Research Summary
The report discusses the increasing interest in Bitcoin and other cryptocurrencies, driven by speculation around the approval of Bitcoin ETFs in the US. It also highlights the rise in global crypto product inflows, the surge in Bitcoin ordinal activity, and the reassertion of Ether’s deflationary status. The report further explores the potential impact of rollups on Ethereum’s activity and the increasing volumes on crypto exchanges.
Key Takeaways
Bitcoin ETF Speculation Fuels Interest
- Investor Speculation: The report suggests that the appetite for Bitcoin risk is heavily driven by investor speculation regarding the approval of one or more spot Bitcoin ETFs in the US. The SEC’s dialogue with Grayscale about converting its Bitcoin Trust to an ETF has further fueled this speculation.
- ETF Applicants’ Progress: Several ETF applicants have updated their prospectuses recently, indicating meaningful interactions with the SEC. This is a first for the crypto industry and suggests progress towards ETF approval.
Global Crypto Product Inflows Rise
- Positive Inflows: CoinShares reported six straight weeks of global crypto product inflows totaling a net US$767M as of November 6, contributing to positive YTD flows of $847M, mainly concentrated in Bitcoin.
- ETH-Linked Investment Products: ETH-linked investment products attracted $17.5M for the week, although they are still net negative for the year. The registration of paperwork for an iShares Ethereum Trust by BlackRock has raised market expectations of an official filing with the SEC.
Bitcoin Ordinal Activity Surges
- Return to Previous Highs: Following a drop last month, Bitcoin ordinal transaction counts have returned to previous highs. This surge corresponds with a spike in transaction fees by more than 500% since November 1.
- Ordinal Trading Volumes: Ordinal trading volumes over the past week have been comparable to NFT trading volumes on Ethereum.
Ether Reasserts Deflationary Status
- Increased Activity: Ether has reasserted its deflationary status alongside increased activity on the Ethereum network. Fee burn has been driven primarily by activity on Ethereum mainnet.
- Impact of Rollups: Despite the transaction count on layer-2s having 50% more transactions than the settlement layer, the total execution transaction fees paid on these rollups were less than 5% of the fees paid on the mainnet.
Increasing Volumes on Crypto Exchanges
- Broader Momentum: Volumes on crypto exchanges continue to increase as the rally broadens beyond Bitcoin and into Ethereum and the altcoin sectors. This momentum is drawing multiple client segments back into the market.
- Allocation of New Money: The majority of the new money is being allocated to the majors, with a small subset venturing further out the risk curve.
Actionable Insights
- Monitor Bitcoin ETF Developments: Investors should keep a close eye on developments around the approval of Bitcoin ETFs in the US, as this could significantly impact the crypto market.
- Investigate the Potential of ETH-Linked Products: With BlackRock registering paperwork for an iShares Ethereum Trust, there may be potential for growth in ETH-linked investment products.
- Assess the Impact of Ordinal Activity: The surge in Bitcoin ordinal activity and its impact on transaction fees could have implications for Bitcoin investors and traders.
- Consider the Role of Rollups: The increasing use of rollups on the Ethereum network and their potential impact on the burn rate of Ether should be considered by Ethereum investors.
- Explore Opportunities in Altcoin Sectors: As the rally broadens beyond Bitcoin and Ethereum, there may be opportunities to explore in the altcoin sectors.
