Blockstream Markets Weekly — Oct, 29, 2021

Australia green lights Bitcoin ETFs, El Salvador adds another 420 BTC, MSTR buys 9k BTC in 3Q, India inching towards regulating Bitcoin as a commodity, Skybridge Capital reveals a billion-dollar BTC position, and Grayscale expects US spot ETFs by next summer.

By Jesse Knutson

Uptober

Bitcoin is on pace to finish October with the first monthly close above $60,000 ever.

ETFs continued to be a focus of trading with a slew of new applications coming to market and driving a record $1.5B of inflows into Bitcoin investment products over the previous week.

Outside of ETFs, headlines this week included El Salvador buying another 420 BTC, MicroStrategy adding almost 9,000 BTC in the third quarter, India looking likely to regulate Bitcoin as a commodity, Rand Paul saying that Bitcoin could become a global reserve currency, and Skybridge Capital revealing a billion-dollar Bitcoin position.

ETF madness

Bloomberg’s senior ETF Analyst Eric Balchunas noted that at the moment the bulk of trading is being split between BITO and Grayscale’s GBTC which are accounting for about $500M to ~ $1B of daily trading volume.

The success of the BITO launch has also really lit a fire on new ETF applications with at least 40 already in the queue, including a number of leveraged ETF applications despite signals from the SEC later in the week that they will likely limit bitcoin-related investment vehicles to those that provide un-leveraged exposure.

Meanwhile, down under, Australian regulatory authorities have given the green light to a range of cryptocurrency-related ETFs, which could see Bitcoin ETFs traded on the Australian Securities Exchange in the coming months.

With Candian spot ETFs already out in the wild and Australian versions likely out in the coming months, a US version probably isn’t that far away. David LaValle, global head of ETFs at Grayscale, thinks that the SEC could begin to approve proper, spot ETFs by as early as July of next year. Likewise, Valkyrie Funds CIO said we probably won’t see a spot ETF approved until at least the middle of next year.

Wall of money

Coinshares’ weekly fund flows note reported the biggest week of fund flows in digital asset investment products on record.

Digital asset investment products saw inflows last week of $1.5B, smashing the previous record by 2.3x and bringing inflows year-to-date to more than $8B. Bitcoin accounted for 99% of total inflows following the SEC’s approval of Bitcoin futures backed ETFs which contributed inflows totaling $1.24B.

Canada’s Prosper Bitcoin ETF also continued to plow new highs with total BTC under management increasing to 23,910 BTC, up almost 1,000 BTC versus the previous week.

$100k Christmas

Trading this week was pretty choppy with Bitcoin making a couple of sharp moves, but looking likely to end in the middle of the week’s range. Today’s $3.2B options expiry looked to have relatively little impact on price.

Sentiment remains strong despite a general downward trajectory from last week’s record high of $67,000. Funding rates and the crypto fear and greed sentiment indicator are both at the top end of their recent ranges, but I don’t think either is massively overheating.

I think the overall technical setup continues to look constructive. The pullback from last week’s high of ~ $67,000 is generally in line with Bitcoin’s first break above the $20,000 mark in December of last year. I wouldn’t be surprised to see that pattern replay itself and for momentum to return in the coming weeks.

Positioning also looks positive. Kraken’s October 2021 report, ‘Shocktober’, highlights a sharp increase in the number of wallets holding ≥ 100 BTC, an aggregate reluctance of Bitcoin miners to sell at current levels, and continued accumulation by long-term holders.

Bitcoin has finished higher in November three of the previous five years with an average gain of +10%. Let’s see if November can follow through on October’s strength.

