Bitwise Crypto Market Compass #48 2024
Bitwise Europe (formerly ETC Group)
Crypto ETPs backed by Crypto Specialists
Key Takeaways
Performance
Last week, cryptoassets once again outperformed traditional assets by a very wide margin as weekly inflows into global crypto ETPs soared to the most on record.??
More specifically, weekly net inflows into global crypto ETPs increased to +2.94 bn USD in the week ending Friday, of which approximately +3.08 bn USD were related to bitcoin inflows alone.??
This has pushed Bitcoin towards the 100,000 USD mark on Friday. However, Bitcoin has so far failed to breach this important milestone as long-term holders have started to distribute significant amounts of bitcoins into the recent rallye. The highest price on Coinbase exchange was reached on Friday at 99,860 USD per BTC.??
Realized profits by long-term bitcoin holders have spiked to 3.845 bn USD last Friday – the highest since July 2024 and second highest profit-taking on record (Chart-of-the-Week).?
Therefore, it is quite likely that the rallyerally in bitcoin will take a break in the short term as sentiment remains elevated and positioning appears to be somewhat stretched.??
Although our internal models indicate an increase in cycle top probabilities for bitcoin, we only think that this could be a bull market correction rather than a change in trend.??
Overall bitcoin valuations are still far away from being excessive and bitcoin’s supply shock continues to build up and we also expect this built-up to continue well into 2025.??
The very latest data provided by Glassnode indicates that exchange balances continue to drift lower despite the increase in profit-taking by long-term holders. The same is true for liquid and highly liquid supply aggregates that have touched a new year-to-date low on Sunday.??
What is more is that bitcoin whales have continued to send bitcoins off exchange on a net basis which indicates that net buying interest by whales has continued unabated. Whales are defined as network entities that control at least 1,000 BTC.??
Outside of bitcoin, we have seen a significant pick-up in altcoin outperformance. Some major altcoins like Stellar (XLM) have more than doubled over the past week. As a result, bitcoin’s market cap dominance has reversed significantly and declined back below 60%.??
We are generally seeing more performance dispersion among altcoins and that altcoins appear to be driven by a more diverse set of investment narratives. In other words, the correlation between major altcoins and bitcoin has declined significantly which allows for more alpha opportunities and higher diversification.??
One of the key reasons for the rotation into altcoins is the fact that SEC Chair Gary Gensler has announced to step down on the 20th of January 2025. His replacement has not been officially chosen yet but both Hester Pierce as well as Mark Uyeda are seen as the most likely candidates who have both shown a pro-crypto stance in the past. That being said, several influential industry leaders have endorsed Hester Pierce as new SEC chair.??
Regarding the Bitcoin Strategic Reserve development, there are several indications that US states and other nation states outside of the US have shown interest in implementing Bitcoin as strategic reserve asset. This narrative has contributed to the recent rallye towards 100,000 USD as well.??
Meanwhile, corporate treasury adoption of bitcoin has also continued to grow significantly, in particular because Michael Saylor’s Microstrategy has most-likely made more significant purchases towards the end of last week.??
It has also been released that the world’s largest insurance company Allianz has been the biggest investor of Microstrategy’s 2031 convertible bond offering. This bond is also the biggest position in Allianz’s convertible bond fund. Favourable financing conditions will likely continue to allow Microstrategy to acquire significant amounts of bitcoin into 2025.??
Besides, founder and CEO of video platform Rumble has made a public poll on Twitter/X which was decisively in favour of adding bitcoin to Rumble’s corporate balance sheet.??
Both sovereign adoption and corporate treasury adoption will most likely continue to be major investment narratives for bitcoin and cryptoassets over the coming months.???
In general, among the top 10 crypto assets, Stellar, Cardano, and XRP were the relative outperformers.??
Overall altcoin outperformance vis-à-vis Bitcoin has accelerated last week, with around 90% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. Ethereum performed in line with Bitcoin last week.??
Sentiment
Although sentiment has somewhat declined from euphoric levels, our in-house “Cryptoasset Sentiment Index” continues to signal a bullish sentiment.??
At the moment, 10 out of 15 indicators are above their short-term trend.?
We are observing very high sentiment readings in indicators like the crypto dispersion index or the BTC perpetual funding rate.??
The Crypto Fear & Greed Index continues to signal an “Extreme Greed” level of sentiment as of this morning.??
Performance dispersion among cryptoassets has continued to increase significantly to the highest level since March 2024. This signals that altcoins have become less correlated with the performance of Bitcoin.??
Altcoin outperformance vis-à-vis Bitcoin has also accelerated last week, with around 90% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. The relative performance of Ethereum vis-à-vis Bitcoin has stabilised.??
In general, increasing (decreasing) altcoin outperformance tends to be a sign of increasing (decreasing) risk appetite within cryptoasset markets and the latest altcoin outperformance continues to signal a positive risk appetite at the moment.?
Meanwhile, sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has continued to be low following the US election results last week as a Trump presidency has continued to weigh on sentiment in traditional financial assets. The index currently signals a neutral cross asset risk appetite.???
Fund Flows
Weekly fund flows into global crypto ETPs have accelerated last week and reached the highest weekly level ever recorded.??
Global crypto ETPs saw around +2,940.5 mn USD in weekly net inflows across all types of cryptoassets which is a significant acceleration compared to prior week’s +2,104.9 mn USD in weekly net inflows.??
Global Bitcoin ETPs saw net inflows totalling +3,076.2 mn USD last week, of which +3,370.4 mn USD in net inflows were related to US spot Bitcoin ETFs alone.??
