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How are long-term BTC holders affected by the recent decline?
In this week’s newsletter, 21Shares explain Bitcoin’s recent price movements, Ethereum’s upcoming upgrade inching closer to mainnet, and how Polygon is leaping towards asset tokenization while helping consumers combat AI-generated fake news.
Bitcoin: Navigating a Cooling Market Amidst Unchanged Fundamentals
Despite investors capitalizing on profits at a rate reminiscent of late 2021, Bitcoin’s fundamentals stand resilient. To contextualize the price movements, with Bitcoin surging nearly 150% from the November 2022 lows and around 90% since the ETF-led speculation in October 2023, it’s reasonable to expect a cashing in on this rally. Although both short-term holders have been selling their holdings post the January 11th approval, the selling pressure, as indicated by transfers to exchanges in Figure 1, has started to stabilize. Nevertheless, a potential headwind lies in GBTC outflows. Particularly, investors who engaged in an arbitrage trade by purchasing GBTC in 2023 to leverage the fund’s discounted value, estimated at around $3 billion, are expected to be liquidating their positions. Further, the FTX estate divested most of its GBTC holdings, valued at approximately $1 billion, adding more color to the recent persistent outflows.
Figure 1: Short-Term Holders Transfer Activity to Exchanges
Source: Glassnode
With the attainment of this historic milestone, it becomes imperative to examine Bitcoin’s fundamentals to gauge the network’s overall health. The surge in new active addresses since January 11 indicates investors’ anticipation for the upcoming April 2024 halving event. Furthermore, the network is transitioning into a new phase marked by the emergence of diverse scaling solutions aimed at overcoming its limitations. This evolution enhances Bitcoin’s competitiveness among smart-contract platforms and heightens user excitement. A notable example is the upcoming Nakamoto upgrade by Stacks, scheduled around the halving. This upgrade will introduce sBTC, a derivative of Bitcoin with smart-contract functionality, that will enable interaction on top of its unique DeFi ecosystem. Additionally, the upgrade aims to reduce the network’s settlement time from 10 minutes to five seconds, providing a more streamlined user experience on top of the Bitcoin blockchain.
Ultimately, as Bitcoin’s hash rate maintains its upward trajectory, signaling sustained resilience for the network, and is complemented by the increasing number of whales highlighted in Figure 2—representing investors holding more than 1,000 BTC—a clearer picture unfolds. It is evident that long-term holders and steadfast believers in Bitcoin remain unfazed by the recent developments.
Figure 2: Large Holders’ Balance
Source: Glassnode
Ethereum Clears the First Hurdle Towards its New Upgrade
Dubbed Dencun, the upcoming network upgrade aims to slash gas fees for Ethereum’s scaling solutions by nearly 90%. This will be achieved through the introduction of data blobs, a novel data container that efficiently carries substantial amounts of data at a lower verification cost. This innovation is poised to significantly reduce settlement costs for rollup networks such as Arbitrum and Optimism. Despite a minor glitch in the first upgrade trial where the Prysm validator client software failed to sync data correctly due to a bug, the diverse client ecosystem maintained the network’s resilience, with Prysm accounting for less than 40% of all Ethereum nodes.
With the successful completion of the current upgrade, the path is now paved for two additional trial runs on January 30 and February 7, leading to the expected mainnet deployment in late March. This upgrade is pivotal, standing out as a key driver of excitement around Ethereum and its extensive ecosystem of scaling solutions, as evidenced by the network’s surging daily transactions reaching a multi-year high (see Figure 3). The upgrade, combined with speculating the approval of a Spot Ethereum ETF in the U.S. and its potential impact on ETH’s performance, is poised to generate momentum for the second-largest cryptocurrency by market cap, solidifying its market position.
Figure 3: Daily Transactions on Ethereum
Source: The Block
Polygon Advances Tokenization while Showcasing Blockchain’s Influence Beyond Financial Applications
Polygon’s Chain Developers Kit, introduced last year, has attracted protocols aiming to cater to the growing institutional appetite for tokenization. Libre is one of these protocols, introduced on January 10, with Hamilton Lane and Brevan Howard as the first consumers. Going live this quarter, Libre is an institution-focused protocol offering compliant issuance and automated lifecycle management of alternative investments. Moreover, Polygon Labs joined the Tokenized Asset Coalition aiming at bringing $1 trillion in assets on-chain. These initiatives focusing on accelerating the adoption of tokenized assets show the active role Polygon is aiming to play across the tokenized market, which we at 21Shares expect to grow to $10 trillion by 2030.
