Building Blocks #43

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Birds Eye View (vs Last 7 Days)

?? Overall Crypto Market Cap: $3.57 Trillion (-1.1%)

?? BTC Dominance: 56.3% (+1.1 PPT)

?? Price Snapshot:

?? Bitcoin: $105229 (+3.7%)

?? Ethereum: $3213 (+0.73%)

? XRP: $3.11 (+0.78%)

?? Solana: $240 (-0.99%)

Bitcoin 'leaving crypto in the dust' in 2025 with increasing dominance

Coinbase's Chief Executive Officer Brian Armstrong recently expressed concerns about the rapid proliferation of new tokens, noting "approximately 1 million tokens being created weekly, with an upward trend," and advocated for reforming the U.S. exchange listing process.

However, the Bitcoin Dominance Index (BTC.D), which measures Bitcoin's market capitalization relative to the entire cryptocurrency market, has demonstrated remarkable strength, recording a 15.50% increase in January and an impressive 55% growth over the past three-year period.

This upward trajectory in Bitcoin's market dominance contradicts bearish predictions made by technical analysts and cryptocurrency experts.

A significant factor contributing to Bitcoin's expanding dominance is the growing participation of institutional investors.

The introduction and authorization of spot Bitcoin exchange-traded funds (ETFs) have enhanced Bitcoin's accessibility to conventional investors, strengthening its position in the market.

As evidence, these funds' assets under management reached $39.57 billion by January 29, a substantial increase from $1.17 billion in the previous year.

Moreover, recent statistics reveal that Bitcoin whales have been accumulating substantial BTC holdings, a pattern that correlates strongly with the emergence and popularity of Bitcoin ETFs.

Private Bitcoin transactions employing CoinJoin technology—a privacy-enhancing transaction method—have tripled since 2022, largely due to major accumulators, including spot Bitcoin ETF-related entities and corporations like MicroStrategy, transferring significant Bitcoin volumes.

Financial experts at Standard Chartered have projected Bitcoin's value to potentially reach $200,000 by the conclusion of 2025, citing the substantial capital inflows into Bitcoin ETFs.

Bitcoin's market standing has received additional support from the political sphere with the election of Donald Trump, a cryptocurrency-friendly US president. Notable Bitcoin advocates in the Senate include Cynthia Lummis, Ted Cruz, and French Hill.

Furthermore, multiple US states are advancing legislation to invest public funds in Bitcoin. States including Wyoming, Arizona, New Hampshire, and North Dakota are considering Bitcoin as a strategic reserve asset.

On January 23, Trump took decisive action by signing an executive order that established a Policy Working Group tasked with investigating the feasibility of creating a national Bitcoin reserve.

This strategic move aligns with Trump's earlier statements regarding the establishment of a federal Bitcoin stockpile to enhance America's financial standing. Notably, the initiative focuses solely on Bitcoin, excluding alternative cryptocurrencies, despite strong lobbying efforts from companies like Ripple.

Sam Wouters, an executive at River Financial, a Bitcoin-focused financial services firm, has observed that Bitcoin is increasingly separating itself from the broader cryptocurrency market, a trend that has become particularly evident in recent months.

While Bitcoin and alternative cryptocurrencies have traditionally moved in sync, with altcoins frequently surpassing Bitcoin's performance during speculative "alt seasons," recent market capitalization trends indicate Bitcoin's growing independence from other digital assets.

"The truth is, there is no more alt season," Wouters declared, urging traders to abandon such "false narratives" and acknowledge Bitcoin's unique position.

Market analyst Tuur Demeester reinforced this view, stating, "This cycle, bitcoin is leaving 'crypto' in the dust."

Meanwhile, Ethereum's native token, Ether, is experiencing its most prolonged decline against Bitcoin to date. The ETH/BTC pair has fallen 65% since 2022, leading analysts to speculate about potential further downsides.

Although Spot Ethereum ETFs in the United States have seen positive inflows since November, CoinShares' weekly analysis reveals that Bitcoin funds have dominated the digital asset sector, accounting for more than 90% of total inflows this year.

Market sentiment suggests that Ethereum's appeal to retail investors has diminished, primarily due to its elevated transaction costs and slower processing speeds compared to platforms like Solana.

Furthermore, investor confidence appears to be shaken by recent changes in the Ethereum Foundation's leadership and ongoing debates regarding the project's development direction.

Technical analysis of Ether indicates that continued weakness could push ETH/BTC toward 0.030 BTC, a significant support level that previously triggered a 190% recovery in 2021.

This level also acted as major resistance in 2016, preceding a 75% decline, and coincides with ETH/BTC's 0.786 Fibonacci retracement level.

The 0.030 BTC threshold remains critical, as breaking below it could lead to testing 0.023 BTC, a support level established in December 2017 and December 2020.

However, a rebound from 0.030 BTC might propel Ether toward the recent high of approximately 0.040 BTC in upcoming months.