The Bitwise Bitcoin ETF (BITB) in the US also saw decent net inflows, totalling +154.4 mn USD last week.?
In Europe, the ETC Group Physical Bitcoin ETP (BTCE) saw net outflows equivalent to -34.3 mn USD, while the ETC Group Core Bitcoin ETP (BTC1) managed to attract capital of around +0.6 mn USD.?
Outflows from the Grayscale Bitcoin Trust (GBTC) stayed high, with around -52.8 mn USD in net outflows last week. The iShares Bitcoin Trust (IBIT) continued to see very significant net inflows of +2,053.6 mn USD, which is even higher than last week.?
Meanwhile, flows into global Ethereum ETPs decelerated significantly with around -84.3 mn USD in net outflows, after +632.3 mn USD in net inflows the week before.??
US Ethereum spot ETFs also saw around -71.6 mn USD in net outflows in aggregate. The Grayscale Ethereum Trust (ETHE) continued to see very significant net outflows of around -95.6 mn USD last week which were not compensated by higher net inflows into other ETFs.??
The Bitwise Ethereum ETF (ETHW) in the US defied negative market trends with net inflows of +7.8 mn USD last week.??
In Europe, the ETC Group Physical Ethereum ETP (ZETH) experienced minor negative net flows of -0.8 mn USD while the ETC Group Ethereum Staking ETP (ET32) continued to attract capital with +0.5 mn USD in net inflows.?
Altcoin ETPs ex Ethereum also saw positive net inflows with around +55.5 mn USD last week. The ETC Group Physical Solana ETP (ESOL) managed to attract +0.5 mn USD last week.??
In contrast, investors continued to repatriate capital from thematic & basket crypto ETPs with around -107.0 mn USD in net outflows on aggregate last week. The ETC Group MSCI Digital Assets Select 20 ETP (DA20) saw sticky AuM (+/- 0 mn USD).?
Meanwhile, global crypto hedge funds decreased their market exposure to Bitcoin last week again. The 20-days rolling beta of global crypto hedge funds’ performance to Bitcoin declined to around 0.79 per yesterday’s close.??
On-Chain Data
In general, Bitcoin on-chain metrics have turned more bearish recently.??
One of the major reasons why bitcoin failed to cross the 100k USD mark is probably related to the fact that net buying volumes on bitcoin spot exchanges already turned negative due to high profit-taking by investors.?
More specifically, long-term holders have started to distribute significant amounts of bitcoins into the recent rallye.??
Realized profits by long-term bitcoin holders have spiked to 3.845 bn USD last Friday – the highest since July 2024 and second highest profit-taking on record (Chart-of-the-Week).?
In fact, long-term holders of bitcoin have decreased their share in bitcoin’s supply over the past week’s to the lowest level since August 2024. This is also related to an increasing share of short-term investor participation, i.e. retail investors.??
For instance, supply held by short-term holders has been growing faster than supply held by long-term holders which is showing in an acceleration in the supply delta metric.?
On the bright side, bitcoins continue to be taken off exchange at a record pace.??
For instance, whales continue to send bitcoins off exchange on a net basis. More specifically, BTC whales have sent -27.3k BTC off exchanges last week, signalling increasing buying interest by whales. Whales are defined as network entities that control at least 1,000 BTC.?
As a result, approximately -43.5k BTC have been sent off exchanges last week – the highest amount since December 2022. BTC miners have also stopped sending significant amounts of bitcoin to exchanges.??
The bitcoin supply shock continues to intensify despite the recent flurry of selling by long-term holders. Glassnode’s metrics for liquid and highly liquid supply continue to drift lower to new year-to-date lows consistent with the ongoing decline in overall exchange balances.??
All in all, the recent profit-taking implies that bitcoin’s rallye may take a break in the short term but we still expect the rallye to continue well into 2025 as the supply shock continues to intensify in the background.??
Futures, Options & Perpetuals
Last week, BTC futures open interest reached a new all-time high in USD-terms with around 54.1 bn USD in open interest. Beides, open interest on CME continued to make new all-time highs in both USD- and BTC-terms as well.??
Meanwhile, BTC futures short liquidations remained relatively low compared to the highs made on the 6th of November, one day after the US election.??
However, BTC perpetual funding rates remained elevated signalling bullish sentiment among BTC perpetual traders.??
When the funding rate is positive (negative), long (short) positions periodically pay short (long) positions. A positive funding rate tends to be a sign of bullish sentiment in perpetual futures markets at the moment.???
The BTC 3-months annualised basis also continued to trend higher to around 15.1% p.a. averaged across various futures exchanges.??
In this context, we have seen a significant built-up in hedge fund net short positioning on CME which is most likely related to an increase in basis trades.??
Besides, BTC option open interest also increased to a new all-time high of almost 45.4 bn USD. This appears to be due to a significant increase in puts relative to calls as the put-call open interest ratio also increased significantly.? The BTC put-call open interest ratio remains at the highest level since March 2024.??
Meanwhile, the 1-month 25-delta skew for BTC remains near year-to-date lows, still signalling a high appetite for call options. At the time of writing, the 1-month skew is still significantly more biased towards call options, with a premium of around 8.5% p.a. for delta-equivalent calls.?
BTC option implied volatilities increased significantly, as realized volatility also increased.??
At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 62.0% p.a.??
Bottom Line
Read the full report including the Cryptoasset Sentiment Index and full chart show in the appendix on our website.
Disclaimer
Important Information
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