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Messages - stormgain

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1
Volume of accumulated Bitcoin hits a new high

Last week saw a record net outflow of $942 million from ETFs, with Bitcoin accounting for 96% of those funds. In a note to investors on 21 March, analysts at JPMorgan noted the cryptocurrency was overbought and risked a continued correction.


Image source: coinshares.com

Investors' decision to sell was influenced by the desire among long-term holders, whales and miners to take profits in March after hitting a new record high for Bitcoin.


Image source: StormGain Cryptocurrency Exchange

However, by the end of last week, the mood had dramatically changed, and while crypto funds continued to show cumulative outflows, cryptocurrency exchanges saw an increased withdrawal of coins to cold wallets. This is one of the signs that market participants are unwilling to part ways with coins at current prices.

The outflow from Coinbase sharply accelerated in March, shrinking the crypto exchange's reserves to 344,900 BTC (excluding institutional assets). This is a level last seen in 2015. The total reserves across all crypto exchanges also dropped after rising earlier in the month. That figure is now 1.98 million BTC.


Image source: cryptoquant.com

However, a tendency to hodl was most clearly seen in accumulation addresses, which set an inflow record on 22 March of 25,300 BTC. The signs of an accumulation address (miner and crypto exchange addresses are excluded) include:

- The absence of outgoing transactions
- More than two incoming transactions
- The latest activity taking place within the past seven years
- A balance of over 10 BTC.


Image source: cryptoquant.com

If we break down cohorts into groups, whales and sharks have moved back to accumulating Bitcoin. They're responsible for the significant loss seen in stablecoins' reserves.


Image source: twitter.com/santimentfeed

In February, BTC's price was boosted by significant inflows into spot ETFs, which faded by mid-March. However, there was no significant sell-off since other market participants quickly moved from taking profits to accumulating coins.


Image source: StormGain infographic

Despite the price 'prematurely' reaching an all-time high, most crypto enthusiasts believe that Bitcoin is very likely to keep going higher. Anthony Scaramucci, the founder of Skybridge Capital, give investors an interesting piece of advice on how to keep their nerves at bay with the sharp price changes:

"Act like you're dead with your bitcoin and don't sell your bitcoin".


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

2
Avalanche takes a wrong turn

Every network that supports smart contracts is looking for its own niche. For example, Polkadot relies on developers to create a user-friendly and functional parachain-based environment. Ripple is bringing distributed ledger technology to traditional finance by offering governments a turnkey service to create central bank digital currencies (CBDC). Avalanche, on the other hand, took the controversial route of focusing on meme coins.

The attitude toward meme coins has been ambiguous in the crypto space and more so among regulators who have banned the circulation of these coins in certain countries. The issue is in the lack of a useful payload and high speculative interest. The meme coin boom can overwhelm some networks and cause significant increases in fees in others.

For example, due to the emergence of ordinals (a protocol that allows quasi-tokens to be minted and exchanged) in the Bitcoin network, the average transaction fee jumped from $2 to $31 in May and to $37 in December.


Image source: bitinfocharts.com

On Solana, the hype around meme coins has reached the point where several thousand new tokens have been minted a day since December. At first, users experienced delays in transaction processing. Then, on 6 February, the blockchain stopped for 5 hours.


Image source: analytics.solscan.io

Most networks view such bursts as a necessary evil, calling what happens a stress test. Avalanche, on the other hand, decided to open the doors to meme coins by rewarding users for being active and purchasing coins for their own fund as part of their Culture Catalyst programme.

"In particular, we note that meme coins generally have high community value because of the engagement, community spirit, and culture that they engender, which goes beyond the humour and virality that they embody".

Last week, the team allocated $1 million to reward users. These funds will follow a complex bonus scheme to reward activity with the following coins: COQ, KIMBO, NOCHILL, GEC, TECH, HUSKY, MEOW, KONG, MEAT and KINGSHIT (see detailed terms and conditions - https://joecontent.substack.com/p/a8688a75-92ad-4a31-9415-5cd57b93f68d).

