DigitalX Weekly Crypto Update: Market Trends and Analysis

Market Commentary

Bitcoins price rose 7% in 24 hours following Wednesday’s lower-than-expected U.S CPI report. Core CPI recorded an increase of 0.3% month-on-month and 3.6% year-on-year, the lowest 12-month core reading since April 2021. Off the back of the rally, the U.S. spot Bitcoin ETFs experienced a substantial net inflow of US$303 million, marking its highest daily inflow since early May. As of Wednesday, the cumulative net inflows across the 11 spot Bitcoin ETFs in the U.S. reached US$12.15 billion, underscoring the sustained demand from investors.

The early submission of Q1’s regulatory 13F filings from some of the major financial institutions in the U.S. revealed significant ownership of spot Bitcoin ETFs. Despite the official submission deadline of May 15, as of last Thursday, 563 professional investment firms disclosed owning U.S$3.4 billion in spot Bitcoin ETFs. These figures are particularly impressive considering the historically limited involvement of institutional investors in new ETF offerings. Most newly introduced ETFs attract very few 13F filings in their first few months of listing. The best ETFs on record were gold ETFs with just 95 financial institutions in its first 13F filing in 2005. Spot Bitcoin ETFs are expected to record more than 700 financial institutions when all 13F fillings are submitted by May 15. Matt Hougan, Chief Investment Officer at Bitwise said these initial allocations are “down payment,” anticipating much more coming as the allocation will build up over time. Noteworthy institutional owners of spot Bitcoin ETFs include Millennium Management (holding US$1.9 billion across five ETFs), Hightower Advisors – the second-largest RIA firm in the U.S. by assets (holding US$68 million), the State of Wisconsin Investment Board (SWIB) – the ninth-largest state pension fund in the U.S (holding US$141 million in IBIT and GBTC), and Morgan Stanley (holding US$270 million, primarily in GBTC). 

Ethereum’s price performance lagged behind Bitcoin’s due to an uptick in net supply and disappointment surrounding the prospect of spot Ethereum ETF approvals at the May deadline. Following the DenCun upgrade, transaction fees in the Ethereum network have decreased fourfold on average, resulting in a reduction in the amount of ETH being burned. The decline in ETH being burned represents one of the lowest levels it has seen since the Merge, and with supply currently growing at its fastest rate since 2022, Ethereum has reverted back to an inflationary asset. On May 23rd and May 24th, the SEC will be forced to announce their decision regarding the approval of spot Ethereum ETF applications submitted by VanEck and ArkInvest/21 Shares. As mentioned previously, the market currently assesses the odds of an approval to be extremely low. 

CEO Comment

The Gap between Bitcoin and the S&P 500 has reduced to 11%, from 15% last week. The US  CPI print however helped close the Gap further from the previous week with US interest rates expected to remain flat, despite a recent run of higher-than-expected inflation. 

As for the shift list, which we define as the major events and announcements facilitating the broader market’s transition to Web3 financial rails or the internet of value, the top shifts for this week include:

1. This report can be 1, 2 and 3 on the shift list, as it is massive for our industry and the type of adoption that influenced the creation of the shift list in our weekly report. JPMorgan, Morgan Stanley, Wells Fargo, UBS, and even the US state of Wisconsin have all reported holdings in the US spot Bitcoin ETFs. What’s even more astonishing is that a total of 937 financial firms have reportedly disclosed spot Bitcoin ETF holdings in Q1 – a record amount amongst ETFs in their first quarter.

Our Top “alts shifts” for this week, featuring shifts in our altcoin universe that drive our thematic approach, saw the second gap, or the broader digital asset market, remain flat at circa 47%. I want to reiterate that this is a big opportunity, as mentioned we see this as a selective opportunity to identify and grow our alternatives portfolio via our “alThematics” work. The gaps themselves are proving to be a risk on, risk off proxy and hugely high Beta – volatility is a certainty and an opportunity – the building is happening no matter what.

1. The year of scaling up for real world asset tokenisation, continues to take shape with the world’s largest securities settlement system, the DTCC completing a pilot project with Chainlink and the likes of JPMorgan, Franklin Templeton, and BNY Mellon, with the goal of accelerating the tokenisation of funds. Click the link to the right or give us a call to find out how DigitalX offers exposure to tokenised real world assets through our very own DigitalX Asset Reference Token Fund. 

What are our favourite thematics for 2024? We continue to like any infrastructure plays of the shift from Web2 to Web3 financial rails and any plays in the real-world asset tokenisation infrastructure, data validation and decentralised storage, as well as scale-up technologies such as ZKrollups. We are closely following all the ”de’s” – DeFi, DePin, DeSoc – (want to know what that means? – message us). 

