21metrics weekly: SOL / ETH Flippening
Escalating Pre-Halving Volatility
The past week has been characterized by incremental volatility, causing bitcoin to range between 63 000 and 73 000 US dollar levels. As concluded in the previous weekly article, bitcoin is currently in a pre-halving price discovery cycle.
The halving event is scheduled to occur in 30 days, and it will act as a watershed moment for bitcoin. The event literally halves bitcoin's block reward from 6,25 to 3,125, increasing the asset's scarcity.
The halving can be seen as one of the factors that guides bitcoin's spot price. Between the most recent halving event of 2020 and the following year's all time high, bitcoin experienced an impressive 654 percent ascent.
Sources: Timo Oinonen, CryptoQuant
A Funding Reset
Bitcoin has weakened by -12,3 percent within a week, correlating with the momentarily cool-down phase of the spot ETF market. Monday (18.3) saw a $154 million net outflow from the ETFs, representing the first outflow day since March 1st.
The Grayscale Bitcoin Trust (GBTC) has continued to "dump" its coins to the market, recording a $643 million outflow on Monday. Facing increasing competition from the direction of BlackRock (IBIT), Grayscale has submitted an application for "Bitcoin Mini Trust", including lower fees. The current 1,5 percent management fee structure of GBTC is sixfold compared to IBIT.
The spot bitcoin ETFs now hold 4,23 percent of bitcoin's supply.
Source: BitMEX Research
Another factor weakening bitcoin's spot performance is an ongoing funding reset, in which $517,4 million worth of long and $132M worth of short bitcoin positions were liquidated between Monday and Tuesday. Combined, these liquidations rise to $649,5 million. The futures market has a tendency to overheat and a funding reset is needed to flush out excessive derivative positions.
Source: Coinglass
Kimchi Premium Reaches a 3-Year Top
While the institutional spot ETF sector might be taking a short break, some retail indicators are clearly positive. According to CryptoQuant's data, the South Korean kimchi premium has reached a new 3-year high, mirroring escalating retail interest. There's approximately a 10 percent bitcoin premium in South Korea right now.
The kimchi premium indicator tracks a phenomenon where the spot price is notably higher on South Korean cryptocurrency exchanges compared to global average prices. This premium emerged primarily due to the high demand for bitcoin in South Korea coupled with regulatory restrictions and limited arbitrage opportunities.
Source: CryptoQuant
SOL / ETH Flippening
The decentralized finance (DeFi) platform Solana (SOL) was one of the parabolic performers of the year 2023, surging more than 900 percent. In addition to its position as retail's favourite token, Solana is heavily challenging the decentralized finance status quo.
More experienced crypto investors remember the year 2017 by its ICO cycle, which was mainly based on "initial coin offering" funding rounds, offering startups a new vector to fund themselves. The ICO cycle can be estimated to have started as early as in 2016 and it lasted till 2018. The main protocol for these new kind of funding rounds was the Ethereum-based ERC-20, making Ethereum the sovereign leader of decentralized finance back then.
In 2024, we're now facing a new cycle that shares many of attributes with the 2017 ICO epoch. We're witnessing a new rise of so called "memecoins" that use Solana as their platform. Due to its fast transaction speed and cheap operational costs, Solana has become the preferred launch platform for new tokens.
Sources: 21metrics, Coin Metrics
Compared to Ethereum, Solana's upside potential is huge: The current market capitalization of the ecosystem is $78,65 billion, approximately 20 percent of Ethereum's $392,31B capitalization. In order to reach mcap parity with Ethereum, Solana should grow almost 400 percent. With the current SOL spot price of $170, a 400% increase to reach Ethereum mcap parity would uplift SOL to $850. Considering the Solana's upside, a four figure target price sounds rational.
Praeterea the spot price upside, Solana is also supported by fundamentals, as its daily transaction count is at 26,4 million, compared with Ethereum's 1,3 million. In terms of daily transaction, Solana is in its own class, as the closest competitors are Polygon (4,5M) and NEAR Protocol (4,3M).
Source: Artemis
In terms of daily active addresses, Solana is also outperforming its competitors. Solana's ecosystem contains 1,9 million daily active addresses, while NEAR Protocol's address count amounts to 1,1M. Polygon currently has around million daily active addresses, and Ethereum's count is somewhat surprisingly below 0,5 million.
Source: Artemis
MSTR's Accumulation Continues
Positioned as a vanguard in the realm of Bitcoin enterprises, MicroStrategy (MSTR) made waves with its announcement on Monday, unveiling the addition of 9245 new bitcoins to its balance sheet. This strategic move propels the company's cryptocurrency reserves to 214 246 units, solidifying its position in the digital asset sphere.
Meanwhile, in the dynamic landscape of spot ETFs, BlackRock's iShares Bitcoin Trust (IBIT) has surged ahead, boasting an impressive holding of 238 488 bitcoins, thus surpassing MicroStrategy's balance sheet. MicroStrategy, often dubbed the unofficial bitcoin ETF, may need to fortify its position amidst the emergence of new investment products.
MicroStrategy's approach is based on a dollar-cost averaging (DCA), calibrated to navigate market fluctuations. Additionally, the company adjusts its purchasing program over time. During the market downturn of 2022, MicroStrategy exercised prudence with modest acquisitions totaling 8109 bitcoins.
However, in 2023, the company's acquisitions soared, amassing 56 650 units, an extraordinary 599 percent growth in its buying program from 2022 to 2023, underscoring MicroStrategy's adaptability and resilience in the volatile cryptocurrency market.
Source: 21metrics
Formerly, Preston Pysh has characterized MicroStrategy's buying program as a speculative attack against the dollar. The company's loan structures hinge on an influx of fiat currency, obtained to fuel the acquisition of a finite asset class, Bitcoin. In essence, this model suggests a potential erosion of the dollar's strength as bitcoin steadily ascends.
Drawing parallels, Pysh has made an analogy between MicroStrategy's strategy and George Soros's renowned assault on the Bank of England (BoE), during which Soros famously shorted the pound (GBP) to the tune of nearly a billion units. This historic maneuver occurred at a juncture when the BoE was perceived to be teetering on the brink of collapse, underscoring the audacity and potentially disruptive impact of such bold financial maneuvers.
Growing Anticipation Towards Spot Ethereum ETF
Multiple companies, including Grayscale and Fidelity, have revealed their plans to launch a spot ether ETF, using the successful spot bitcoin ETFs as a benchmark.
Fidelity recently filed a "19b-4" application, giving an in-depth look into to the underlying process. In its application, Fidelity argues that ethereum spot and futures markets are highly correlated, using the eleven new spot bitcoin ETFs as a reference point.
Source: U.S. Securities and Exchange Commission
