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🟣 Sovereigns lean in to bitcoin

BTC and ETH are flattish despite positive news from governments that should lead to increased adoption. 

Author

ryan connor
May 28, 2024

Welcome back to 0xResearch – quick hitting alpha for the crypto degens. Here's what we got for you today:

  • Weekends are for memes

  • Argentina is BTC curious

  • Marathon and Kenya strike a deal to mine BTC

  • NYDIG guesses the ETH ETF impact

Memecoins have led markets the past 24 hours while US TradFi markets slept for the US Memorial Day holiday. WIF, Floki, and Bonk were all up 10-15% and PEPE is holding its $7 billion market cap as crypto’s preferred ETH high beta play. BTC is flat-to-down despite positive news from governments that should lead to increased adoption and legitimacy. 

When I first started learning about crypto and discovered projects like Synthetix it was obvious to me that some trading would move onchain to take advantage of the 24/7 risk management offered by crypto rails. In hindsight, this is the skeuomorphic use case. The net new use case is a new type of asset that is available on weekends with a weekend audience, as opposed to the weekday audience and 9-5ers that populate TradFi. We saw this over the holiday as memes were running up following pump.fun teasing a big upgrade. 

Now, on to the majors. Crypto custodian NYDIG laid out a path for over $4b in ETH ETF inflows and showed that the numerous announcements along the way to the BTC ETF launch added anywhere from 40% to 160% to bitcoin’s market cap. NFA of course, past performance is no guarantee of future results of course. 

The legitimacy of the majors continues to compound, and sovereigns and international actors continue to flirt with bitcoin. First, Argentina and El Salvador met to discuss bitcoin. Argentina’s National Securities Commission met with El Salvador’s National Commission of Digital Assets and discussed the use and regulation of bitcoin as legal tender and released an official statement on the talks. Given President Javier Milei’s political leanings, we’re looking forward to what comes of this meeting. 

Next, Marathon Digital has struck a deal with Kenya to mine bitcoin with the country’s surplus energy. Kenya is looking to move its green energy profile from 80% to 100% of the country’s electricity generation by 2030. Because storing green energy is challenging and wind and solar often overproduce energy from time to time, it makes sense to leverage that excess capacity that would otherwise be wasted. Marathon was up on the news, bitcoin miner ETFs were up this AM as well.

– ryan (X: @_ryanrconnor | Farcaster: @ryanconnor) 

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Is SOL the next narrative? 

Source: x.com/joemccann & tradingview

Rookie traders are buying ETH spot on the news of the ETF approval, but pro traders are likely a few steps ahead, positioning for whatever narrative the market will rotate to next. 

There are a few candidates for the next narrative. There’s the Circle IPO, There’s WWDC and Apple AI announcements. But the big question is - which crypto asset will get an ETF next?

There are some pros and cons wrt SOL as the next ETF candidate. Some arguments against a SOL ETF are that it’s is relatively centralized, its liquidity is not as deep, investor demand might not be there, Solana is newer than Ethereum and Bitcoin, its volatility profile is much higher (TradFi people hate this), and there isn’t a CME futures product for SOL yet. 

On the flip side, SOL’s sizable market cap coupled with its perceived legitimacy relative to the other crypto assets of similar size (read: BNB, XRP, and DOGE) make SOL a worthy candidate. And regarding a futures product, Coinbase added SOL perps in late 2023, and there’s speculation on ct about SOL coming to the CME. 

As an added bonus for traders who already long’d SOL in anticipation of this narrative, the FTX estate has officially run out of coins to sell, and the SOLETH trading pair recently tapped the 200-day moving average.

Again, none of this is financial advice.

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

Although these are strong narratives, the key driving force behind crypto gaming will likely be financial incentives through tokens, similar to how SocialFi apps flourished under financial incentives and tokenization (Friend.tech tokenized communities and personalities while Farcaster benefited greatly from DEGEN and Frames).

Opinion: When it comes to long-term custody, exchanges just aren’t worth it — and frankly, it’s absurd to ignore the risks they pose as custodians.

Plus, the doge passes away and fantasy.top trading slows.

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.