Bitcoin’s Institutional Era Begins

While ETH builds momentum as the market looks for the next catalysts

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we discuss the launch of the Bitcoin spot ETFs, taking a look at its impact on BTC trends. We analyze the ETFs’ effect on institutional adoption and how miners have been positioning in anticipation of this milestone. Finally, we evaluate ETH as the next focal point for the industry moving forward.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

• Bitcoin fees dropped by half week over week as Ordinals transactions declined significantly
• Fees for using Ethereum increased by 10% driven by Uniswap volumes reaching a 10-month high

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

• $210M in Bitcoin was net deposited into CEXs this week, and over $500M over the last two weeks
• Ether saw $120M in net outflows as the markets focus shifted post-ETF

Bitcoin’s Institutional Era Begins

After years of failed applications, the Bitcoin spot ETF was announced and launched this week. The approval process was not exactly smooth, with an initial fake approval tweet coming from the SEC’s X account a day prior to the official announcement.

Eleven Bitcoin ETFs were approved and launched on Thursday, generating a record $4.6B billion in volume on their first day. On-chain, volume has also been rising, reaching a 14 month high on the day of the ETF approvals.

Source: IntoTheBlock’s Bitcoin Financial Indicators

Volume Reaches 14 Month High — Bitcoin’s on-chain volume reached its highest since the FTX collapse

• Bitcoin recorded $60B in total volume on Wednesday, of which $58.76B was in transactions of over $100k (97% of volume)
• The high share that transactions over $100k makes out of total volume has been consistently rising and is bound to get bigger following the ETFs’ launch
• Based on Bitwise’s survey of financial advisors, 88% of advisors are waiting to invest until after the ETF was approved
• While the inflows from traditional entities into Bitcoin is not likely to materialize over night, the approval and strong launch of the spot ETFs set the path towards a more institutionally adopted BTC

Source: IntoTheBlock Bitcoin Mining Indicators

Old Players vs New Ones — Bitcoin miners’ share of on-chain volume reached its highest since October of 2019 a few days prior to the ETF approvals

• Bitcoin miners’ aggregate holdings has dropped by 30,000 BTC (~$1.4B) in the last two weeks
• The total amount held by miners still sits at 1.93M BTC, or around 10% of the circulating supply
• With the halving less than 90 days away, miners may face some pressure in their earnings if BTC’s price does not continue to rise
• Thus far, however, it does not seem miners are too concerned about the halving decreasing their revenues, as Bitcoin’s hash rate hit an all-time high yesterday

Even though the Bitcoin halving has historically been a catalyst in Bitcoin cycles, the market seems to be placing its attention elsewhere at the moment.

Source: IntoTheBlock Capital Markets Insights

ETH ETF Next? Ether has outperformed Bitcoin by over 10% since the initial fake approval of the spot ETF came out on Tuesday

• With Blackrock and several other entities having pending applications for Ethereum spot ETF applications, the market appears to be giving it high odds they will pass
• The SEC’s approval order further increases the odds of the ETH ETF by stating that “fraud or manipulation that impacts prices in spot bitcoin markets would likely similarly impact CME bitcoin futures prices”
• Since Ethereum already has a futures ETF, it appears that the SEC may follow the same logic as they did with ETF in approving it since both are subject to the same type of potential manipulation
• Additionally, the market has also favored higher beta ETH-related investments, with layer 2 tokens and liquid staking protocols recording gains of over 10% this week, and with extra catalysts fueling these higher

Overall, Bitcoin is closing off a historical week. Traditional institutions can now access BTC easier than ever through spot ETFs, though that demand might not flow over night. In the mean time, market speculators have already shifted their attention to ETH in anticipation of spot ETFs generating a similar effect on the second largest crypto-asset.