Bitcoin Newsletter Week 20 2024

Weekly update on all things Bitcoin

May 19, 2024

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TL;DR

  • BTC is up this week

  • BTC dominance is up this week

  • CME to Launch Bitcoin Trading for Hedge Funds

  • Senate Overturns SEC Crypto Rule; Biden Threatens Veto

  • Morgan Stanley Invests in Bitcoin ETF: $1.5 Trillion Move

  • Bitcoin's Influence on El Salvador’s Economy

  • Blackrock Bitcoin Draws 414 Institutions, Sets Record

  • Turkey Suggests Aligning Crypto Regulations with Global Norms

  • Bitcoin Miners Marketshare Drift Towards Duopol

  • Miners Remain Bullish on Bitcoin Amid Halving

  • Bitcoin Mining Expenses Plummet to $45K Amid Departure of Inefficient Miners

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Bitcoin Price

Crypto is up this week, with BTC being up 10.2% and ETH up 6.8%:

Bitcoin dominance has increased this week, rising from 51.1% to a peak of 52.6%, and ending at 52.3%. Typically, as Bitcoin's price rises, investors begin moving capital into Ethereum and other altcoins, which are riskier assets. This shift causes Bitcoin's dominance to decrease, a trend observed over the past few weeks.

It’s going to be interesting to see whether this trend will continue in the short term, as capital in crypto tends to flow initially to BTC and then further out on the risk-curve, starting with altcoins like ETH and then into mid- or low-cap coins.

The Bitcoin halving just passed. If history is any guide, we can expect BTC dominance to continue rising before investors start seeking higher returns in altcoins. This typically starts with ETH, and then on to mid- and low cap coins. Other coins being moved into are typically “ETH killers” like SOL, AVAX and other other L1s. Yet ETH is still the king amongst altcoins, as price action this week also shows.

With BTC dominance increasing and the ETH price increasing less than BTC, the BTC/ETH ratio is trending upwards to 21.66 ETH per BTC, underlining that BTC continues to be king in crypto, but alts like ETH are gaining momentum.

Financial News

The Chicago Mercantile Exchange (CME), the world's largest futures exchange, plans to offer spot bitcoin trading on its platform, according to a Financial Times report. This move would provide major hedge funds and institutional traders with a regulated venue to trade Bitcoin. Already the global leader in Bitcoin futures trading, CME aims to offer clients an integrated platform that includes both spot and derivatives markets. This integration enables complex trading strategies like arbitrage and basis trading, leveraging price differences between the two markets.

Currently, most spot bitcoin trading occurs on offshore exchanges like Binance. By providing a regulated alternative, CME targets institutional investors who require strict due diligence and compliance standards. The exchange has reportedly held talks with traders who have expressed strong interest in trading bitcoin in a regulated environment. This development comes as Wall Street ramps up its Bitcoin offerings amid surging demand.

The Senate has just passed legislation H.J.Res. 109 to overturn the SEC's Staff Accounting Bulletin (SAB) No. 121, which prevents highly regulated financial firms from custodying Bitcoin and other cryptocurrencies. The measure passed with bipartisan support in a 60-38 vote. Having already passed the House last week, the resolution aims to dismantle SAB 121. This bulletin imposes stringent restrictions on financial institutions, effectively barring them from acting as custodians for digital assets like Bitcoin.

H.J.Res. 109, under the Congressional Review Act, seeks to remove these barriers, enabling regulated financial firms to offer custody services for cryptocurrencies. However, the White House has stated that President Biden will veto the bill if it reaches his desk. The administration argues that overturning SAB 121 would "disrupt the SEC's work to protect investors in crypto-asset markets and safeguard the broader financial system." Proponents of H.J.Res. 109 argue that overturning SAB 121 is crucial for protecting U.S. consumers, especially in light of the recent approval of several spot Bitcoin ETFs by the SEC.

Recent 13F SEC filings have uncovered significant allocations to Bitcoin among major US financial institutions through spot ETFs, revealing holdings of institutional investors with over $100 million allocated. Following the SEC's approval of several spot Bitcoin ETFs earlier this year, investors have eagerly awaited these disclosures. Filings now reveal institutions such as the State of Wisconsin Investment Board, Wells Fargo, JPMorgan, and others.

