• Arbitrum about to experience a massive token unlock event
Bitcoin above $70K, while inflation remains sticky
Bitcoin doesn’t seem to stop and keeps on reaching higher. On March 11 the biggest crypto asset jumped above the $70K mark and has maintained above it since the time of writing. The main driver continues to be the US Bitcoin Spot ETFs, which experienced record inflows of more than $1 billion on March 12. The “newborn” nine now accumulated more than 400K BTC, double the post-halving issuance of Bitcoin (~165K BTC). If this accumulation persists, a potential supply squeeze is still in play. Additionally, fundamentals also continue to be strong for Bitcoin. Last week, a Bitcoin Ordinal was sold for 17 BTC on Magic Eden, the leading NFT marketplace that has recently launched its multi-chain wallet supporting Solana, Bitcoin, Polygon, and Ethereum. Thanks to its early adoption of Bitcoin Ordinals, Magic Eden has increased in market share to over 35% in daily volumes, toppling Blur and OpenSea. However, attention should be given to Bitcoin’s open interest in futures and perpetual swaps, which remain high. As speculators and leverage traders flock to the market, we might see increased volatility in the short term.
Looking at macro data, consumer prices (CPI) rose by 0.4% in February and 3.2% over the past year, slightly hotter than expectations. Core inflation, which leaves out volatile food and energy prices, was also 0.4% over the month and 3.8% over the last year. Living conditions in the U.S. are becoming more expensive, as costs for shelter, airline tickets, and gasoline, among others, have increased in February. All eyes are on the upcoming FOMC meeting on March 20, which is expected to shed light on the Federal Reserve’s approach to potential rate cuts. According to the CME FedWatch Tool, market participants still anticipate an initial rate cut of 25 basis points (bps) by June. Despite the inflation data, over the past 5 days, markets seemed unfazed, with the S&P 500 and Nasdaq climbing by 0.64% and 0.19%, respectively.
Figure 1: US Bitcoin ETF Flows
Source: Glassnode
Dencun is live!
Ethereum’s eagerly anticipated ”Dencun” upgrade was activated on Wednesday, paving the way for a significant reduction in the costs associated with using Layer 2 rollups like Arbitrum, Optimism, and Starknet. Thanks to the Dencun upgrade, these costs are expected to decrease by as much as ten times. However, to fully realize these benefits, rollups need to undergo their own updates. The teams behind Arbitrum and Optimism, the two leading rollups, are set to implement these necessary changes on Thursday. This upgrade represents a significant leap forward for Ethereum, which has often been criticized for its slow speeds and high costs, despite aspirations for it to become a ”world computer” that underpins a new era of crypto-based financial services, social networks, and beyond. It’s important to note that while the upgrade improves transaction fees on Layer 2 platforms, it doesn’t directly affect gas fees on the Ethereum mainnet. Although the price of ETH and other Layer 2 solutions has not shown significant movement over the last 24 hours, they have experienced substantial price appreciation in the 30 days leading up to the event. This increase can be partially attributed to the surge in Bitcoin prices and speculation regarding a potential Ethereum ETF, as well as anticipation of this significant event.
Figure 2: Monthly performance of ETH and its leading scalability solution
Source: 21Shares, Coingecko (Note: Starknet launched its token on February 20, 2024)
Arbitrum Token Unlock Event
On March 16, Arbitrum plans to release 1.1 billion tokens into circulation, which means over $2 billion worth of vested ARB tokens would be added to the circulating supply. Investors should be aware that the unlock represents a 76.6% increase in the circulating supply of Arbitrum and may lead to selling pressure. However, given that the token unlock is timed closely to Ethereum’s Dencun upgrade and taking into account the current momentum in the market, the demand for ARB could rise, potentially minimizing the impact of the token release. Despite the potential market impact of ARB’s token unlock, users have persistently injected capital into the Arbitrum network, propelling it to achieve an all-time high (ATH) of $3.67 billion in AuM. Notably, it grew by close to 8% over the last week, demonstrating strong confidence in its ecosystem, in contrast to Optimism, which grew by only 0.7% over the same period.
Alternatively, on March 7, the Optimism Foundation sold $90M worth of OP in a private token sale, subject to a two-year lockup. During the lock-up period, the unidentified buyer will be able to delegate the tokens to unaffiliated third parties for governance participation. As previously noted, solutions like Arbitrum and Optimism must upgrade their networks to leverage the advantages of the Dencun upgrade. Thus, it will be intriguing to observe the extent of cost reductions and the onboarding of more users, propelling their adoption in the coming months.
Figure 3: Breakdown of ARB Token Allocation During the Unlock Event
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
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Denna ETCs TER (total cost ratio) uppgår till 1,00 % p.a. BNPP RICI Enhanced Brent Öl (TR) ETC är den största ETCsom följer RICI Enhanced BrentCrude Oil-index. Denna ETC replikerar det underliggande indexets prestanda syntetiskt med en swap.
BNPP RICI Enhanced Brent Öl (TR) ETC är en mycket liten ETC med 5 miljoner euro förvaltade tillgångar. Denna ETC lanserades den 2 september 2016 och har sin hemvist i Nederländerna.
Det betyder att det går att handla andelar i denna ETC genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest och Avanza.
Valour Render (RENDER) SEK (VALOUR RNDR SEK) with ISIN CH1108679288, är en börshandlad produkt (ETP) som spårar RENDER, den ursprungliga kryptovalutan i Render Network. Render utnyttjar blockchain-teknik för att decentralisera GPU-baserad rendering, vilket ger skapare kostnadseffektiv och skalbar tillgång till beräkningskraft för visuella effekter, spel och design.