Beyond the financial use cases that crypto is misperceived to exclusively fulfill, Polygon also announced “Verify” in partnership with Fox Corporation. Verify is a blockchain-based content verification platform that aims to empower media companies to register their content and grant artificial intelligence (AI) platforms the right to use them so that end-users can easily verify the origin of a piece of content. This use case of blockchain technology is of utmost importance with the rapid rise of AI across different disciplines. AI-generated content may be used in bad faith to make a rumor believable, for example. Fake news can be detrimental in the age of AI. Verify is another example of how Polygon is trying to break the barrier and showcase blockchain’s value proposition beyond finance.
This Week’s Calendar
Source: Forex Factory
Research Newsletter
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
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
- Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
- Bitcoin price technical analysis: Where are the liquidation levels?
- What are real-world assets and why do we need tokenization?
Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
Strategy (formerly MicroStrategy) has amassed a staggering $43 billion in Bitcoin, positioning itself at the forefront of the corporate “reserve race.” Under the leadership of Bitcoin maximalist Michael Saylor, the company now boasts an $84 billion market cap. But with such an aggressive strategy, how sustainable is its approach—and what risks lie ahead? We break it down in today’s analysis.
Bitcoin price technical analysis: Where are the liquidation levels?
A drop below $72,000 could flush longs, while a breakout above $90,000 may squeeze shorts. One key positive indicator is that Bitcoin continues to print higher lows since March 10, which preserves a bullish market structure in our view. Dive into our technical analysis.
What are real-world assets and why do we need tokenization?
Imagine owning a slice of a skyscraper or a piece of fine art with just a few clicks. Tokenization, the act of converting ownership rights to real-world assets (RWAs) into tradable tokens, has surpassed $10 billion in on-chain value, unlocking global 24/7 access to once-exclusive markets with liquidity, efficiency, and yield. Find out how it works.
Research Newsletter
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
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
Since President Trump appointed Mark Uyeda as acting SEC chair two months ago, many investigations into crypto businesses have been dropped, as the SEC moves away from regulation by enforcement and works to create a framework for digital assets. As regulations become clearer and news flow turns more positive, crypto prices—which dropped sharply this week—should begin to better reflect the new regulatory landscape in the US.
We believe this regulatory shift could ultimately help trigger the next leg of the current bull run, as investors better understand the significance of regulatory clarity and seek to acquire bitcoin and altcoins at what we believe are currently very favorable levels.
Market Highlights
SEC Dismisses Crypto Enforcement Actions
The SEC dropped its enforcement actions against crypto-related companies Kraken, Consensys, and Cumberland DRW.
This indicates a shift in SEC’s regulatory approach, favoring clearer guidelines over enforcement actions. Such a pivot could foster a more predictable environment, encouraging innovation within the sector.
Banks to Engage in Crypto Activities
The FDIC has rescinded previous guidelines which prevented financial institutions from engaging with crypto activities without prior sign-off.
By removing bureaucratic hurdles, banks may more readily offer crypto-related services, potentially leading to broader adoption and integration of digital assets.
Bitcoin ETFs Inflow Streak Surpassed $1 Billion
US spot Bitcoin ETFs have recorded a 10-day inflow streak exceeding $1 billion marking the longest such streak in 2025.
This underscores growing institutional and retail investor confidence in Bitcoin as an asset class that helps increase market stability and possibly paving the way for the approval of other crypto-based financial products.
Market Metrics
All NCITM constituents had negative performance last week, with XRP (-10.8%) and UNI (-10.7%) seeing the steepest declines. ETH also experienced a sharp drop (-9.1%), contributing to NCITM’s underperformance relative to BTC (-2.9%). The NCITM -4.2% decline reflects a broader risk-off sentiment in the crypto market, as investors reassess their positions amid ongoing macroeconomic uncertainties.
NCITM (-4.2%) extended its underperformance last week, deepening year-to-date losses. Traditional indices like the S&P 500 (-1.5%) and Nasdaq 100 (-2.4%) saw smaller declines. The gap between crypto and other risk assets continues to widen, while gold has emerged as the top performer in 2025, gaining nearly 20% amid ongoing macroeconomic uncertainties. This trend highlights a growing risk-off sentiment, with investors shifting toward defensive assets and away from high-volatility investments.
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