Research Summary
In September 2023, Bitcoin outperformed many traditional assets, highlighting its diversification properties amidst a global market downturn. The pressure on global markets was attributed to rising government bond yields and higher oil prices. Bitcoin’s on-chain metrics improved during the month, and the stablecoin market capitalization steadied after a year-long decline. The digital asset markets remained focused on developments around Layer 2 blockchains and the potential for spot Bitcoin ETF approval in the US market.
Key Takeaways
Bitcoin’s Resilience Amidst Market Pressure
- Bitcoin’s Performance: Bitcoin gained 4% in September, contrasting the significant losses experienced by many traditional assets. This underscores the diversification benefits of cryptocurrencies in challenging market environments.
- Market Pressure: The pressure on global assets originated from the US bond market, with the Federal Reserve signaling potential interest rate hikes. This pushed up short-maturity bond yields and lifted the value of the Dollar.
On-Chain Metrics and Stablecoin Market
- On-Chain Metrics: Bitcoin’s on-chain metrics, including funded addresses, active addresses, and transaction counts, all increased in September. This could be due to new investors positioning ahead of potential regulatory approval for a spot Bitcoin ETF.
- Stablecoin Market: The stablecoin market capitalization steadied around $124bn after a continuous decline over the last year. This was driven by an increase in the outstanding supply of DAI, True USD, and Tether.
Layer 2 Blockchains and Spot Bitcoin ETF
- Layer 2 Blockchains: The digital asset markets remained focused on developments around Layer 2 blockchains. Social media application friend.tech on the BASE L2 overtook decentralized exchange Uniswap in total fees collected during September.
- Spot Bitcoin ETF: The SEC has until October 13th to seek a rehearing following its loss to Grayscale in the recent ruling from the DC Circuit Court of Appeals. If the agency forgoes an appeal, it will then reconsider Grayscale’s pending application, as well as the applications of other spot bitcoin ETF filings it’s currently considering.
Actionable Insights
- Investigate the Potential of Bitcoin: Bitcoin’s resilience amidst significant losses for traditional assets speaks to the diversification benefits of digital assets. This suggests that Bitcoin’s valuation could begin to recover once the macro backdrop improves.
- Explore Stablecoin Market Trends: The leveling off of stablecoin market capitalization after a long decline indicates a potential shift in the market. The increase in the outstanding supply of DAI, True USD, and Tether could be worth investigating.
- Monitor Developments in Layer 2 Blockchains: The focus on Layer 2 blockchains in the digital asset markets suggests potential growth in this area. Developments such as the success of friend.tech on the BASE L2 could provide insights into future trends.