Lisa Wade, CEO DigitalX

CRYPTO TOP 20 7 DAY PRICE CHANGE

*All figures throughout are in USD unless otherwise specified

Market Updates

• Jack Dorsey says Bitcoin price will go beyond $1 million in 2030
• Crypto custody tech firm Fireblocks seeks New York-regulated trust company
• ETH reverts to inflationary asset following fee-reducing Dencun upgrade
• JPM Coin to act as settlement mechanism for Broadridhe’s Distributed Ledger Repo platform
• Robinhood CEO says Americans should be able to access crypto as it becomes ‘more important’
• Robinhood Wells Notice shouldn’t deter eventual approval of an Ether Spot ETF: JPMorgan
• Vitalik Buterin drafts EIP-7706, proposing new calldata gas type for Ethereum
• Founder of dYdX steps down as CEO of firm behind decentralised exchange
• Lightning Labs is bringing stablecoins to the Bitcoin blockchain: CEO
• Tokenised funds could chip away at stablecoin market, Polygon exec says
• VanEck’s MarketVector launches Meme Coin Index
• Coinbase sees infinite interoperability potential with Ethereum and USDC
• ARK and 21Shares drop staking plans from Ethereum ETF proposal
• Solana-based marketplace AgriDex raises $5M to tokenise agricultural industry
• Ripple joins multi-chain DeRec Alliance for secrets management
• Celo community ratifies plan to use Optimism’s OP stack for new layer-2 chain
• BlockFi partners with Coinbase for fund distribution, shuts down web platform
• China’s Digital Yuan isn’t taking off despite state employee state trial: Report
• Bitcoin miner Marathon in talks with Kenya to help with its green energy ambitions
• Custody provider Liminal wins approval in Abu Dhabi as it extends expansion in Asia
• Binance fired investigator who reported market manipulation at DWF Labs: Report
• Synthetic founder Kain Warwick launches Infinex
• Peter Thiel’s Founders Fund, Vitalik Buterin back $45M investment in Polymarket
• ‘CryptoDad’ Giancarlo joins Paxos board
• OKX officially launches crypto exchange in Australia
• Nasdaq, after pivoting crypto ambitions to tokenised T-bills, sees staffers exit amid delays: Sources

The Shift List

• State of Wisconsin buys nearly $100M worth of BlackRock spot Bitcoin ETF
• Metaplanet makes Bitcoin a reserve asset as Japan’s debt mountain grows
• JPMorgan’s Onyx to industrialise blockchain POC’s from Project Guardian
• Hong Kong issuer seeks spot Bitcoin ETF for mainland China
• Deutsche Bank joins Singapore’s Project Guardian asset tokenisation project
• JPMorgan reports holding shares of several spot Bitcoin ETFs
• Wells Fargo reports exposure to Grayscale and ProShares Bitcoin ETFs
• Philippine Central Bank approves Peso-pegged stablecoin for faster remittances

Macro and Regulatory Environment

• Bitcoin struggles despite European equities rally as Bank of England signals summer rate cut
• U.S. House’s McHenry says bill on crypto market structure will get floor vote
• SEC asks court to deny Coinbase’s motion for interlocutory appeal
• Stand with Crypto sets up election war chest, backs candidates seeking open seats
• IMF backs Nigeria crypto adoption amid local SEC crackdown
• Mark Cuban slams SEC’s Gary Gensler, says ‘crypto voters will be heard’ in the 2024 election
• U.S. CFTC proposes ban on political event contracts
• Chinese police bust $296M illegal crypto-based currency operation: Report
• Binance, KuCoin win registration from India anti-money laundering regulator as crypto credibility improves
• Kraken asks court to dismiss SEC claims to avoid ‘significant reordering’ of U.S. financial structure
• Exiled Russian opposition leader launches blockchain-based referendum on Vladimir Putin’s election win
• Binance fined $4.3M by Canadian financial regulator for ‘administrative violations’
• U.S. blocks China-tied crypto miners as ‘national security risk’ near nuke base
• FalconX settles with CFTC for $1.8M over failure to register as Futures Commission Merchant
• U.S. Senators question Justice Department’s pursuit of crypto mixers
• Tornado Crash developer Alexey Pertsev found guilty, sentenced to 64 months in prison by Dutch court
• Canada’s ‘Crypto King’ and associate arrested, charged with fraud in alleged $30M ponzi scheme
• Sweeping ‘Bitcoin Rights’ bill becomes law in Oklahoma

About DigitalX

DigitalX Ltd (ASX:DCC) is a leading ASX-Listed Bitcoin and digital asset funds management business. The Company has a 9 year track record mining Bitcoin, blockchain and smart contract development. DigitalX Asset Management is the investment manager of digital asset investment products that provide qualified investors with highly secure and streamlined access to digital asset exposure. To learn more contact the team at [email protected] or visit our website https://digitalx.fund/.

Disclaimer:

DigitalX Asset Management Pty Ltd is a corporate authorised representative (CAR) of Boutique Capital Pty Ltd (AFSL 508011), and True Oak Investments Ltd (AFSL 238184). To the extent to which this document contains advice it is general advice only and has been prepared by the CAR for individuals identified as wholesale investors for the purposes of providing a financial product or financial service. The information herein is presented in summary form and is therefore subject to qualification and further explanation. The information in this document is not intended to be relied upon as advice to investors or potential investors and has been prepared without taking into account personal investment objectives, financial circumstances or particular needs. Recipients of this document are advised to consult their own professional advisers about legal, tax, financial or other matters relevant to the suitability of this information. Past performance is not indicative of future performance.