DigitalX Weekly Crypto Update: Market Trends and Analysis

Market Commentary

Bitcoin surged to an all-time high (ATH) surpassing the US$73,000 (~AUD $110,000) on 13 March. Bitcoin continues its rally, defying broader market downturns spurred by hotter-than-expected inflation data. As at the time of writing, Bitcoin’s price has increased 3% in the past 24 hours whilst the S&P and Nasdaq Composite were down 0.2% and 0.6% respectively. Bitcoin’s latest rally has been driven by the strong inflows into the spot Bitcoin ETFs in the US. Over the past week, trading volume for the US spot Bitcoin ETFs ranged from US$7 billion to US$9 billion per day. To put this into perspective, there are only five other stocks which saw higher trading volumes, according to Eric Balchunas of Bloomberg. 

Ethereum broke US$4,000 on 12 March and has been trading in the $3,900-$4,000 range since. Ethereum’s Dencun upgrade went live on 13 March 2024. Its core feature, EIP-4844, also known as  “proto-danksharding,” introduced blobs aimed at reducing transaction costs on layer-2 networks. In addition, the Dencun upgrade incorporates eight other Ethereum Improvement Proposals (EIPs) designed to enhance various functions on the network, including consensus, execution, and data costs. A mere 13 minutes after the Dencun upgrade went live, someone uploaded the entire Bee Movie script on the mainnet — costing roughly $14, showcasing a significant fee reduction on Ethereum layer 2s. Uploading the Bee Movie script has been a long-running joke in the crypto circles, in which people race to mint the full-length script on brand-new networks and blockchain-related functions to confirm success of the networks/function. 

On top of our shift list this week is the Canton pilot in the US that allowed 15 asset managers, 13 banks, four custodians and three exchanges to seamlessly transact and settle tokenised assets and deal with fund registry, digital cash, repo, securities lending, and margin management transactions. Participation in the pilot included Goldman Sachs, BNY Mellon, DRW, Oliver Wyman, and Paxos.

CEO Comment

The Gap between Bitcoin and the S&P 500 has become essentially negligible, equating to 1%, with Bitcoin and the S&P 500 continuing to hit all time highs. We expect to see all time highs continue to be made with fairly volatile range trading over the next few weeks with the market nervously questioning if the halving will be buy the rumour sell the fact. Now that the Gap has well and truly closed, what now? We certainly see the Second Gap closing in on Bitcoin as we enter Altseason. Rest assured, we are running our altThematic process in the Digital Asset Fund to generate this alpha. 

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. I am not sure if we touched on this enough last week – entry into traditional portfolio allocations is the pathway to the next big shift for digital asset markets, and the next wave of demand. This Blackrock move is nothing short of huge. We have done portfolio optimisation work and this is a theme you will hear about a lot from us.
2. For those like us who are following real world asset tokenisation scaling this year, you will know this is also nothing short of huge. The collaboration of names like Goldman Sachs and BNY show the weight of money that can and will come into this space. We still believe that real world asset tokenisation markets may one day dwarf Bitcoin and the broader crypto space. 

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 40%. There is a big opportunity here, as we see this as a selective opportunity to identify and grow our alts portfolio via our “alThematics” work. 

1. We continue to look at intersectionality and AI plays with the NVIDIA conference on. We certainly see a lot of interest to be generated in this theme over the coming weeks.
2. You will hear the term blobs a lot, here is why – https://www.coindesk.com/markets/2024/03/13/arbitrums-arb-polygons-matic-lead-gains-as-ethereums-dencun-upgrade-goes-live/

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

• Bernstein is ‘now more convinced’ that Bitcoin will hit $150K after massive rally
• 4% of the entire Bitcoin supply is now backing US spot ETFs
• Bitcoin surge sees crypto trading volumes exceed the stock market in South Korea
• Ether hits $4K for first time in more than two years
• Ether could run to $10,000 or higher this year on numerous catalysts: Bitwise
• Coinbase upgrade to neutral as Goldman Sachs ends bearish stance
• Grayscale, Coinbase sit down with SEC over spot Ether ETF
• DeFi TVL reaches $100b as Bitcoin pumps sentiment
• VanEck temporarily cuts Bitcoin ETF fee to zero after lagging in assets
• Bitcoin developers unite to draft guidelines for BRC-20 tokens
• Ethereum’s Dencun upgrade will benefit networks like Polygon, Arbitrum and Optimism
• CoinShares acquires Valkyrie’s ETF business
• OKX gets in-principle license approval in Singapore

The Shift List

• BlackRock plans to acquire spot Bitcoin ETPs for its Global Allocation Fund
• Indian crypto investment platform Mudrex to offer U.S. Bitcoin ETFs to Indian investors
• London Stock Exchange to accept physically-backed crypto ETN
• Goldman Sachs, BNY Mellon and others test enterprise blockchain for tokenised assets
• Grayscale plans low-fee GBTC spinoff: the Bitcoin Mini Trust
• With Mastercard, MetaMask tests first blockchain-powered payment card

Macro and Regulatory Environment

• U.S. President again proposes Crypto Mining Tax, ‘Wash Sale Rule’ for digital assets in new budget
• Wyoming grants DAOs new legal structure
• U.S. Fed Chair Powell says ‘nowhere near’ pursuing CBDC, won’t spy on Americans
• Nigeria’s Central Bank enlists Gluwa Nigeria to boost eNaira systems, Adoption
• Pro-Bitcoin Senator Cynthia Lummins pushes stablecoin bill
• SEC pushes back decision to open up options trading on spot Bitcoin ETFs
• South Korea plans crypto management system against tax evasion: report
• Coinbase accuses U.S. SEC of breaking the law in rejecting crypto rulemaking
• EU Parliament approves new sanctions laws that also apply to crypto
• Hong Kong’s central bank starts regulatory sandbox for stablecoin issuers
• Thailand’s SEC greenlight investment from institutional and wealthy individuals in crypto ETFs
• Israel announces plans for interest-bearing shekel CBDC
• EU regulators publish batch of draft rules for stablecoins under MiCA
• Indonesia’s finance regulator issues new crypto regulation to strengthen industry
• South Africa is poised to license 60 crypto firms by month end: Bloomberg

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.