The ambiguity of Avalanche's policy is that many crypto participants (if not most) characterise such assets as nothing more than "shitcoins". For example, to get on the Culture Catalyst list, the age limit is limited to just a week (see a full list of requirements - https://www.avax.network/blog/avalanche-foundation-eligibility-criteria-framework-for-community-coins).

It's obvious that Avalanche is trying to reach Solana's figures with similar programmes. However, in terms of the number of active addresses, the network has seen a decrease compared to the previous year.


Image source: avax.network

What's more, buying quasi-tokens with the fund's money in the long term lays a bomb under the sustainability of the underlying AVAX token since most quasi-tokens fail.


Image source: StormGain Cryptocurrency Exchange

AVAX has only risen 42% this year, lagging behind both Solana and Ethereum. If developers continue to emphasise meme projects, this gap is very likely to widen.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

3
Bitcoin's likelihood of a post-halving crash

When assessing the impact of the halving event on Bitcoin, most analysts rely on the emergence of scarcity that will unquestionably lead to a price increase. However, here, we'll list a few reasons why the first reaction may be negative.

Statistic

A third of the time, Bitcoin has corrected by more than 30% since the 2016 halving. There were no significant factors for a major sell-off, and the correction was an example of the old adage "buy the rumour, sell the news". The price has risen 75% since early 2016, and after the halving, it fell by 37% from the local high to $470 in two months.



The price is up 74% this year, similarly encouraging a number of players to sell in order to lock in profits. The last time the "buy the rumour, sell the news" principle was put into action was on the approval of spot Bitcoin ETFs, with the price correcting 21% to $38,500.



Halving compensation

What makes this fourth halving different from previous ones is that, firstly, Bitcoin has reached an all-time high ahead of the event, and, secondly, a 'Bitcoin hoover' has appeared in the form of ETFs. The halving represents an ultimate reduction in incoming supply, but ETF investors are just as subject to emotion as other market participants.

They have now accumulated $11.3 billion worth of Bitcoin, thus anticipating the upcoming deficit and ensuring the coin's rise to a new high. But what happens to the price if funds start actively unloading reserves? If that happens, they would offset almost all of the good momentum from the halving in the short to medium term.

The price is already under pressure as whales, miners and long-term holders lock in profits. Meanwhile, spot ETFs have seen net outflows for the fourth day in a row now. These are excellent prerequisites for the correction to continue.



The impact of miners

This time around, competition among miners is at an unprecedentedly fierce level, with almost a third of the network hashrate being provided by publicly traded mining companies. To appreciate the gravity of the situation, one only needs to look at the yields from a terahash of power, which are increasingly lagging behind the price.



If the correction drags on, most miners will ramp up the sell-off of their resolves due to falling revenues as a result of the halving, which CryptoQuant analysts estimate at 1.8 million BTC or $119 billion. Even if only a tenth is sent to market, it would have a significant negative impact.

Conclusion

Halving certainly has the long-term positive effect of reducing the flow of fresh supply, but in the first few months after it occurs, the market reaction may be negative. If all of these risks take place, the price may roll back to $45,000.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

4
Inflows into Bitcoin ETFs decline sharply

Since February, spot Bitcoin exchange-traded funds have been the leading force on the demand side, driving over 75% of cash inflows into the cryptocurrency. On average, they've attracted $270 million each day since they launched. However, the net inflow last Thursday was $133 million and $199 million on Friday.



Without a significant boost from ETFs, the price immediately began to undergo a correction since miners, whales, and long-term holders have been engaged in active profit-taking this March. The number of whale addresses (>1,000 BTC) has dropped from 2,159 to 2,081 since the end of February.



We also warned on 4 March that after a relatively quiet accumulation phase, Bitcoin has moved into a growth phase characterised by corrections of 36% to 71%. It's unlikely that the new cycle will feature smaller drawdowns.



And it's all about the spontaneous nature of Bitcoin here. In any traditional market, if the price of an asset drops by 10%, the regulator usually halts trading. But Bitcoin has no such safeguards. Its decentralised nature provides both a high level of freedom and an appropriate response to market overheating from excessive optimism.

The latter is vividly evidenced by the strongly increased funding rate, rising debt in the DeFi lending market and new record highs for open interest in the derivatives market.



