Grayscale has stolen the headlines in the spot Bitcoin ETF news. Many large-cap fund managers are still skeptical of spot Bitcoin ETFs. Ethereum’s ETF boost has melted away. Solana plans to release a new version of the Saga smartphone. The Finnish KRP managed to track Monero transactions.
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Grayscale dominates spot Bitcoin ETF headlines
In the previous news review, we reported on the approval of spot Bitcoin ETFs in the United States. This event had been awaited for over ten years, and there has been so much discussion and news about these ETFs since the end of 2023.
Market data was only available for a few days when we published the previous news roundup. Spot Bitcoin ETFs have been trading in the US for over two weeks. What does the situation look like?
The following chart explains the spot Bitcoin ETF flows in January.
As you can see from the picture, there have been about 5.8 billion dollars of inflows to ETFs. Roughly speaking, one-third has gone to Blackrock, one-third to Fidelity, and one-third to the remaining ETFs.
However, as a counterweight to these, Grayscale’s fund has a negative flow worth at least five billion dollars. Investors have been selling Grayscale ETF shares for nearly $500 million per day!
There have been two clear reasons for this:
- Grayscale converted from another type of fund to an ETF and did not start from scratch like its competitors. Many investors made a big profit by buying Grayscale fund shares at a discount in 2023 and have repatriated their profits.
- Grayscale’s fees are 1.5 percent, compared to competitors’ fees of 0.2-0.5 percent. Because of this, many investors have sold their Grayscale ETF shares and bought other ETFs.
Grayscale has completely stolen the headlines in ETF news. These outflows have also contributed to Bitcoin’s price drop, although whale sales have also occurred in the background.
Based on two weeks, the spot ETF launch has been quite a contradictory event. Many Bitcoin fans were waiting for an immediate price boost, but it hasn’t happened. Some investors have even considered the ETF launch a flop, but this is untrue.
The launch of the spot Bitcoin ETF has caused a bigger media frenzy than any ETF launch in the stock market’s history. It has also attracted enormous interest in traditional investment media.
Although Grayscale has brought huge selling pressure to the market, this volume is reducing. Last Friday’s sales were the lowest since spot Bitcoin ETF trading opened, and the decline continued on Monday.
A week ago, we also received information that the biggest Grayscale seller on the opening days was the bankruptcy estate of FTX. The bankruptcy estate of FTX dumped more than two billion dollars worth of Grayscale ETF shares in one week. This selling pressure is gone now.
Over 608,000 bitcoins are in spot Bitcoin ETF funds, translating to 2.9 percent of the entire 21 million Bitcoin supply.
We follow closely the development of the ETF sector. If we see significant changes in the market, we will report more on the topic.
Some fund managers are still skeptical about ETFs
Spot Bitcoin ETF product launch in the US was led by Blackrock, the world’s largest asset manager. Despite this, many large US asset managers remain skeptical of Bitcoin ETFs.
The financial giant Vanguard, which manages over seven trillion dollars in assets, has attracted the most attention. Vanguard skipped applying for a spot Bitcoin ETF and completely blocked such ETFs from its platform, which caused a small social drama. Many investors moved their pension funds from Vanguard to Fidelity.
A recent Vanguard report says they are refusing to allow spot #Bitcoin ETFs because:
– It’s an immature asset class
– It has little history
– It has no inherent economic value
– It has no cash flow
– It can create havoc within a portfolio
HAVE FUN STAYING POOR VANGUARD
— The ₿itcoin Therapist (@TheBTCTherapist) January 27, 2024
Charles Schwab is in the same class and has also been left out of the ETF race. The company manages more than seven trillion dollars in assets. However, there have been news reports that the company is considering making a spot Bitcoin ETF application.
This news underlines an important fact. It is good for a Bitcoin investor to understand how small a part of potential spot Bitcoin ETF customers are interested in the product and able to invest in it. The situation will change significantly in the coming years.
Many have the assumption that millions of investors will jump into spot Bitcoin ETFs just because they are available. This couldn’t be further from the truth. Many asset managers are not properly educated about Bitcoin, and they have to first educate their clients about the risks and rewards of such a product. Bitcoin ETFs won’t be added to pension funds that quickly but gradually over the coming years and decades.
Ethereum’s ETF boost lost
Let’s continue with topics related to the spot Bitcoin ETF, as they have dominated the news headlines throughout January.
In the previous news review, we told how Ethereum was the biggest winner of the spot Bitcoin ETF release. The price of Ethereum started to go higher right on the day of the launch when investors started speculating that Ethereum would also get its spot in the ETF in the United States.
In a couple of days, the price of Ethereum increased by more than 20 percent compared to Bitcoin. Just a week later, the Ethereum rocket ran out of fuel. The ETH/BTC ratio has returned to the level it was at in early January.
The graphic below shows the evolution of ETH/BTC with daily candles.
The ETH/BTC ratio has historically been an important signal for the altcoin bull market. However, a major bull market in altcoins is hard to see as long as the price of Ethereum melts compared to Bitcoin. Ethereum has been down against Bitcoin for over two years.
