🟣 Can you smell the fear?

Stocks up, bitcoin down. Some blame GBTC outflows, but what's really going on?

January 22, 2024

The S&P 500 is at a new all-time high as of this morning.

BitMEX co-founder Arthur Hayes is buying $35k strike put options on BTC.

Fin.

(Joking. But that does about sum up the market at the moment.)

Crypto speculators are fairly used to seeing correlation between risk-on sentiment in equities and bitcoin. But lately they’ve been moving in opposite directions. Even crypto equities like Coinbase and bitcoin mining stocks are rallying with the broader US market in early Monday trading, while spot BTC explores the range lows going back to December.

Friday saw a continuation of funds fleeing Grayscale’s GBTC spot bitcoin ETF with negative net flows — to the tune of -$590 million. Most of that is presumably being redeployed in the cheaper ETF options, and Friday’s total net inflows were once again positive after flipping negative on Thursday.

However, a significant chunk is from the bankruptcy estate of FTX.

Everyone is tired of hearing about the ETFs, but zooming out the price spike in the week of Jan. 8 certainly is starting to look like an anomaly amid the overall consolidation range from $40k-$45k. 

Over the past 10 days, bitcoin has been printing a series of lower highs and lower lows. The last 4-hour candle close was the lowest since Dec. 4.

Another interpretation: Bitcoin is resting on support, and this has been a bouncy area for weeks. Futures funding rates reflect that â€” currently positive at around 0.01% which, while not extreme by any means, points to traders’ optimism.

One has to assume that those using any sort of leverage will have their stop-losses set not too far south of $40,000, so if the range breaks, the next major point of control is somewhere between $37-$38k.

At approximately 650k bitcoins through Thursday, the total amount of BTC owned by funds as a percentage of the total supply remains relatively small, with the top 10 accounting for about 3.5% of all BTC that will ever exist.

Solana DEX protocol, Orca, has recently implemented its fee switch, which passed the governance vote in November 2023. The protocol stands to generate a significant amount of revenue from the fee switch, presenting a potentially attractive fundamentals based opportunity.

Yield bearing layer-2s with alternative data availability layers, decentralized AI, Solana and Sui ecosystems, Bitcoin smart contracts and DePIN are some of the themes discussed by Blockworks Research Analysts in their list of narratives to watch this year.

Crypto fund trading volumes amounted to $11.8 billion last week — roughly seven times the weekly average in 2023, according to CoinShares.

Terraform Labs, the blockchain development firm behind the Terra ecosystem and its algorithmic stablecoin, filed for bankruptcy protection in the US on Sunday.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.