In dollar terms, the $3,500 resistance remains crucial for bullish momentum in the weeks ahead.

Stablecoins drive retail adoption and increase Mobile Wallets to a record 36 million

The mobile cryptocurrency landscape has witnessed unprecedented growth, with a significant shift as passive digital asset holders transform into active participants, indicating broader mainstream acceptance.

Mobile cryptocurrency wallets hit an unprecedented milestone, exceeding 36 million users in Q4 2024, as revealed in Coinbase's latest quarterly cryptocurrency market analysis, released on Jan. 29.

"Mobile wallet technology serves as a crucial bridge, transforming passive crypto holders into engaged crypto users," noted Daren Matsuoka, serving as data scientist at a16z Crypto.

The distinction between crypto owners and users lies in their engagement level - while owners simply hold digital assets, users actively engage with decentralized finance (DeFi) and various blockchain applications.

The contrast between 36 million active wallet users and approximately 560 million global crypto holders was highlighted in Triple-A's 2024 Cryptocurrency Ownership report, according to recent data.

Lunu's CEO, Pavlo Denysiuk, projects that cryptocurrency holders may triple within the next two years, based on current adoption trends.

Stablecoins emerged as cryptocurrency's dominant "killer app" throughout 2024, driven by enhanced market liquidity and increased adoption in payments and international transfers, as Coinbase's report emphasized: “Behind this growth lies a simple but powerful fact: stablecoins can make it faster and cheaper for both businesses and individuals to move money around the globe.”

The total stablecoin supply experienced an 18% surge during Q4 2024, nearly reaching the $200 billion threshold as the year concluded.

Rising stablecoin supplies typically indicate potential cryptocurrency buying pressure and heightened investor interest, as these tokens serve as the primary gateway from traditional currency to cryptocurrency markets.

Stablecoin trading volume experienced a remarkable surge, exceeding $30 trillion throughout 2024, with December alone recording over $5 trillion in trading activity, coinciding with Bitcoin's surge to a $100,000 record high.

Stablecoin deposits on cryptocurrency exchanges achieved a monthly record of $9.7 billion by Nov. 21, approximately two weeks before Bitcoin's historic breakthrough of the $100,000 milestone in crypto history.

Stablecoins are expected to achieve wider adoption, though comprehensive cryptocurrency regulations will be essential for enhancing financial inclusivity, as highlighted in the report, which stated:

Stablecoins and cryptocurrencies are starting to supersede traditional fiat currencies in several East Asian nations, underscoring their growing importance in developing economies.

East Asia has established itself as the sixth-largest cryptocurrency economy in 2024, representing more than 8.9% of global cryptocurrency value received from June 2024 to July 2023, according to a Sept. 17 report by Chainalysis.

The increasing adoption of cryptocurrencies and stablecoins is partially attributed to nations experiencing persistent fiat currency depreciation and elevated inflation rates, according to Maruf Yusupov, who co-founded Deenar, a digital stablecoin backed by physical gold.

In his statement, Yusupov noted: “In most emerging markets, stablecoins are gradually replacing fiat because of lower barriers to entry, low cost, and ease of use. If the current adoption trend is sustained, the asset might fuel lower patronage to traditional banks as we have it today.”

Stablecoins are proving to be a more economical and efficient alternative to conventional bank transfers, particularly for international transactions. According to Statista, remittance fees averaged 7.34% during 2024 for bank account transfers.

East Asia received in excess of $400 billion in onchain value between June 2024 and July 2023.

Cardano’s Plomin hard fork sets the stage for a new chapter of completely decentralized governance

Cardano is preparing to implement a completely decentralized voting mechanism through its upcoming significant system upgrade.

The Cardano network will shift to a decentralized governance framework following the activation of the Plomin hard fork, according to the Cardano Foundation's Jan. 29 X post, stating:

“The Plomin hard fork takes effect, marking the transition to full decentralized governance. $Ada holders gain real voting power—on parameter changes, treasury withdrawals, hard forks, and the blockchain’s future.”

The enhancement will allow Cardano token owners to assign voting rights to designated representatives who participate in governance decisions, including protocol modifications, treasury distributions, and hard fork launches.

Hard forks necessitate network operators to update their nodes and validate the upgrade with a 51% consensus. By Jan. 22, 78% of Cardano's network nodes had implemented the latest version, as indicated in a Jan. 23 report by Emurgo — a voting participant of Cardano's Interim Constitutional Committee (ICC) backing the hard fork.

The Cardano Foundation has also endorsed the upgrade, as confirmed in a Jan. 23 X post that stated:

Despite this anticipated upgrade, the ADA token has shown weak market performance. The ADA token decreased by 8.2% over the week, trading at $0.91 as of 1:23 pm UTC, according to Cointelegraph Markets Pro data.

Nevertheless, Cardano's governance token has gained over 95% in the past year, surpassing Ether's 38% annual increase. Bitcoin led both alternatives with a 156% yearly growth.