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Bitcoin markets news

Australia gives green light to Bitcoin ETFs

  • Australia’s corporate regulator has given the green light to a range of cryptocurrency-related ETFs, which could see Bitcoin ETFs traded on the Australian Securities Exchange in the coming months
  • Investment firms interested in establishing a Bitcoin ETF will be required to adhere to a set of best practice guidelines — most notably strict rules around asset custody

El Salvador announces acquisition of another 420 BTC

  • With the addition of ~ $25M of new Bitcoin, El Salvador now holds 1,120 Bitcoin, worth nearly $66M

MicroStrategy added almost 9,000 BTC in the third quarter

  • Brings MSTR’s total Bitcoin hoard to 114,042, worth ~$7B
  • CEO, Michael Saylor, said on the company’s earnings call that the company is committed to buying Bitcoin and doesn’t have plans to sell

India to regulate Bitcoin as a commodity

  • The proposed framework is likely to veer away from an earlier approach that had proposed a complete ban on cryptocurrencies. Instead, the government is likely to opt for regulating cryptocurrencies as an asset class, somewhat on the lines of commodities, with appropriate taxation of transactions and gains

Grayscale expects SEC to approve spot ETF in next 9 months

  • David LaValle, global head of ETFs at Grayscale Investments, said on Wednesday that he expected the U.S. Securities and Exchange Commission to approve the company’s application for a spot bitcoin ETF by July next year
  • Probably as good as guess as anyone, but think Grayscale are probably talking their book a bit as well

CME net profit jumps +125% QoQ after ETF approval

  • CME’s bitcoin futures volumes rose 170% versus the third quarter of 2020, helped by the recent regulatory approval and launch of the first U.S. futures-linked Bitcoin
  • Net profit attributable to CME rose to $926.5 million, from $411.7 million a year earlier
  • So far in October, the average daily volume for the company’s bitcoin contracts is up 57% versus September, to over 12,000 contracts or more than 60,000 equivalent bitcoin worth a record $3.5 billion per day

Yellen wants unrealized gains

  • This seems like a bad idea. It’s probably negative for capital markets in general as it discourages founders from taking companies public and investors from putting money in the market
  • It seems like it would be hard to implement and apparently might not even be constitutional
  • I wonder if this is an actual attempt at a wealth tax or just part of political wrangling around Biden’s infrastructure bill

Rand Paul: Bitcoin could become the reserve currency of the world

  • Sen. Rand Paul (R-Ky.) in a new interview questioned whether cryptocurrency could replace the dollar as the reserve currency of the world. I’m pretty sure he means Bitcoin here and not Shiba Inu. I wish we could get analysts, investment banks, and politicians to be a bit more precise in their usage of the words ‘crypto’ and Bitcoin

“I’ve started to question now whether or not cryptocurrency [he means Bitcoin] could actually become the reserve currency of the world as more and more people lose confidence in government”

Scaramucci: Skybridge has more than a billion dollars in BTC

  • Anthony Scaramucci argues anyone who studies bitcoin carefully and understands the cryptocurrency will be convinced of its potential
  • Scaramucci said he sees bitcoin as “digital gold” and has “over $1 billion” in Bitcoin, which he started accumulating last year

“Anybody that does the homework … ends up investing into it. Look at Ray Dalio, a bitcoin skeptic, now a bitcoin investor”

Charts

Bitcoin ETFs drive record inflows

  • Digital asset investment products saw inflows last week totaling US$1.47bn, the largest on record by a long shot
  • Bitcoin accounted for 99% of inflows totaling US$1.45bn

Chart credit: Coinshares

Long-term holders continue to hold

  • The number of coins that haven’t moved in six months or longer has increased to ~52% while young coins fell to a three year low of ~ 25%
  • This suggests that long-term holders held through both September’s weakness and October’s strength

Chart credit: Kraken

Miner supply

  • Mining pools look reluctant to sell Bitcoin, pointing to price optimism
  • Kraken also notes that listed, North American mining firms are holding > $1.25B worth of BTC on their balance sheets

Chart credit: Kraken

Purpose BTC ETF hits new high

  • The Purpose BTC ETF continued to set new all-time highs with a total of 23,910 BTC now under management

Chart credit: ByBt

The most concise roundup of Bitcoin market action in the industry.

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