A key BTC metric just hit a new high
Over the past six weeks, more than $750 million has flowed into institutional crypto funds. [lo lo via Unsplash]
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
Is Wall Street ready for the next bull run? Major institutional investors have been making moves as BTC hovers near 2023 highs.
A key Bitcoin metric just hit an all-time high. A closer look at BTC mining and the significance of next year’s “halving.”
This week in numbers. The price tag for a luxury web3 smartphone, the record amount of wallets with at least $1K of BTC, and more stats to know.
WHALE STREET
How big-money institutional investors are preparing for the next bull run
As crypto markets have risen from their slumber this year, institutional investors from Wall Street, Silicon Valley, and beyond are paying attention. Major firms are increasing their investments in crypto, crypto-oriented venture funds are busy raising and deploying capital, and many of the world’s biggest banks are exploring blockchain-native financial products like tokenized treasuries and loans. Is all of this big-money activity — much of it seeded during the quiet months of crypto winter — teeing up crypto’s next bull run?
Here’s what you need to know.
Money keeps flowing into crypto investment products.
More than $260 million poured into digital-asset investment products last week (which includes funds at crypto-focused asset managers like Bitwise, Grayscale, and ProShares), capping a six-week, $767 million inflow streak. Crypto fund inflows are often viewed as a proxy for demand among institutional investors, and the past six weeks have seen more investment than all of 2022, according to CoinShares.
Unsurprisingly, bitcoin products led crypto-fund inflows at $229 million. In a sign that investor interest might be returning to Ethereum, ETH funds — which saw $100 million of outflows this year amid previously-stagnant blockchain activity — had their best week since 2022 with $17.5 million of new investment. Institutions are also showing rising enthusiasm for altcoins, with investment in products focused on Solana ($8 million), Chainlink ($2 million), Polygon ($0.8 million), and Cardano ($0.5 million) all growing last week.
VC funding for crypto initiatives just grew for the first time in 2023.
Crypto-focused venture funds raised more than $1 billion last quarter, the first time fundraising totals have increased this year, which has seen fewer investments in crypto startups than last year. New major sources of funding include Blockchain Capital’s $580 million fundraise in September and Polychain Capital’s $200 million raise from July.
Last week, Axios reported that Coinbase investor Andreessen Horowitz (a16z) is planning a new $3.4 billion fund for “growth, crypto, and bio” initiatives. And given the billions that crypto-oriented VC firms like a16z and Haun Ventures raised late in the last bull run, a huge amount of capital is likely still on the sidelines, awaiting the next generation of crypto companies.
Global finance giants see a big future for tokenized assets.
Major institutions are increasingly exploring the digitization of real-world assets, including U.S. Treasuries and loans — the total market for tokenized treasuries has already increased sixfold this year, to $675 million. In just one example, investment giant Franklin Templeton, which manages more than $1 trillion in assets, has tokenized more than $300 million of its U.S. Government Money Fund on the Stellar and Polygon blockchains.
Wall Street firms like JPMorgan and Citigroup say they see big potential in blockchain technology to enable 24-7 trading, faster settlement times, and lower costs. As BlackRock CEO Larry Fink put it earlier this year, tokenization represents “the next generation for markets.”
The bottom line...
A lot of the current institutional activity began even before the current spike in prices, which was triggered by optimism that the SEC could approve Wall Street’s spot BTC exchange-traded fund applications in the near-ish future. What might happen once one or more of the planned major BTC ETFs launch? The expectation from analysts is billions of dollars in new money will come pouring into crypto, much of it from financial advisers, pension funds, and other asset managers.
MAJOR MINERS
Activity spikes to all-time high on the Bitcoin network ahead of next year’s “halving”
As bitcoin prices have ticked upward this year, BTC’s hashrate — a measure of the amount of computing effort that goes into the mining process — has spiked to an all-time high. Meanwhile, crypto mining companies continue to seek cheaper and greener sources of energy and mining company stocks are surging in value.
Here’s what you need to know.