This means that when inflows into ETFs (and especially outflows) stop, Bitcoin will start correcting. The forced closure of traders' margin positions on crypto exchanges and lending platforms will cause an even bigger decline. When some ETF investors see the correction, they'll start panicking and selling off assets. All of this will lead to another chain reaction, and Bitcoin will once again be criticised for its increased volatility.



At the same time, the cryptocurrency's long-term prospects remain bright, and a potential correction in no way reduces its chances of hitting the six-figure mark as early as this year.

When planning a strategy, you should rely on the classic "buy and hold" rule, taking the MicroStrategy or El Salvador's approach as an example. Salvadoran President Nayib Bukele, who has been buying a coin a day since November 2022, said, "[El Salvador] won't sell, of course; at the end, 1 BTC = 1 BTC (this was true when the market price was low, and it’s true now)."


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

5
Open interest in Bitcoin hits a record $31 billion

The excitement around the world's first cryptocurrency is gaining momentum, as evidenced by a record high of $31 billion in terms of open interest (total number of outstanding Bitcoin futures or options contracts in the market). The previous record of $24.3 billion was set in April 2021.



The funding rate has been at record levels for at least the last six months, suggesting a significant preponderance of buyers in the derivatives market.



The second-highest weekly net inflows into exchange-traded crypto funds this year ($1.8 billion) also points to the high demand. Some 94% of the inflows came into Bitcoin. Record-breaking weekly inflows of $2.45 billion were registered two weeks ago.



This was not without a spoonful of tar in a barrel of honey – the Grayscale crypto fund, which switched from a trust to spot, experienced heightened outflows again. This is now predominantly driven by the high fund management fee of 1.5% versus 0.2–0.3% for competitors. Last week, Grayscale's GBTC posted $1.4 billion in withdrawals, and the fund has lost a total of $9 billion since the relaunch.



Bitcoin's potential is also evidenced by outflows from gold ETFs. Recently, investors have increasingly contrasted these assets, which have similar limited reserves and store of value status.



However, Bitcoin ETFs are showing much more vigour. For example, a BlackRock fund took just 39 days from launch to rack up 10 billion in investments. The first gold ETF in the U. S. took more than two years to achieve such a feat.

Price dynamics in 2024 are also not in favour of gold, which is up just 2.6% compared to 58.3% for Bitcoin.



Forecasts are being revised upward as quickly as Bitcoin breaks new records. Bitwise Chief Investment Officer Matt Hougan believes that due to strong demand, the price could reach $200k or higher before the end of this year.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

6
The total count of active Ethereum validators approaches 1 million

Despite the efforts of its competitors, Ethereum maintains its status as the leading smart contract platform. Its share of the DeFi sector has returned to growth in 2024, reaching 60.8% in terms of Total Value Locked (TVL).



Ethereum is the most secure network after Bitcoin due to the large number of validators. There are currently 965,000 validators, and the milestone of 1 million will soon be reached.



This year we are seeing renewed interest in staking for two reasons. First, several new projects have been launched offering tokens to replace blocked ETH. These tokens can be pledged in the same way on another platform, thereby improving the overall performance of staking. For example, since January, EigenLayer's TVL has increased 8-fold to $8.8 billion.



Second, Ethereum is outperforming Bitcoin by 6.9% this year, which makes investing in cryptocurrency (including staking) even more tempting.



Ethereum trades low bandwidth and high fees for unrivalled security. This has provided blockchains like Solana and Avalanche the opportunity to significantly expand their market presence. However, the expected Dencun upgrade in March will give a second wind to Ethereum-based Layer 2 (L2) networks. Fees are expected to drop to $0.01 or less from the current $0.2-0.3.



In many cases, L2 will be preferable when choosing a platform to implement a project as security and fault tolerance will be provided by Ethereum, and speed and fees will be similar to Solana.

If Dencun makes an impact as anticipated, Ethereum may outperform Bitcoin in 2024.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

7
Bitcoin ETF trade volume sets new record

New investment products remain one of the key catalysts for Bitcoin's growth in 2024. On 26 February, a new record was set for daily trade volume, reaching $2.4 billion. Among the ETFs, BlackRock (ticker IBIT) was in the top spot, with a trading volume of $1.3 billion on that day.



