Crypto market re-emerges after FTX collapse and other events, BTC crosses $40,000 mark

On December 4, Bitcoin exceeded $40,000 for the first time this year. Bitcoin ushered in an upward momentum, benefiting from widespread expectations for a U.S. interest rate cut and traders’ expectations of the imminent approval of a U.S. stock market trading Bitcoin fund.

The world’s largest cryptocurrency hit $41,522 on Monday, its highest level since April 2022. This seems to be a positive sign, suggesting that the crypto market is gradually emerging from the predicament since the collapse of FTX and the collapse of other crypto businesses. This may bring more confidence to investors, sparking more interest and investment in cryptocurrencies.

Source Reuters

Bitcoin has returned to above US$40,000 after 578 days. What is the reason that causes the price of Bitcoin to continue to rise?

01

Bitcoin Spot ETF Expectations

With the fermentation of fake news about the adoption of the Bitcoin spot ETF in October, the news of the implementation of the Bitcoin spot ETF application continues to stimulate the encryption market.

According to a research report from Glassnode, Bitcoin spot ETF products are facing a large amount of pent-up demand. Currently, the total assets under management of the 14 Bitcoin spot ETF applicants has reached US$14 trillion. Analysts believe that stock, bond and gold investors could potentially introduce inflows of up to $70.5 billion by allocating only a small portion of their assets to the crypto market. Even the more conservative forecasts see tens of billions of dollars flowing into the market in the first few years.

At the end of November, the US SEC met with eight institutions including Grayscale, BlackRock, Hashdex, Bitwise, VanEck, Fidelity and Invesco regarding their respective Bitcoin spot ETF applications. On November 30, when BlackRock met with the SEC’s Trading and Markets Department, it also showed them a “revised” Bitcoin ETF spot physical model design. In the new model, offshore entity market makers operate from Coinbase Get Bitcoin and cash advances with a US-registered broker-dealer.

BlackRock Bitcoin ETF spot physical model design; Source: Eric Balchunas

On December 1, Bloomberg analyst James Seyffart also said that the approval window for a Bitcoin spot ETF is expected to be between January 5 and 10, 2024. According to the SEC filing, the comment period ends on January 5 for Franklin/Hashdex and on January 10 for Ark/21.

On the same day, Coinbase CEO Brian Armstrong said in an interview that he was “quite optimistic” about the approval of the spot Bitcoin ETF. Armstrong said, “Judging from everything that has been read publicly, it feels like the spot Bitcoin ETF is getting closer and closer to approval. 』

02

Institutional funds continue to flow in

While the market believes in the positive expectations that the Bitcoin spot ETF will finally be launched, institutional funds are also continuing to enter the market.

On November 27, CoinShares released a weekly report stating that the net inflow of funds in digital asset investment products in the past week was US$346 million, which has been a net inflow for 9 consecutive weeks and set the largest weekly inflow amount in the past 9 weeks.

A combination of higher prices and inflows has now pushed total assets under management (AuM) to $45.3 billion, the highest level in 1-and-a-half years. Bitcoin inflows totaled $312 million last week, bringing year-to-date inflows to just over $1.5 billion.

On December 4, according to Coinglass data, CME BTC futures contract positions increased by 3.02% in the past 24 hours to 116,700 BTC, with a position value of US$4.753 billion, accounting for 25.47% of the entire network, becoming the current BTC futures contract position. The largest exchange.

CME BTC contract open interest; Source: Coingalss

Giovanni Vicioso, CME’s global head of crypto products, pointed out that the increase in trading volume and open interest in the crypto derivatives market is “a clear sign that institutions are entering this space.”

03

Binance reaches settlement with regulators

In November, in addition to strong prices, the crypto market also took a big step forward in terms of regulation. Compared with the blow to the crypto market caused by the FTX thunderstorm in November 2022, the settlement between Binance and US regulators has sent a positive signal to the market.

Since the FTX thunderstorm, the market's confidence has collapsed. Everyone believes that centralized trading platforms must have problems of one kind or another. However, this time Binance was investigated by multiple regulatory agencies and found no problems that were serious enough to cause thunderstorms. The United States has not accused it of misappropriating user funds or market manipulation. In a sense, this is already building industry confidence.

On November 22, Conor Grogan, director of Coinbase, posted on social media that according to Binance (Binance Corporate)’s Proof of Reserves (PoR) data, its crypto asset holdings were US$6.35 billion, including US$3.19 billion in stablecoins. Includes off-chain cash balances or funds not in wallets in PoR. There is a good chance that Binance will pay the $4.3 billion DOJ fine in full without selling any crypto assets at all.

The new CEO of Binance, Richard Teng, also said that "Binance has no debt in its capital structure and the fees are moderate. Although the fees we charge users are lower, we have strong revenue and profits," which gave the market a boost. .

In addition to some macro factors, the active Bitcoin ecosystem has also increased the number of transactions in the secondary market, thereby driving up the price of Bitcoin. The income of Bitcoin miners continues to increase. In November 2023, Bitcoin transaction fees were once as high as $18. On December 3, data from The Block Pro showed that Bitcoin miner revenue increased by 30.1% in November to $1.15 billion.

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