How does crypto mining work, anyway?
Mining is the process the Bitcoin network uses to remain secure and issue new tokens. In the early days of Bitcoin, technically savvy individuals with a decent laptop could easily become miners, but now mining is largely performed by dedicated companies with huge data-center-like operations.
Roughly every ten minutes, millions of specialized bitcoin mining computers around the world race to become the first to guess a 64-digit hexadecimal number (or “hash”). The winner gets to update the blockchain ledger with a “block” of newly verified transactions and is currently granted a 6.25 BTC block reward (worth around $219,000) in return.
BTC’s hashrate hit new highs as the next “halving” approaches.
Bitcoin’s hashrate, which is a proxy for network activity and a key security metric, hit an all-time high this week. In addition to the correlation between rising BTC prices and hashrate, the surge was likely supported by a large number of new participants joining the network in anticipation of BTC’s next halving — which is expected around April of next year and will cut the block reward in half to 3.125 BTC.
Why would the prospect of a smaller block reward result in more miners?
Good question! It’s because the halving — which happens every four years and is designed to make bitcoin resistant to inflation by cutting down the issuance of new tokens over time — has been correlated with a lot of new BTC activity in the past. As a recent Morgan Stanley report notes, “Historically, most of bitcoin’s gains come directly after a ‘halving’ event that occurs every four years.” (Of course, past performance is no guarantee of future returns.)
Meanwhile, mining firms are testing greener, cheaper energy sources.
Miners are naturally incentivized to source the electricity they use as cheaply as possible, and in many places the cheapest energy is renewable — including forms of energy that would otherwise go to waste.
In a new pilot, mining firm Marathon Digital is exploring the viability of powering mining using the methane produced by landfills. “The methane naturally produced from landfills, biowaste, and elsewhere is often stranded, and Bitcoin miners like Marathon are uniquely positioned to help convert this harmful gas into a productive source of clean, renewable energy,” Marathon’s chairman and CEO told CoinDesk.
The bottom line…
Bitcoin prices may have spiked to year-and-a-half highs, but many major U.S.-based mining companies have seen their stock prices rise even faster than BTC in 2023 — in part benefiting from revenues boosted by the emergence of Bitcoin Ordinal NFT technology. Next up for miners: preparing for the double-edged sword that is the halving, in which network activity will likely surge but block rewards will be cut in half.
NUMBERS TO KNOW
$1.4 billion
Trade volume for Nike-RTFKT’s two-dozen-plus lines of NFT collectibles (with revenues topping $170 million) since Nike’s 2021 purchase of digital merch company RTFKT. Owners of the NFTs can order exclusive sneakers like the new Nike Dunk Genesis Cryptokicks.
8 million
Number of bitcoin addresses holding at least $1,000 of BTC, a new all-time high according to data from Blockware Solutions and Glassnode. Bitcoin has rallied roughly 25% over the past month amid growing optimism that the SEC could approve the first spot bitcoin ETFs in the U.S.
$5,100
Base price for the new Metavertu II smartphone, which includes crypto-friendly features like a built-in wallet, a decentralized operating system for running dapps, and a “secure element chip” meant to boost privacy and security with “zero-knowledge” capabilities. Want to upgrade to an alligator leather finish? You’ll need to drop $8,100.
32%
Percentage the NFT market grew from September to October as trading volumes increased by $99 million, according to DappRadar. The NFT market’s first positive monthly volume move of 2023 was buoyed by a 50% spike in Ethereum-based NFTs and a 15% bounce in Solana-based NFTs.
10%
Rate of interest that stablecoin borrowers on the Aave DeFi protocol are charged as of this week. Rising borrowing rates are seen as a sign that activity is returning to the DeFi sphere as traders’ appetite for risk grows.
TOKEN TRIVIA
An upgrade called Dencun is expected next year for which blockchain?
A
Bitcoin
B
Ethereum
C
Solana
D
Cardano
Find the answer below.
Trivia Answer
B
Ethereum
