Cryptocurrency Market Update: Analysis and Insights – March 6, 2024
The Bitcoin price reached an all-time high yesterday at 69,170 US dollars according to CoinMarketCap.
The price of Ether reached 3,828 US dollars, its highest level since January 2022. At this specific level, the price of the second cryptocurrency by market cap is more than 20% below its all-time high reached in November 2021.
Both Bitcoin and Ether have surged nearly 15% this week. Most altcoins are also showing double-digit returns: Solana's SOL and Polkadot's DOT have risen by nearly 20% this week. Cardano's ADA has increased by almost 17%. Uniswap's UNI and Bitcoin Cash have outperformed, climbing by more than 30%. However, the most notable performances this week are from meme coins: Dogecoin has surged by 70%, and Shiba Inu's price has doubled.
Looking at the best performers, the top 5 are all meme coins. The total market cap of meme coins listed on CoinMarketCap reached $61 billion yesterday. There are meme coins catering to every taste. While they hold some appeal among retail investors seeking quick wealth, they also serve as an ideal playground for scams, including pump and dump schemes, or rug pulls, where developers misappropriate investors' funds and eventually abandon the project.
Back to the market rally, unsurprisingly, investments in Bitcoin ETFs remain robust, totaling above $1.8 billion this week. Net inflows are particularly strong for the top two funds:
BlackRock's IBIT holds over $11 billion in Assets Under Management (AUM), while Fidelity's FBTC holds nearly $7 billion. The AUMs of the bottom five ETFs are stagnating, despite most of them charging no fees below a specific AUM threshold. Concentrating AUMs among the top two issuers is not ideal for diversification and could contribute to the market volatility.
BlackRock and Fidelity both had a record day this week. IBIT gathered an additional $788 million yesterday, while FBTC grabbed $404 million on Monday. The AUM growth appears to be increasing and is on track to exceed the $150 billion target suggested recently by Ric Edelman: $150 billion invested through Independent Financial Advisors by 2025. Ric Edelman is the founder and board member of Edelman Financial Services, one of the top financial advisory firms in the US.
So far, net inflows remain strong despite severe unwinds hitting Grayscale's GBTC. However, the AUM of GBTC in US dollars is not showing a significant decrease.
The fund has lost nearly 200,000 Bitcoins since the SEC approval in January. In other words, the fund's Bitcoin holdings have dropped by nearly one-third, or 33%. However, Bitcoin's value has increased by almost 44% since the approval.
If we examine more closely, the fund's total AUM in US dollars is actually quite resilient. According to 'The Block', GBTC's AUM started at $28.62 billion on January 11th and decreased to $27.2 billion by the end of February. The bull market is offsetting the impact of the decline in GBTC holdings. Grayscale likely anticipated a market rally when it decided to maintain its fee at 1.5%. It probably reasoned that competing with BlackRock or Fidelity would be futile and opted to maximize its revenues.
Setting the fund fee at 1.5%, significantly above the competition, evidently works as long as the rally persists. However, it is clearly not sustainable in the long run. To maintain their revenues once the rally subsides, Grayscale would need to propose alternative vehicles to attract investors. This pivot will be highly challenging.
A bright future for Grayscale is difficult to envision. It could consider expanding its offerings by launching niche funds. In this context, Grayscale announced the launch of a highly specialized actively managed fund this week: the Grayscale Dynamic Income Fund (GDIF). The fund aims to optimize income from staking activity. Its investment scope covers nine cryptocurrencies, including Coinbase wrapped staked ETF (CbETH), and targets qualified investors with holdings valued at over $2.2 million.
Back to markets:
We've seen the Bitcoin price drop from its all-time high (ATH) to nearly $59,000 in the span of five hours. This represents close to a 15% drop, which triggered significant liquidations in the derivative markets.
$900 million worth of long futures contracts were liquidated yesterday, according to Coinglass, with $244 million worth of Bitcoin long futures contracts being affected.
The open interest exceeds $31 billion, marking a new record amount. The implied volatility is soaring, with the 30-day At-The-Money (ATM) implied volatility reaching 74 points. However, it is still only half as high as the volatility levels reached during the previous major rally in 2021.
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