Cardano's ADA token might surge beyond $1.90 post-hard fork, suggested by a symmetrical triangle pattern, which could trigger a substantial price increase upon confirmation.

Symmetrical triangles emerge when prices consolidate between converging trendlines, typically indicating an impending breakout following the dominant trend.

This developing pattern suggests ADA's extended-term value near $1.90, representing roughly 108% growth from current levels. However, the 50-day small moving average (SMA) momentum indicator remains a key resistance point at $0.962.

$150M money market funds added to Arbitrum’s RWA ecosystem

Spiko, a French fintech firm, has launched its money market funds on Arbitrum One, introducing institutional-quality investment products to the layer-2 network.

As stated in a Jan. 28 announcement, Spiko has activated its tokenized US and EU T-Bill Money Market Funds on Arbitrum One. The funds operate under the European Commission's Undertakings for Collective Investment in Transferable Securities (UCITS) regulations, which establishes guidelines for mutual fund distribution.

According to RWA.xyz, net assets in Spiko's US T-Bills Money Market Fund have increased by 8% in the last 30 days, surpassing $50 million. The fund currently delivers an annual percentage yield (APY) of 4.37%.

The company's EU T-Bills Money Market Fund holds assets totaling $95.1 million, with a 10.9% increase recorded over the previous month.

The tokenized US Treasury market continues to expand, with Ondo Finance revealing on Jan. 28 its plans to implement Short-Term US Government Treasuries (OUSG) on the XRP Ledger. RWA.xyz data shows the total value of tokenized Treasury assets has reached $3.43 billion.

Donald Trump's cryptocurrency-friendly policies may also benefit real-world asset tokenization (RWA), suggests Eli Cohen, an attorney working with tokenization platform Centrifuge.

In an interview, Cohen indicated that the incoming administration might issue "a very public renouncement and repudiation" of anti-crypto policies, potentially boosting RWA market engagement.

"This will open up banking and brokerage channels to spur the creation of many more tokenized products," Cohen explained.

While fintech and blockchain firms drive the RWA tokenization surge, traditional financial institutions will ultimately lead mainstream adoption, according to Bitfinex Securities operations chief Jesse Knutson.

"It's the more nimble institutions, the fast movers, like the family offices, those kind of guys. I think they'll have an outsized impact in these early days," Knutson stated during an interview at the Plan B Lugano conference in November.

"But eventually — the benefits of tokenization — they're going to pull in the mainstream institutional investors," he added.

Nvidia slump and $100B crypto IPOs could fuel Bitcoin rally

Analysts predict that Bitcoin's value could experience an upward surge, influenced by Nvidia's substantial market decline and an upcoming wave of Initial Public Offerings (IPOs) from major cryptocurrency companies.

Nvidia, the prominent chip manufacturer, witnessed its shares plummet by almost 17% on Jan. 27, resulting in a staggering $600 billion loss in market value — marking the largest single-day value decline in US stock market history — sparked by concerns over Chinese AI company DeepSeek's newest model, which competes directly with OpenAI's ChatGPT.

Research firm 10x Research, in their Jan. 27 report, views Nvidia's market value reduction as a "positive indicator" for Bitcoin BTC$105,299. The report indicates that decreased AI investment could help control inflation, potentially leading to more accommodative monetary policies from the US Federal Reserve:

These factors, coupled with the forthcoming approximately $100 billion worth of crypto firm IPOs, could set the stage for Bitcoin's next major price surge, according to the report.

Several prominent cryptocurrency companies are preparing for public offerings, creating a "strong motivation to maintain elevated Bitcoin prices," as stated by 10x.

Approximately 10 major crypto enterprises are scheduled to go public in 2025, with their combined valuation exceeding $73.9 billion.

The report noted that Bitcoin's value is connected to "financial strategy," as evidenced by the "considerable efforts to boost Bitcoin's price before Coinbase's IPO in April 2021," further stating:

“With a pipeline of high-profile crypto “financial” companies aiming to go public this year, inflated valuations will likely depend on maintaining a sky-high Bitcoin price—a trend worth watching closely.”

The analysis suggests these IPOs could boost valuations by 50% to 100% compared to previous private funding rounds, potentially reaching an aggregate valuation of $100 billion to $150 billion:

Nevertheless, the $36 trillion US debt ceiling has emerged as a significant warning indicator for Bitcoin's liquidity, suggesting a potential temporary dip to $70,000 before the market cycle continues its upward trajectory.

According to Raoul Pal, founder and CEO of Global Macro Investor, Bitcoin is projected to reach a "local top" exceeding $110,000 in January, followed by an "interim peak in liquidity" that could trigger a more substantial correction. Pal shared these insights through a Nov. 29 X post.

Analysis of Bitcoin's correlation with the global liquidity index indicates that its right-hand side (RHS), representing the lowest selling price traders are willing to accept, is expected to peak around $110,000 in January before declining below $70,000 by February.

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