Ethereum fans also got cold water down their necks from the direction of the SEC, which oversees the US securities market. SEC delayed the decision on Blackrock’s spot Ethereum ETF application until March. Of course, this was not a big surprise. According to Bloomberg ETF analyst James Seyffart, the next relevant day is late May.
Spot Ethereum ETF Delays will continue to happen sporadically over the next few months. Next date that matters is May 23rd https://t.co/2zBBvHkrVk
— James Seyffart (@JSeyff) January 24, 2024
Investors shouldn’t expect miracles during spring. SEC boss Gary Gensler also commented that investors should not put too much weight on approving the spot Bitcoin ETF. It does not automatically mean that the spot Ethereum ETF is also approved.
However, the situation is much more favorable for Ethereum investors. The SEC has already approved the futures-based ETF, so rejecting the spot ETF would lead to a legal battle that the SEC would lose. At the moment, it can only postpone the final decision until May.
Solana releases a new smartphone
When looking at the biggest cryptocurrencies of 2023, Solana was arguably the best-performing one. Its price increased more than tenfold during the last year. Although Solana is primarily known as a smart contract platform, it has also released a smartphone called Saga.
Saga was released in 2022 and went on public sale in May 2023. Due to a general market downtrend, it did not gain much popularity. Solana Mobile, responsible for the development, had to reduce the phone price by as much as 40 percent in August last year. The device was sold for $599 instead of the original $1000 price tag.
In April, we introduced Saga with a clear vision: to put web3 at your fingertips. We continue to work to bring more people into the ecosystem and drive web3’s mobile future. Today, we are reducing the price of Saga to $599.
Over the past four months, Saga users embraced the… pic.twitter.com/qpC1BHiqZ7
— Solana Mobile 2️⃣ (@solanamobile) August 9, 2023
However, a turnaround occurred during Q4 of 2023. Solana’s price started skyrocketing, which moved many Solana platform tokens higher. The Saga phone included an airdrop of Solana’s BONK meme coin, and its explosive price increase also raised the Saga’s value to thousands of dollars. Many bought the phone to get the BONK tokens.
Solana announced in January that it will release a new model, “Chapter 2. ” So far, its delivery date is 2025. The phone can be pre-ordered from Solana Mobile’s website for 450 dollars.
Like Saga, Chapter 2 has a built-in crypto wallet, Dapp Store, and custom Android apps. Solana Labs director Raj Gokal commented on the upcoming model like this.
For developers, Solana Mobile is creating a massive opportunity for crypto app teams looking to incentivize their users. It gives them a concentrated distribution channel to die-hard, dedicated users. It allows them to do this without any prohibitive app store fees.
Demand for the new phone seems high, as the Chapter 2 model received 30,000 pre-orders in a few days. Saga received a similar number of pre-orders in 12 months. If the Chapter 2 model becomes popular, it can significantly boost the Solana ecosystem’s popularity and the SOL token price.
KRP was able to track Monero transfers
Last week, interesting news came from Finland regarding the Monero cryptocurrency. Monero is a so-called private crypto whose transactions are practically impossible to trace- or at least that’s how it’s been thought until now.
Monero uses different techniques to encrypt the sender, recipient, and amount sent. Its Block Explorer only contains so-called Stealth Address information, i.e., fake addresses from which the real recipient cannot be determined.
However, Finnish media outlet MTV Uutiset reported the opposite last week. According to MTV, KRP, the National Bureau of Investigation (NBI) in Finland, traced transactions made with Monero in the Vastaamo investigation.
The Vastaamo case involved a major breach of sensitive patient information. Its perpetrator extorted 0.1 bitcoins from the victims to prevent their information from being leaked online. The perpetrators used bitcoins instead of Monero because acquiring Monero would be too difficult for the victims.
KRP sent 0.1 bitcoin to the blackmailer’s address and tracked the money’s movement to a cryptocurrency exchange. However, it was possible to register anonymously on the exchange in question. The hacker was also able to exchange bitcoins for Monero (XMR). After this, the XMR tokens were transferred to another wallet. It would seem that the tracks ended there.
However, KRP could track that the XMR tokens had been sent to the crypto exchange Binance. At the time, Binance did not have mandatory KYC, so the criminal’s identity remained unclear. However, KRP discovered that the XMR tokens had been exchanged back into bitcoins and could trace these payments – thanks to Bitcoin’s open blockchain.
This is a rather exceptional case, and KRP does not want to open the methods it uses publicly. MTV reports as follows.
In KRP’s report, the Monero analysis is described as heuristic, i.e. the purpose is mainly to find out the most likely or best option as a payment recipient. Sometimes the conclusions are very certain, sometimes not.
KRP has certainly not cracked Monero’s encryption technology, but it has still deduced the likely recipient and finally caught the culprits with the help of Bitcoin transfers. This case also illustrates well how poorly Bitcoin suits criminal use (if anyone still doubts that).