This strong performance from new ETFs suggests high interest in the underlying asset, Bitcoin. To fully appreciate it, it's worth looking at the net capital inflows into crypto ETFs, which attracted $600 million in investments over the past week.



The figure could have stopped at the $1 billion mark were it not for continued outflows from the Grayscale (GBTC) fund. Its negative performance is due to a significant discount on the underlying asset in 2023, which attracted speculators, and a high management fee of 1.5% versus the 0.2% to 0.3% fee offered by other ETFs.



On the positive side of the story, however, the rate of daily outflows from GBTC slowed from an average of $500 million in the first week after it converted from a trust fund to a spot ETF to $50 million in the last two days.



In total, spot ETFs have now accumulated $6 billion in investments. Significant capital inflows have renewed talk of Bitcoin replacing gold among investor preferences. Gold ETFs currently boast $90 billion. Bloomberg analyst Eric Balchunas believes Bitcoin will overtake gold funds in less than two years.

This alone will cause Bitcoin's price to rise above the six-figure level.



Michael Saylor, head of MicroStrategy, the largest public holder of Bitcoin, also thinks the current price is low. On 25 February, MicroStrategy acquired an additional 3,000 BTC at a price of around $51,800. The company now has in its reserves 193,000 BTC purchased at an average purchase price of $31,500, with unrealised gains approaching $5 billion.

In a recent interview with Bloomberg, Saylor said he has no intention of selling assets in the foreseeable future since the cryptocurrency is competing with gold, the S&P index and the real estate market as a means of savings. He clarified that "Bitcoin is technically superior to those asset classes. And that being the case, there's just no reason to sell the winner to buy the losers".


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

8
What Is Bitcoin Halving? How Does It Work, and Will Bitcoin Go Up After Halving 2024?

Bitcoin halving is a term that often pops up in discussions about the world's most famous cryptocurrency, often accompanied by speculation and anticipation. But what exactly does it mean, and why does it matter? In this article, we'll explore Bitcoin halving, how it works, its dates and what effect it can have on the price of Bitcoin, especially as we approach the next halving event in 2024.

There are 3 eras of currency: Commodity based, politically based, and now, math based.— Chris Dixon, technology investor.

What is Bitcoin halving?

Basics of the Bitcoin network and mining

The Bitcoin network operates as a decentralised digital ledger, or blockchain, that records all transactions made with the cryptocurrency. Each block in the blockchain contains a set of transactions, and blocks are linked together in a sequential and immutable chain. At its core, Bitcoin utilises a peer-to-peer network of computers called nodes, which store a copy of the blockchain and collectively maintain the blockchain through a process known as mining.

Mining plays a crucial role in maintaining the security and integrity of the Bitcoin network. Bitcoin mining involves the process of solving complex mathematical puzzles to validate and record transactions on the blockchain. The difficulty of the mining puzzles adjusts periodically to ensure that blocks are mined consistently, approximately every 10 minutes. Miners compete to find a solution to these puzzles using specialised equipment, with the first one to find a valid solution being rewarded with newly minted BTC and transaction fees. This reward serves as an incentive for miners to contribute their computational resources to secure the network.

Mechanism of Bitcoin halving

Miners are rewarded with newly created BTC for successfully mining a block. But this block reward isn't constant. It decreases at certain intervals in a process known as halving.

Essentially, Bitcoin halving is a programmed reduction in the reward that miners receive for adding new blocks to the blockchain. The halving event occurs after every 210,000 blocks mined, which is approximately every four years. This interval is hardcoded into the Bitcoin protocol.

When the predetermined block height is reached, the mining reward is halved. Initially set at 50 BTC per block when Bitcoin was launched in 2009, the reward is reduced by half, resulting in 25 BTC per block after the first halving, 12.5 BTC after the second halving, and so forth.

Bitcoin halving is a mechanism designed to control the rate at which new BTCs are created and introduced into circulation. By reducing the block reward that miners receive for adding new blocks to the blockchain, halving events serve to limit the inflation rate of Bitcoin. This controlled supply issuance is a key aspect of Bitcoin's deflationary monetary policy, ultimately leading to a maximum supply of 21 million BTC.


