🔮 BTC ETFs First Week of Trading, ETH Updates and Upgrades, Bull Run Graveyards, China's Love/Hate Relationship, FTX Sells

Top Stories

Bitwise Become First To Disclose Bitcoin ETF Holdings Address

On Wednesday the Bitwise Bitcoin ETF (BITB) became the first U.S. bitcoin ETF to publish the bitcoin addresses of its holdings. This groundbreaking step allows for direct public verification of the ETF's holdings, valued at around $535.6 million or approximately 12,840 BTC at the time of writing. Bitwise's move is part of a larger effort to create new industry standards for Bitcoin reserve transparency. This initiative includes innovative address management strategies and future plans to explore advanced security methods like off-chain multisig or multi-party computation. Bitwise's approach, which also involves dedicating 10% of BITB ETF profits to Bitcoin development causes, not only increases transparency but also sets the firm apart in a competitive market, underscoring the growing importance of reserve transparency for investors in evaluating spot ETFs.

Source: Bitwise

Bitcoin Spot ETFs Conclude First Week of Trading

The first 10 days of trading for Grayscale's Bitcoin Trust ETF (GBTC) and the nine new Bitcoin ETF's have been a tale of mixed signals. While GBTC experienced significant outflows, total net flows into the ETFs stand at $744 million at the time of writing. In total, Bitcoin ETFs became the second largest ETF commodity, surpassing the market capitalization of traditional silver ETFs in a remarkably short timeframe. This highlights the growing interest and acceptance of Bitcoin as a legitimate asset class in the global financial market. GBTC, which launched in 2013, and recently converted to an ETF, faces competition from the new rival U.S. offerings, with its higher fee structure (1.5%) compared to the others charging between 0.19% and 0.39%. A notable portion of GBTC's outflows can be attributed to the bankrupt crypto exchange FTX, which sold about $1 billion worth of GBTC shares. Despite these outflows, crypto investment product trading volumes reached a high of $11.8 billion last week, about seven times the average weekly volumes seen in 2023. Meanwhile, new entrants like BlackRock’s iShares Bitcoin Trust and Fidelity’s bitcoin fund quickly accumulated significant assets, reaching $1 billion each within days of trading. Other products, such as Bitwise's and Ark Invest's spot bitcoin ETFs, also saw substantial growth. This trend indicates a shift in assets, particularly towards U.S. products which saw net inflows of $263 million last week, contrasting with outflows in Canada and Europe, suggesting a migration of assets to the U.S. where fees are more competitive.

Source: Bloomberg

Implementation of EIP-4844 Expected to Drastically Cut Ethereum Rollup Costs, Posing Revenue Challenges

The impending implementation of EIP-4844 in the first half of 2024 is poised to bring about a noteworthy reduction in Ethereum's Data Availability (DA) solution costs, potentially lowering them by up to 10 times. While this cost reduction is advantageous for rollups, it also presents a challenge as it may result in significant drops in transaction fee-based revenue for these solutions. The intensified competition driving fees downward is the primary factor contributing to this anticipated revenue decrease. To counterbalance this potential loss, rollups could leverage their reduced operating costs to attract new users or stimulate the creation of additional rollups with their technology stacks. This influx of user activity has the potential to offset the decline in current revenue levels. See similar: Ethereum Software Client Centralization Sparks Concern

Source: Dune

Decentralized Apps Experience Substantial Growth in 2023, But Challenges Persist

The Dapp Industry Report for 2023 highlights the notable growth of decentralized apps (dApps), witnessing a 124% year-over-year increase in unique active wallets, reaching 4.2 million daily UAWs by the end of the year. Games constituted over a quarter of all activity, with NFT collection trading, led by platforms like Blur and OpenSea, driving a surge in new user engagement. Despite a decline in new app launches, certain platforms like Alien Worlds gained popularity. However, challenges for mass adoption persist, exemplified by instances of declining user bases for apps like Friend.tech and hurdles faced by Stars Arena.

Source: DappRadar

dYdX Surpasses Uniswap as Largest DEX by Daily Trading Volume after Migrating to Cosmos

Decentralized exchange dYdX, having recently transitioned from Ethereum to Cosmos, has achieved the status of the largest decentralized exchange (DEX) by daily trading volume, surpassing Uniswap, according to data from CoinMarketCap. The Cosmos-based v4 version of dYdX recorded $757 million in daily trading volume, outpacing Uniswap v3, which had $608 million. dYdX's v3 market, still operational, secured the third position with $567 million. Since its v4 market's launch, dYdX reports a total trade volume of $17.8 billion, and in 2023, its v3 market registered over $1 trillion in trading volume, with several days exceeding $2 billion.

Graveyard: Over Half of Listed Coins Dead, 2020-2021 Bull Run Projects Hit Hardest

The market's robust growth is tempered by a stark reality—over half of the listed coins have met their demise. The 2020-2021 bull run projects, numbering 7,530, account for a staggering 53.6% of dead cryptocurrencies on the platform. The year 2021 emerges as the hardest hit, witnessing the demise of 5,724 cryptocurrencies, constituting over 70% of those launched. This trend is indicative of the challenges faced by projects birthed during bull runs, particularly in the ease of token deployment and the rise of memecoins. While the cryptocurrency landscape saw a surge in project launches during 2022 and 2023, the failure rate exhibited a decline, reflecting a maturing industry.

