Digital asset firm Gemini notes in its Weekly Market Update that Bitcoin miners are seeing rewards cut following the halving event. However, there are some positive indicators in terms of the supply of Bitcoin and its relationship to the availability of gold in global markets. More generally, hard assets could continue to rise in value due to key trends emerging in broader financial markets, according to digital asset investors.
Notably, BTC miners collected over $100 million in revenue for the halving on April 20, 2024 which is notably the highest total ever recorded in a single day.
Gemini‘s report also notes that miners now “face a drop in block rewards that could reshape the industry.”
The report points out that speculators are now hopeful that the upcoming Fed meeting will leave rates unchanged. US inflation rates have “eased slightly” this month along with weakening demand in manufacturing and service sectors.
Gemini also mentions in a blog post that the crypto bulls hope the Fed holds interest rates steady. The update further notes that the recent Bitcoin halving brings fresh interest to spot ETFs. After a period of net outflows prior to BTC’s halving event, spot BTC ETFs in the US have “started to rebound.”
In other key blockchain and crypto industry developments, Ripple is calling for the US Securities and Exchange Commission (SEC) to reduce a multi-billion dollar proposed fine.
As covered, Ripple Labs has strongly opposed the SEC’s proposed $2B fine for selling its XRP crypto token, and a contingent of crypto lobbyists have now moved to sue the regulatory authority for “expanding the definition of a dealer.”
In other notable announcements, Gemini’s update points out that Tether is claiming it will freeze any addresses that may be linked to OFAC-sanctioned entities.
As stated in the report, Venezuela’s state oil company, PDVSA, reportedly used the USDT stablecoin to circumvent US sanctions and carry on with its oil exports. This, according to a Reuters report. Now, Tether has decided to freeze any accounts linked to the sanctioned entities.
In a separate market report, covering broader financial markets, digital asset investor Anthony Pompliano points out that the US national debt is now more than $34.6 trillion. Despite that insane number, the US government continues “to run a deficit that is estimated to be ~ $2 trillion annually.”
Given the high interest rate environment, our interest payment on this debt has now crossed over $1 trillion annually, Pompliano notes in a letter to investors.
As The Kobeissi Letter put it:
“The annual interest expense on US debt is literally moving in a straight line higher, now at $1.1 TRILLION. To put this in perspective, less than 3 years ago the annual interest expense on this debt was $450 billion. That’s a 144% jump as total US debt has surged by over $11 TRILLION since 2020. Even in 2008, at the peak of the Financial Crisis, annual interest expense was just $450 billion. As interest rates surge and debt levels hit record highs, we are paying the prices for decades of deficit spending. The era of “free money” is over.”
According to Pompliano:
“The only viable path the US has in my opinion is to continue borrowing money. That means the national debt will grow to the sky. The US dollar will be debased. Hard assets will continue to appreciate in value. And the investors who understand investing, not saving, is the path to financial freedom will be rewarded handsomely. It is a tale as old as time. We have reached the point of no return. Our government is allergic to a balanced budget. They have a money printer and they aren’t afraid to use it.”
In another market recap report from Talos, it was noted that crypto markets saw a rebound this week, even though these gains have been erased at the time of writing.
Before the recent losses, crypto markets had, earlier this week, posted a 5.8% weekly gain in total marketcap of “the universe and the bitcoin dominance edged higher just shy of 54%.”
Among the blue-chip names, Talos notes that bitcoin “rose 4.9% while ether outperformed it posting a 5.2% weekly gain.”
In the US-listed spot bitcoin ETF universe, there “were some net inflows over the past few days in ex-GBTC ETFs, although these inflows remained lighter than those seen in previous months.”
Unsurprisingly, GBTC continued to “witness net outflows, totaling a cumulative daily outflow of $16.9 billion since its inception, while IBIT and FBTC accumulated $23.5 billion in daily net inflows during the same period.”
Also unsurprisingly, the US Securities and Exchange Commission (SEC) has extended its decision timeline “for the Franklin ether ETF to June 11, 2024.”
Following this date, the SEC may “either approve, disapprove, or initiate proceedings, as stated in a filing on Tuesday.”
