Bitcoin is breaking records:

Bitcoin is breaking records: More than $10.3 billion of inflows into digital asset-related investment products has occurred YTD.?

• Last week, digital asset investment products saw record weekly inflows totalling US$2.7bn, bringing the total inflows year-to-date to US$10.3bn.
• The current level of YTD inflows is sitting just shy of the previous record of $10.6 billion set in 2021, and we are only 2.5 months into the trading year.?

Bitcoin is smashing records every week, with two record weekly inflows into digital asset-related investment products occurring in the last three weeks alone. On Tuesday this week, the Bitcoin spot ETFs purchased more than 14,000 BTC, a new daily record.

Analysts at JMP Securities predict that this trend will continue. In a research report issued this week, JMP Securities expects $220 billion in inflows over the next three years, implying that BTC's price might double to $280,000 when the multiplier on incoming capital is applied.

Bitcoin spot ETF Inflows/Outflows

This forecast provided by JMP Securities comes as no surprise when tracking the live inflows into the 10 Bitcoin spot ETFs. The combined net holdings of the Bitcoin spot ETFs currently sit at 831,843 BTC, worth more than $61 billion.?

Looking at the inflows and outflows into Bitcoin spot ETFs, we can find a consistent outflow from the GrayScale Bitcoin ETF (GBTC). This is attributable not only to investors abandoning the ETF due to excessive management fees but also to Genesis Holdings. The huge GBTC negative transactions are expected to stem from a $2.1 billion stack of 35 million GBTC shares controlled by Genesis Holdings' bankruptcy trustees.

They were permitted to sell those shares in a hearing on the 27th or 28th of February in accordance with a creditor distribution plan. They would sell the shares carefully since they have a responsibility of care to the creditors to maximise the price they receive. Based on the level of outflows from GBTC, this selling pressure is expected to ease over the coming days/week.?

Despite the selling pressure from the GBTC, the other 9 Bitcoin spot ETFs are seeing a continued increase in inflows and demand, and are absorbing the negative outflows from the GBTC. Institutional/professional ivestors are clearly awakening to the benefits of holding Bitcoin in a diversified portfolio.

Bitcoin Record High:

The new liquidity entering the market via Bitcoin spot ETFs has propelled Bitcoin to record highs, marking the first time a record high has occurred before a halving event.?

Bitcoin has taken an average of 954 days to establish a new record high since the previous bull market peak. All previous record highs have taken place after a halving event (red vertical lines on the chart). This current cycle has taken only 840 days since Bitcoin's bull market peak in November 2021, which is roughly 40 days before the next halving event in April.

The speed of this cycle comes as no real surprise due to the major supply shock that is currently taking place. This trend may expedite after the halving event in April, where the amount of Bitcoin going into circulation is cut in half resulting in a second supply shock.

Bitcoin Supply Shock: A Very Simple Breakdown

Bitcoin is going through a major supply shock. The total number of Bitcoins that have been mined currently sits at roughly 19.5 million. However, we must also understand that the total circulating supply can be broken down into different categories.?

• Stored supply/ illiquid supply, which is Bitcoin held in cold storage / any lost Bitcoin which is essentially illiquid.?
• Available supply / On-exchange supply, which is Bitcoin readily available to trade as it is held on-exchange

On-Exchange Supply - data courtesy of Coinglass

Over the past twelve months, Bitcoin held on exchange (available liquid supply) has reduced drastically. In May 2023 the on-exchange supply peaked at 2,020,802 BTC, fast forward to today, the on-exchange supply sits at roughly 1,831,991 BTC, this is a reduction of roughly 188,000 BTC in 12 months.?

The Bitcoin spot ETFs went live on January 11th 2024. When the Bitcoin spot ETFs were approved, the on-exchange supply was 1,888,144 BTC. Today, the on-exchange supply is 1,831,991, a reduction of 56,153 BTC in only two months. The Bitcoin spot ETFs have had roughly 44 days worth of trading since going live on the 11th of January 2024, and have amassed roughly 188,718 BTC (not including the GrayScale BTC Trust initial holdings). Over the past two weeks, the 10 US Bitcoin spot ETFs have had an average growth rate of 5,028 BTC per day. That's 5,000 BTC being taken off exchange, and removed from the liquid circulating supply.?

Bitcoin has an issuance/inflation rate of 900 new Bitcoins per day, which are rewarded to Bitcoin miners for supporting the network. The Bitcoin spot ETFs are on average accumulating 5.5X the amount of Bitcoin per day than what is currently being produced through mining. Fast forward to April, the next Bitcoin halving event will reduce the daily issuance rate to 450 BTC per day. If the inflows into the Bitcoin spot ETFs remain consistent, they will accumulate 11X the amount of Bitcoin than what will be produced per day through mining.?

Based on today's data, it would take the Bitcoin spot ETFs roughly 364 days to exhaust the current on-exchange available Bitcoin liquid supply. On-exchange supply 1,831,991 / ETF daily growth rate 5028 BTC = 364 days. (Of course, not taking into consideration sellers moving back on exchange to sell at certain price points).?

Are you still surprised Bitcoin is trading at record highs this early in the bull market cycle??

Total Value Locked: $103 Billion

Bitcoin will not be the only benefactor of this bull market cycle; as Bitcoin spot ETFs dominate crypto news, liquidity will naturally trickle downstream to smaller-cap tokens. Over the last six months, we've seen significant growth in Total Value Locked (TVL), indicating increased optimism in the digital asset industry. Total value locked (TVL) is a statistic used in the cryptocurrency industry to calculate the total US dollar worth of digital assets locked or staked on a certain blockchain network using decentralised finance (DeFi) platforms or decentralised applications (dApps).

The TVL reached a low of approximately $39 billion USD in October 2023; currently, it is worth more than $103 billion USD, a 260% increase. The TVL is vital to monitor for both the broader market and specific projects. This signals market confidence because a higher TVL implies a greater long-term investment interest.

Ethereum dominates the TVL, with over $60 billion currently locked up in multiple staking protocols, which reduces the available circulating supply. Ethereum has risen by more than 35% in the past month. This is being driven by both new liquidity streaming into the asset and an increase in the TVL. Institutional investors have begun rotating into Ethereum, looking to front-run the potential Ethereum spot ETF deadline due later this year (between May and August). This is evident in the inflows tracked by CoinShares.?

As of last week's inflows, Ethereum received more than $135 million of inflows YTD. This is almost 10X the level of inflows from the whole of 2023, where Ethereum only received roughly $15 million. The approval of the Bitcoin spot ETFs has put a positive light on the approval of the Ethereum spot ETF applications.

Whether the ETH spot ETFs are rejected or approved appears to be irrelevant in the short term as investors appear to be trading the narrative.?

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Blockchain Index (BLX) - passive index portfolio

The Blockchain Index provides investors with a passive portfolio that diversifies across the top 27 major cryptocurrencies. The BLX holds 40% Bitcoin, and 30% Ethereum, and the remaining 30% is allocated to the top 25 cryptocurrencies, each with a different weighting.

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