Decun Dilemma: Prysm Bugs Pause Ethereum's Goerli Testnet Upgrade

The Dencun upgrade on Ethereum's Goerli testnet experienced initial challenges despite its anticipated launch. Following the upgrade's deployment, it encountered difficulties finalizing within the expected timeframe, attributed to a bug in the Prysm client. The network faced a four-hour delay before the Dencun upgrade successfully concluded on the Goerli testnet. Despite the initial hiccups, Ethereum's commitment to refining and advancing its technology is evident, ultimately leading to the successful completion of the Dencun upgrade on the testnet.

Regulation

Newly Approved Bitcoin ETFs Face Competition in Fees and Branding

The recently approved Bitcoin ETFs are entering a new phase, with the focus shifting to market share and sustainability based on distribution, brand recognition, and fees. On the first day of trading, the eleven ETFs generated $4.6 billion in trading volume, but only a quarter represented new Bitcoin inflows. Early data suggests Bitwise, with the lowest expense ratio at 0.2%, led in new capital inflows, followed by Fidelity and BlackRock. The competition has triggered a fee war, with some funds waiving fees for early investors. While institutional investors currently dominate, retail investor activity is expected to increase over time as the ETFs become widely available on brokerage platforms. However, not all in the Bitcoin community are enthusiastic, expressing concerns about centralization and potential conflicts between Bitcoin purists and Wall Street.

Bitcoin Mining Hashrate Plummets 25% as Texas Faces Power Curtailment

Bitcoin's network hashrate experiences a sharp 25% decline in the midst of an extreme cold spell in Texas. The state had become a key global hub for Bitcoin miners attracted by its affordable electricity, grid incentives, and deregulated energy market, particularly after China's industry crackdown in 2021. Global hashrate estimates, sourced from MiningPoolStats and Blockchain.com, indicate a drop from approximately 600 EH/s on Friday to 450 EH/s recently. This decline coincides with curtailment requests from Texas' grid regulator, ERCOT, as the state grapples with adverse weather conditions. The situation mirrors a previous event in August when Bitcoin miners adjusted power usage during a summer heatwave in Texas.

Source: MiningPoolStats

Collapsed Crypto Trading Firm Drops Lawsuit Against Grayscale : FTX Sells

The collapsed crypto trading firm Alameda Research has withdrawn its lawsuit against Bitcoin fund manager Grayscale, allowing the new management of the failed crypto brand to sell shares in its recovery fund. Alameda had sued Grayscale in March, alleging an "improper redemption ban." Grayscale's Bitcoin Trust (GBTC) recently converted to a Bitcoin spot ETF, leading to significant redemptions and a decline in Bitcoin's price. FTX, a once-respected crypto brand affiliated with Alameda, went bankrupt in November 2022. See similar: FTX sells nearly $1 billion worth of GBTC

"Please Stop" - Coinbase

Coinbase has formally requested Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York to dismiss the SEC's case against the company. Although considered a longshot, Judge Failla has taken this request seriously. During a four-hour oral argument session on Wednesday, both Coinbase and the SEC presented their cases. The significance of the case, intricately linked to Coinbase's business model, heightens the stakes, according to Chris Odinet, a professor at the University of Iowa College of Law[1].

China's Crypto Conundrum: Underground Trading Thrives Despite Ban

The relationship between China and crypto remains complex. While officially banned since 2021, recent reports suggest widespread crypto trading by Chinese "small investors" going underground. Traders utilize accounts set up pre-ban, communicate through platforms like WeChat and Telegram, and hold secretive meetings in cafes to exchange wallet addresses. Between July 2022 and June 2023, Chinese traders reportedly received a net $86 billion through crypto activities. Additionally, Chinese nationals, potentially influential figures, are allegedly moving funds to the U.S. via offshore exchanges, sidestepping the ban. Despite the ban, China is advancing in NFT development and blockchain applications, prompting debates about a potential change in the country's stance on digital assets.

Other Domestic Regulation Updates

• Vivek Ramaswamy, crypto-friendly U.S. presidential candidate, suspended his campaign 
• SEC will ‘apply precedent’ when making decision on spot ether ETFs
• Ripple CEO Slams 'Very Hostile' SEC, Says Gensler Is a 'Political Liability'
• Former President and front-runner in the Republican leadership race, Donald Trump, has promised to ban the creation of a central bank digital currency

Other International Regulation Updates

• Sam Bankman-Fried's parents are seeking to have a lawsuit filed against them related to FTX's collapse dismissed
• India Blocks Websites of Non-Compliant Offshore Exchanges
• South Korea Reaffirms Crypto ETF Ban
• Fidelity becomes second spot bitcoin ETF issuer to hit $1 billion of inflows
• Hong Kong finance firm VSFG aims for spot bitcoin ETF launch in Q1

Pain & Gain

Pain

• Interoperability service Socket and its bridging platform, Bungee, restarted operations after an apparent $3.3M exploit led to a temporary pause in trading activity
• Manta hit by a DDoS attack during its token issuance
• Moody's, the bond-rating service, said tokenized fund adoption is growing but brings the risk of "technological failure."
• Jamie Dimon vows never to opine on the world's top cryptocurrency ever again
• North Korea is still a threat to crypto: Chainalysis
• Terraform Labs Files for Chapter 11 Bankruptcy in Delaware

Gain

• ‘Embrace AI or Be Left Behind’: Industry Leaders Stress AI Adoption at Davos
• BNB Smart Chain's Steady Growth
• Bitcoin surpasses silver to become second-largest ETF commodity in the US
• Tether now owns $2.8 billion worth of bitcoin after recent $380 million buy
• Global investment firm Franklin Templeton has tweeted about the merits of Ethereum and Solana
• Ronin Gaming Wallet Now Supports Ethereum, Polygon, and BNB Chain