Bitcoin inflation chart

The history of Bitcoin halvings

The Bitcoin algorithm dictates that there will be a total of 33 halving events. Once these 33 halvings are complete, the fixed portion of the block reward will diminish to less than 1 satoshi, effectively reaching zero, and the only reward for mining will be the transaction fees.

Previous Bitcoin halving events

So far, there have been three Bitcoin halving events.


Bitcoin halving dates history

When is the next Bitcoin halving?

The exact timing of the next halving event is difficult to predict as it depends on the rate at which new blocks are mined, which can vary depending on fluctuations in the network hashrate. According to estimates, the nearest Bitcoin halving will occur in late April 2024.


The future Bitcoin halvings

You can watch the countdown to the next Bitcoin halving in real time if you wish. A Bitcoin halving countdown feature is available on various websites and apps and tracks progress towards the next Bitcoin halving event.


Bitcoin halving countdown

Will Bitcoin go up after halving 2024?

But what happens after a Bitcoin halving event? Does Bitcoin halving increase the price of Bitcoin? Well, let's try to figure it out.

Supply and demand dynamics

Halving reduces supply by lowering the rate at which new BTCs are created. However, while this reduction in supply growth was noticeable after the first halving, the reduction after each subsequent halving is less and less significant. As of now, 93.50% of Bitcoin's maximum supply has already been mined, and the day's supply growth reduction due to halving will amount to less than 0.1% of the daily trading volume.

Impact of the previous halving events on Bitcoin's price

Looking at the Bitcoin price behaviour after previous halvings, it's easy to notice a certain pattern. After a halving event, the Bitcoin price entered a period of consolidation or sideways movement that lasted from a few weeks to a few months. Following the consolidation phase, Bitcoin has historically entered into a bull market cycle characterised by sustained price growth and increasing investor optimism. This bull market cycle lasted from a few months to over a year, and the Bitcoin price reached new all-time highs in the process.

Nevertheless, correlation doesn't necessarily imply causation, and it's difficult to say how much influence the halving events themselves have on this pattern or if there is any at all.


Bitcoin halving price chart

Bitcoin halving 2024 price prediction

Given the historical pattern, many hope the halving will again trigger a bullish cycle in the market and push Bitcoin to new all-time highs. At the moment, the Bitcoin price is showing a clear bullish trend. Although Bitcoin's growth is fuelled, among other things, by investors' expectations of new all-time highs due to the approaching halving, one of the key drivers of Bitcoin's current growth is still the increasing demand from institutional investors with a steady inflow of funds into Bitcoin spot ETFs.

Given the optimistic expectations of investors, as well as economic and political developments in the world, there's a possibility that as early as 2024, the price of Bitcoin could exceed the current all-time high. However, this doesn't mean there will be no corrections, possibly quite deep ones, in the process.

9
Stablecoins are losing significance

Stablecoins are the bridge between fiat money and cryptocurrencies. When trading crypto, traders would inevitably turn to stablecoins, which ensured the growth of this segment as demand for Bitcoin increased.



For example, during the 2020-2021 bull run, Bitcoin grew six-fold, while the capitalisation of stablecoins increased 33 times to $166 billion over the same time.



The emergence of spot ETFs has weakened this relationship, as many traders and investors have gained access to cryptocurrency through brokers. There's no longer a need for stablecoins when Bitcoin is of purely investment/speculative interest.

A bizarre event occurred on 20 February, when the trading volume of VanEck's HODL fund shares jumped more than 10-fold to $400 million in a day, and the number of trades rose from 500 to 50,000. Eric Balchunas of Bloomberg suggested that a recommendation from a popular blogger on Reddit or TikTok caused the hype.



The remarkable thing here is that such a surge demonstrates retail investors' strength and ease of entry. Previously, they would storm a crypto exchange. Now, these movements are seen in ETFs.

Speaking about the loss of significance of stablecoins, it's worth mentioning internal problems. Last year, USDC almost lost part of its reserves due to the bankruptcy of a US bank, and USDT is still being challenged due to the lack of a transparent audit and the presence of commercial papers in its reserves. These are the market's leading coins, with a combined share of 90%.