The latest disclosure unveils that financial services giant Morgan Stanley has acquired $269.9 million worth of Grayscale's GBTC, positioning itself as one of the largest institutional holders of GBTC alongside Susquehanna's $1.8 billion position. With assets under management exceeding $1.5 trillion, this move signals Morgan Stanley's growing confidence in Bitcoin's role within portfolios. While some firms like Vanguard have expressed opposition to Bitcoin, the broader trend leans towards embracing Bitcoin exposure.

Adoption News

Harnessing the power of cryptocurrency to generate wealth is undeniably impressive, but what truly elevates the game is transforming an entire nation's economy. That's precisely what's happening in El Salvador. In a groundbreaking move, the country embraced Bitcoin as legal tender in 2021, making history as the first nation to do so. Since November 17, 2022, they've embarked on a daily routine of purchasing one Bitcoin without fail, utilizing the renowned saying, "a Bitcoin a day keeps the doctor away." Adding a touch of brilliance to this narrative is their utilization of free, environmentally friendly volcanic energy to bolster their Bitcoin mining efforts.

Nestled amidst 20 active volcanoes, El Salvador boasts an abundance of geothermal power. Leveraging this resource, the country has mined a staggering 474 BTC (equivalent to approximately $32 million) over the past three years alone. As a result, El Salvador's Bitcoin reserves now stand at an impressive 5,752 BTC, valued at around $373 million.

In the first quarter, according to 13F filings with the U.S. Securities and Exchange Commission (SEC), 414 institutions have disclosed holdings in Blackrock’s spot bitcoin exchange-traded fund (ETF), the Ishares Bitcoin Trust (IBIT). Institutional investment managers overseeing over $100 million in assets are required by the SEC to file Form 13F to disclose their securities holdings.

Bloomberg senior ETF analyst Eric Balchunas described this achievement as “mind-boggling,” noting that it “blows away record.” He emphasized that having even 20 holders for a newly launched ETF is “highly rare.” Other ETFs launched in January have not achieved nearly as many institutional holders as Blackrock’s IBIT, including other spot bitcoin ETFs like the Bitwise Bitcoin ETF (BITB), the Fidelity Wise Origin Bitcoin Fund (FBTC), and the ARK 21shares Bitcoin ETF (ARKB).

This week, Turkey's ruling party presented a proposed cryptocurrency bill to parliament, emphasizing licensing and registration for crypto service providers in line with global norms.

The bill seeks to modernize current regulations to effectively oversee the cryptocurrency market, with a strong emphasis on consumer protection, platform transparency, and adherence to financial regulations.

Under the proposed legislation, cryptocurrency trading platforms and other service providers in the sector would be mandated to secure licenses from Turkey’s Capital Markets Board (CMB)

Mining News

In May, AntPool and Foundry USA collectively held sway over 50% of Bitcoin's hash rate, a development signaling potential trouble ahead for Bitcoin users.

Bitcoin mining now finds itself increasingly concentrated in the hands of a select few. Major mining pools wield overwhelming influence, casting a shadow of existential concern over the pioneering digital asset. This scenario, while seemingly dire, traces back to a fundamental flaw in Satoshi Nakamoto's design.

Regrettably, Bitcoin mining has always trended towards centralization. Initially, miners could effortlessly mine blocks using CPUs on personal computers, owing to a smaller miner base and subsequently, a lower hash rate. However, this paradigm shifted to GPUs around 2010, then to application-specific integrated circuit (ASIC) miners by 2012. The advent of ASICs paved the way for colossal mining enterprises, which now operate warehouses stocked with hundreds or even thousands of mining rigs.

Following the Bitcoin halving event, miners have encountered hurdles, with diminished income prompting some to exit the network. Yet, GoMining provides a remedy via its innovative NFT-based method, rendering Bitcoin mining more accessible with lower entry barriers.

The landscape post-halving poses a complex scenario for Bitcoin mining. Miners grapple with income reduction, leading to network departures and a subsequent drop in mining difficulty. Despite innovations like the Runes protocol and Ordinals showing promise, their utilization has also dwindled significantly.

According to JPMorgan, bitcoin miners currently face a mining cost of approximately $45,000. Despite expectations of a post-halving drop in hashrate, the launch of the Runes protocol prevented an immediate decline.

However, due to various challenges, the bank remains pessimistic about the near-term prospects for bitcoin's price, seeing no upside potential.

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