Additionally, the SEC has postponed “a similar proposal for the Grayscale Ethereum Trust to June 23, 2024, according to the filing. The SEC has also delayed decisions on applications for other ether ETFs, including VanEck’s spot ether ETF and one from BlackRock.”
While flows into spot bitcoin ETFs “are diminishing in the West, the East is gearing up to launch six crypto-based spot ETFs starting April 30.”
Initially, three spot bitcoin and three spot ether ETFs will be available, “allowing investors to speculate on the price of the two dominant cryptocurrencies without direct ownership.”
Unlike the US, where spot bitcoin ETFs are “cash-only,” Hong Kong’s newly listed funds will be “in-kind,” potentially “reducing complexity and costs for investors.”
However, mainland Chinese investors, “prohibited from investing in such products, may impact the capital inflows into Hong Kong’s spot crypto ETFs.”
On April 24, 2024, ETF analyst Eric Balchunas noted that management fees for Hong Kong bitcoin ETFs will “range from 0.3% to 0.99%.”
This contrasts with US spot bitcoin ETFs, where certain issuers charge “less than 0.25% annually.”
The Talos update added that “all three ETF issuers will facilitate the creation and redemption of ETF shares on Hong Kong’s regulated crypto exchanges, OSL and HashKey.”
Investors will have “until 11:00 am local time each day to redeem shares for cash or until 4:00 pm for crypto withdrawals.”
BOCI Prudential will act “as the custodian for all issuers, while market makers such as Vivienne Court and Virtu Financial will be involved.”
The Talos update further noted that this last Saturday marked a significant moment for Bitcoin as it underwent its fourth halving event.
As reported, this led to “a reduction in the block subsidy from 6.25 BTC to 3.125 BTC per block, resulting in an issuance of about 450 bitcoins per day.”
According to a recent report from Glassnode, Bitcoin has now surpassed Gold “in terms of issuance scarcity.”
Glassnode analysts noted:
“The fourth halving marks a major milestone in comparing Bitcoin to Gold. For the first time in history, Bitcoin’s steady-state issuance rate (0.83%) becomes lower than Gold’s (around 2.3%), marking a historic handover in the title of scarcest asset.”
However, it’s important to note that the report also mentioned that the impact of Bitcoin halving events “on the available traded BTC supply may be diminishing across cycles.”
This is not only due to the reduction in mined coins but also because of “the growing size of the asset and the ecosystem surrounding it.”
Similarly, miner revenues exhibit “a diminishing growth rate when measured in USD, but there’s a net expansion in absolute size.”
Cumulative miner revenue has “surpassed a staggering $3 billion over the past four years, marking a tenfold increase over the prior epoch. Hashrate serves as a crucial metric for assessing the collective power of the mining community.”
Talos also noted that while “the rate of growth in hashrate has slowed across halving epochs, the absolute number of hashes per second continues to surge, now reaching an impressive 620 Exahash per second.”
To put this into perspective, it’s equivalent “to all 8 billion people on Earth collectively completing 77.5 billion hashes every second.”
One intriguing trend is that hashrate tends “to reach or hover near new all-time highs as each halving event approaches.”
As stated in the analysis by Talos, this phenomenon suggests two possible scenarios:
- More ASIC rigs are being brought online
- There’s a development of more efficient hashing ASIC hardware
Regardless of which scenario is at play, the overarching conclusion is clear: despite “a 50% reduction in issuance with each halving, the combined security budget has proven sufficient not only to cover current operational expenses (OPEX) but also to fuel further investment across both capital expenditures (CAPEX) and OPEX domains.”
Transitioning from the blockchain to market dynamics, funding rates on perpetual contracts “for both BTC and ETH across various platforms have seen significant drops, lingering in negative territory since the recent downturn a couple of weeks ago. Despite this, the prices have rebounded, indicating that the recent price action has been primarily led by spot.”
A negative funding rate suggests that traders “are aggressively taking short positions on perpetual contracts, paying a funding cost to maintain these leveraged short positions.”
The Talos update concluded that should the spot price “continues to rise, these traders may not see the rewards for their risk-taking, consequently forcing them to unwind their short positions at some point.”