Two days ago, Circle (the issuer of USDC) refused to further mint on the Tron blockchain, which is headed by scandal-plagued Justin Sun. Last year, the SEC sued Sun and the Tron fund for illegal and manipulative securities trading. Given the impending proceedings, Circle probably decided to withdraw from this network.

However, Tether's (the issuer of USDT) connection with Tron is getting stronger every year, and there are now more USDT minted on this blockchain than on Ethereum: $52 billion vs. $45 billion, respectively.



Last year, Paxos was the #3 issuer, issuing BUSD for Binance until the NYDFS Department of Finance filed a pre-enforcement action notification. The problem was that Paxos was minting BUSD on Ethereum while Binance issued the stablecoin in parallel on the BSC network. This caused a gap of over $1 billion between reserves and supply. Both companies decided to stop supporting BUSD starting in 2024.



It's little wonder that in such conditions, more and more market participants prefer to avoid stablecoins. Legislators are also busy. In the EU, from mid-2024, the MiCA legislation will be implemented, including regulation of stablecoin transparency. Meanwhile, in the US, a similar bill is being discussed in relevant committees.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

10
Ethereum challenges Bitcoin for top growth rate in 2024

In its recovery from last year, Ethereum has shown excellent dynamics in the previous two months. Its price has increased by 31% and overcome the important $3,000 level. The altcoin's boom is due to both the revival of the DeFi sector and hopes for spot ETFs emerging as early as May.



Over the past five months, spot ETFs have been the undoubted driver of the cryptocurrency market's growth, which has led to Bitcoin's market share strengthening to 52%.



Several signs point to the imminent return of the altcoin season, with the initial momentum spreading from Bitcoin to other coins. After a brief pause, altcoin capitalisation returned to growth, which reset Glassnode's indicator on 4 February.



Among altcoins, the most notable is Ethereum, which leads the DeFi sector in capitalisation, number of active validators and staked funds (TVL). This year, TVL grew by 54% to $46.4 billion.



The DeFi revival is due to the growing popularity of new projects. For example, the EigenLayer platform has managed to raise $6.8 billion since the beginning of the year, thanks to the emergence of a new type of liquid restaking tokens or LRT. These tokens are designed to displace the leadership of stETH, which Lido issues in exchange for ETH locked in staking.

Simply put, both stETH and LRT increase the profitability of ETH staking by re-lending funds. First, ETH is locked, and platform tokens are issued, which users can deposit or sell on another platform. All of this significantly increases the associated risks but also allows you to make the most out of the available ETH.

Without such tricks, the annual yield from ETH staking is less than 4%. Yield floats since it's affected by the number of validators and transaction processing fees.



The Ethereum network's deflationary nature is another reason for its growth. Since the switch to PoS, the number of coins in circulation has decreased by 362,000 ETH (~$1.1 billion) because part of the reward paid by the sender for processing transactions is burned.



However, speculation surrounding the approval of Ethereum spot ETFs in May should be treated with caution. The SEC has always spoken of Bitcoin as a commodity, which has helped promote exchange-traded funds. The regulator labelled Ethereum as a security immediately after it switched to PoS and even forced a number of cryptocurrency exchanges to stop staking it.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

11
Bitcoin's new records in investment inflows

Investment interest in Bitcoin is reaching new heights. The net inflow of investments into ETFs last week was a record-high $2.45 billion and $5.2 billion in total since the beginning of the year.



Freshly launched spot ETFs performed well, with BlackRock leading the way with $6.2 billion under management, followed by a product from Fidelity with $4.5 billion. Combined, the two funds beat Grayscale's $7 billion outflow (GBTC).



It's worth remembering that the outflow from GBTC is not related to the investment appeal of the cryptocurrency but is caused by a significant discount on the shares against the underlying asset in 2023 and increased fund management fees if compared to competitors. The reduction in GBTC's 'blood-letting' is a positive factor.



The growth of open interest (the total volume of all open positions) in futures on the Chicago Mercantile Exchange (CME) to $6.8 billion was another record for Bitcoin. Like the growth of inflows into ETFs, this indicates increased interest in the cryptocurrency among institutional investors.



