib Bukele announced plans to purchase at least one BTC daily until it “becomes unaffordable with fiat currencies.” The government has announced progress toward BTC-backed government bonds, and last year the country launched its first bitcoin mining pool, which relies on geothermal energy.
El Salvador owns 5,700 BTC (worth around $400 million) and is sitting on about $80 million in unrealized profit.
Earlier this month, El Salvador sent around 5,000 of the nation’s BTC to a cold-storage wallet that’s held in a physical vault within El Salvador’s borders — a move that was widely celebrated by the bitcoin community. As Bitcoin Magazine notes, “shortly after Bukele announced El Salvador’s Bitcoin address, Bitcoiners began to send donations to the wallet.”
Thailand’s SEC will let wealthy investors invest in crypto ETFs.
Thailand’s Security and Exchange Commission issued new rules allowing institutional investors and high-net-worth individuals to legally purchase shares in spot bitcoin ETFs on U.S. exchanges. The move reversed a decision from earlier this year that would have banned all investors from holding shares in crypto ETF products.
Thailand ranked 10th on Chainalysis’ 2023 Global Crypto Adoption Index, with an estimated 10% of Thai citizens having used or owned crypto. While the country’s new SEC rules primarily apply to institutional investors, the regulator is also contemplating extending the rule to cover retail investors in the future.
The bottom line…
With governments around the world watching the U.S. BTC ETF rollout carefully, similar financial products will likely become more common.
But what could happen after that? One major global crypto theme in recent years has been tokenization (tying real-world assets to blockchain-based tokens). In the U.K., a recently released government-backed report encouraged firms to collaborate with each other on tokenization projects, a sign of growing comfort with blockchain use-cases and digital assets.
| NUMBERS TO KNOW |
$825 million
Maximum amount of crypto custody coverage that insurance broker Marsh will provide with its newly announced insurance product geared toward financial firms and custodians. According to a press release, the policy is the “largest facility of its kind” and is meant to support organizations with digital assets held offline in cold storage, and assets secured via multi-party computation.
$100 million
Size of the new “Inevitable Games Fund” started by Polygon Labs, VC firm King River Capital, and blockchain gaming platform Immutable. Per CoinDesk, the IGF will “target high-growth opportunities for … sophisticated investors in web3 gaming.” Since 2018, the blockchain gaming sector — which includes projects like The Sandbox and Gods Unchained — has seen $19 billion in investments.
83
Level that the Crypto Fear & Greed index hit on Wednesday. The index — which measures sentiment on a scale of 1 to 100 via a variety of metrics including volatility and social searches — is firmly in the “extreme greed” zone, indicating that traders are feeling bullish about bitcoin.
| TOKEN TRIVIA |
What is the U.S. tax deadline for 2024?
| A | April 1 |
| B | April 12 |
| C | April 15 |
| D | April 18 |
Find the answer at the end of the email.
| NOW TRADING ON COINBASE |
| RONIN |  |  |
Ronin is a low-cost and highly efficient network purpose-built for onchain gaming.
| AKT |  | |
Akash is a blockchain network that supports a decentralized compute marketplace.
Trivia answer
| C | April 15 |
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Disclaimer: This material is the property of Coinbase, Inc., its parent and affiliates ("Coinbase"). The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Coinbase or its employees and summarizes information and articles with respect to cryptocurrencies or related topics that the author believes may be of interest. This material is for informational purposes only, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations or (iii) an official statement of Coinbase. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated on the materials. Recipients should consult their advisors before making any investment decision. Coinbase may have financial interests in, or relationships with, some of the entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Coinbase's endorsement, or approval of any third-party websites or their content.
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