Render-nätverket är designat för att stärka digital kreativitet och kopplar samman användare som söker renderingstjänster med GPU-ägare, vilket optimerar resurser och minskar kostnaderna. RENDER-tokens används för betalning och incitament för deltagare i nätverket, vilket möjliggör sömlöst samarbete över det kreativa ekosystemet. RENDER-innehavare stödjer en vision om decentraliserad datoranvändning, som främjar innovation och tillgänglighet inom den digitala konst- och underhållningsindustrin.
Beskrivning
Valour’s Certificate-produktlinje erbjuder börshandlade produkter som uppfyller kraven, var och en helt säkrad av sina respektive digitala tillgångar. För att säkerställa säker kylförvaring samarbetar Valour med nivå 1-licensierade förvaringsinstitut som Copper. Handlade på reglerade börser och MTFer ger dessa certifikat transparent prissättning och likviditet, vilket stärker investerarnas förtroende för säkra digitala tillgångsinvesteringar. Valours grundprospekt är godkända av Finansinspektionen och uppfyller EUs krav på fullständighet, tydlighet och konsekvens.
Det betyder att det går att handla andelar i denna ETP genom de flesta svenska banker och Internetmäklare, till exempel DEGIRO, Nordnet, Aktieinvest, Levler och Avanza.
The outcome of the US election last month continues to reverberate through the crypto markets. The Nasdaq Crypto IndexTM (NCITM) has risen over 57% since November 5, fueled by widespread optimism over the direction of digital asset policy in the US.
As I wrote in a previous note, crypto assets tend to follow a four-year cycle that includes a bull phase of roughly 12 months, followed by a year-long bear market, and then a two-year recovery period. In the previous two bull markets, altcoins (i.e., everything outside of BTC) have significantly outperformed the largest crypto asset.
I believe we’ve entered a bull market, reinforced by the macro environment and US election outcomes. But there’s another data point signaling a bull market—the outperformance of the NCITM relative to BTC.¹ In the last three months, the NCITM has had a higher return than BTC (78.0% vs. 76.5%) and since the election, the NCITM has outperformed BTC by 6.8%.
Crypto Asset Performance
So, which specific aspects of crypto are poised for outperformance this time around?
One key area to watch is smart contract projects, platforms that will allow users to transact not only information but value and property as well. We believe these platforms and applications will outperform BTC in the next 12-18 months as they compete for users and lay the groundwork for decentralized applications. On the back of the infrastructure developments we have seen in this area in the last few years, new applications are emerging across AI, gaming, and many other areas as tokenization continues to expand.
We also believe that new regulatory progress in 2025 will be more beneficial to these applications than to Bitcoin specifically, because Bitcoin already has regulatory clarity and a well-developed capital markets structure, with the growth of ETFs, options, and futures. In the US and Europe, this legislative and regulatory clarity that will benefit altcoins may include:
• Market structure legislation: Proposals like FIT21 will remove ambiguities regarding the commodity vs. security status of crypto assets, as well as create paths to registration that could boost adoption in the US.
• Stablecoin legislation / MiCA implementation: Both will drive the adoption of stablecoins in the US and Europe, expanding the stablecoin phenomenon beyond just emerging markets.
• Repeal of SAB121: When this obstacle is removed and US banks can hold crypto for their clients, banks and brokerages will increase their crypto trading and custody offerings, which will benefit altcoins the most.
• New ETF launches: With the new SEC chair, there are renewed hopes for additional ETF approvals, including indices and single assets like Solana and XRP. There’s still much uncertainty here, but new assets having ETFs as on-ramps is highly positive.
In addition to Bitcoin developing as an emerging digital store of wealth and smart contract platforms becoming a new way to exchange information, value, and property, there are three other altcoin use cases we believe will benefit in the coming year:
DeFi: Projects aimed at creating an internet-based financial system, running on smart contract platforms, will create a new global capital markets infrastructure for payments, with stablecoins and tokenized money market funds being the first important use cases.
Web3: A new iteration of the internet that will let us own our data and make the internet decentralized and more usable for things like AI agents and other innovations.
Digital Culture: An emerging digital-native generation will have more demand to own digital assets and collectibles, with gaming being a natural first application.
If we compare crypto to the internet, this industry is like the internet in the 1990s and Bitcoin could be compared to email—the only application most people hear about. But fast forward 20 years and while email is still very useful, it has not been the internet’s application that created the most societal value. We believe this could be true for how Bitcoin is currently viewed relative to crypto.
Benefits of diversification
Our team at Hashdex are firm believers that getting broad exposure to this market is necessary to capture the growth we believe we will experience in these other areas. Indices like the Nasdaq Crypto IndexTM (NCITM) can provide broader market exposure and, as crypto matures as an asset class, better risk-adjusted returns. Additionally, indices provide more significant optionality as investors don’t need to rely on an active manager to do this for them. The complexity and fast-evolving nature of crypto make it hard to pick individual winners and an index simplifies investing by offering a balanced, data-driven selection of assets that can align with modern portfolio theory principles.
This is why index ETFs have been at the core of our mission. Accessing crypto through these familiar structures allows investors to benefit from the growth of this asset class with minimal friction. For most investors, we most often recommend a very small allocation to crypto, from 1% to 5%. We strongly believe that a benchmark like the NCITM is an excellent way to “buy the market” and benefit from a strategic allocation into this promising asset class.
[1] The Nasdaq Crypto Index includes Bitcoin, Ethereum, Solana, Ripple, Cardano, Chainlink, Avalanche, Litecoin, Polygon, and Uniswap as of 9/30/24