According to CryptoQuant, over 70% of all Bitcoin investments in recent weeks have been generated by US ETFs. As a result, the share of US capital by market depth has increased from an average of 40% in 2023 to 50%. And the indicator increased from $454 million to $539 million in 2024.

For reference, market depth is the total volume of open orders from the current price in both directions (in this case, by 2%). The greater the indicator is, the more resistant the asset is to market manipulations and the more restrained volatility is.



This surge of interest has led to Bitcoin's 22% growth in 2024. In addition, most forecasts predict a new all-time high and reaching the six-figure level as early as this year.



On 19 February, former US intelligence official Edward Snowden called Bitcoin the most significant achievement in the history of money.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

12
Worldcoin's price increases 2.5 times in a week

Sam Altman, the CEO of OpenAI responsible for the emergence of ChatGTP, is actively applying AI developments to the crypto industry. His global currency project, Worldcoin, continues to gain momentum, and the WLD coin that launched in mid-2023 is reaching new heights.



The startup's primary goal is to sort the wheat from the chaff, i.e., to be able to reliably identify a user in an era in which spam bots and scammers dominate. This problem also concerns artificial intelligence, which, with each new year, gets better at copying human behaviours, writing thesis papers, drawing and even generating copies of documents.

Worldcoin proposes to link a unique ID to a specific user once and for all by scanning his or her retina. Verification via World ID on web resources would mean that a real person is behind specific actions. After undergoing a subsequent Know Your Customer identity verification procedure, a platform would definitively link an account to a specific individual.

To reduce the risk of leaking retina scans, the company uses zero-knowledge proof, which, roughly speaking, means keeping a hash function of the scan. The scan itself is destroyed, while the access codes are stored on the user's phone in the World App. If a user needs to be linked to World ID again, he or she undergoes another retina scan.



Worldcoin has implemented a payment of 25 WLD (about $165 at current prices) to motivate users to join the community. In certain countries, this gift has caused real excitement and queues at offices to undergo the scan.

As a result of heightened interest in the project, the number of daily active users has skyrocketed from 100,000 in November to 1 million last week.



However, the governments of a host of countries have already raised the alarm and prohibited Worldcoin due to the collection of biometric data and the risk of leaking confidential data. The news that other peoples' accounts are being bought in China (where it's forbidden to collect biometric data) added fuel to the fire. The black market is rife with offers from Kenya and Cambodia, and the company has confirmed the sale of several hundred World IDs.

Such incidents seriously undermine the project's reputation, and the prohibition on collecting biometric data could become widespread. Investors and traders should exercise extreme caution when assessing Worldcoin's prospects.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

13
Positive trends in the Ethereum network

In 2023, Ethereum's position was undermined by SEC enforcement practices, leading to most US cryptocurrency exchanges refusing to offer staking. The regulator's desire to grant the coin the status of a security and oppose the emergence of spot ETFs with it by all means also hurt its investment appeal.

This resulted in Ethereum losing 26% to Bitcoin over the past year.



Negative dynamics against several crypto assets couldn't compensate for the yield from staking at ~4%, leading to a decrease in the number of those willing to participate. However, the network has experienced an influx of validators in the past two weeks, causing the queue to grow to 2.5 days.



The reason for the renewed interest was the Starknet project, which has planned a free coin distribution starting from 20 February. Some of them will go to Ethereum validators. Starknet is a layer 2 (L2) network, helping to reduce fees and increase the speed of Ethereum transactions.



Another positive trend was the February launch of the experimental protocol ERC-404 tokens, which combines the functions of ERC-20 and ERC-721. The first ones were 10,000 Pandora tokens, each of which was backed by NFTs. This is part of the game since it's unknown which NFTs the user will receive when purchasing Pandora. NFTs can be unbundled from the tokens when sold independently.



Despite the experimental nature of ERC-404 and the lack of official adoption by the Ethereum Foundation, the excitement around the new protocol has already resulted in a noticeable increase in fees.



New projects, experiments, and the expected lower fees on L2 networks after the Dencun update could boost Ethereum, reversing the negative impact of last year's events.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

14
Long-term Bitcoin holders are locking in profits

Currently, 87% of the total BTC issued is in the black for its owners. It's traded above $50,000 for less than 3% or 141 days of its history. This raises the temptation of locking in profits. As a result, long-term holders (LTH) have reduced their holdings by 300,000 BTC to 14.7 million BTC.



At first glance, it may appear that a sell-off by the most resilient market participants has begun, but that's not the case. Half of the volume has come from the Grayscale fund, which was converted to a spot ETF from a trust fund. The fund's shares were actively bought up last year because of the significant discount of over 40% on the underlying asset. By the time the fund was converted, the discount had levelled off. GBTC is responsible for the sale of 150,000 BTC, totalling $6.3 billion.



Of the remaining 150,000 BTC under consideration, miners made up the lion's share of the sell-off as they prepare for the halving event in April. The block's mining income will be halved, which, at current prices (and especially in the event of a correction), will put many in a difficult position. They decided to act on the news of the launch of ETFs by massively reducing reserves from 11 January.



On the other hand, all of that outflow was offset by nine newly created ETFs, with BlackRock at the head. Collectively, they accumulated $10 billion of Bitcoin, which allowed the price to test $50,000 again.



Last week, for example, inflows into these funds totalled $1.5 billion, while outflows from GBTC were $400 million.



It turns out that the main outflow from LTHs came from Grayscale and miners for objective reasons. In terms of how most market participants assess Bitcoin's prospects, they remain purely positive. For example, Skybridge Capital founder Anthony Scaramucci wrote on social media that investors who missed the start of the rally didn't miss the train since Bitcoin's price will quadruple 18 months after its halving event.



The world's largest publicly traded holder, MicroStrategy, is also keeping a positive outlook and building up its Bitcoin reserves every quarter. It currently holds 190,000 BTC or nearly $10 billion.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

15
Solana will miss the next growth wave

The positive momentum from the launch of spot ETFs is gaining speed, and capital inflows are picking up pace. On 8 February, net inflow amounted to $405 million, the third-highest in the past month. Grayscale's negative impact was notably less, going from $640 million on 22 January to the current $102 million.



The total volume of the nine newly created funds (Grayscale was converted to an ETF from a trust fund) has reached $10 billion in just one month. Sceptics had forecast that this would take at least a year. The impressive demand has compensated nearly two-fold the outflow from Grayscale, which is not related to interest in Bitcoin (we previously explained the reasons in our article - https://stormgain.com/blog/bitcoin-outflows-from-grayscale-fund-exceed-five-billion-dollars).

This led to the rise of Bitcoin's price, which aims to break through the $50,000 level and strengthen its share in the cryptocurrency market.



The emergence of ETFs became irreversible in October 2023, when the deadline for the SEC to appeal the conversion of Grayscale's fund expired. Solana was one of several altcoins that were able to take advantage of the change in sentiment in the crypto market. The rise in the coin's price was also fuelled by its own factors, such as the joint creation with Visa of a pilot project to conduct interbank payments and the inclusion of blockchain transactions in the Shopify payment gateway.



Interest in Solana is driven by its high transaction completion speeds and low fees, which is why investment firm VanEck has estimated that the coin's price could reach $3,211 by 2030 in a favourable scenario.



Another thing fuelling the excitement around Solana was the absence of critical errors since February 2023, which came as a pleasant surprise to many observers (including us - https://stormgain.com/blog/solana-surprises-with-dynamic-and-trouble-free-operation) since the network previously experienced outages an average of once per quarter. Unfortunately, however, it wasn't to go a full year without a shutdown. On 6 February, a critical error occurred that led to a 5-hour shutdown and network rollback.



When defending the product, supporters and management always refer to the fact that it's in beta, although Solana's history dates back to March 2020. Daniel Kuhn of Consensus magazine believes this is hypocritical since the sale of related products (for example, Saga smartphones) doesn't mention the network's beta status anywhere.

Failures cause a serious blow to its reputation, which is why pilot projects, like the network, can remain in beta forever. It is likely that Solana won't be able to grow with the same agility in the near future and will finally give way to Bitcoin in terms of growth rates in Q1.


StormGain Analytical Group (https://stormgain.com/)
(platform for trading, exchanging and storing cryptocurrency)

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