This week could potentially see some considerable volatility as we approach the Bitcoin Halving on 4/20 along with important economic data to be released by several countries, with the main event to keep an eye on being the U.S. CPI data print. The expectation is for a bump from the current 3.2% YoY rate to 3.5%, which is in line with price pressures that appeared in last week’s ISM report. We also get inflation data from several other countries including Japan and Germany, and the interest rate decision from the ECB on 4/11 could be an event to monitor later in the week.
Bitcoin Profit Taking has begun
Bitcoin's rejection from $73.5k in the middle of March has it trading within a range between $62-71k since. With the Bitcoin Halving less than two weeks away, we thought it worth addressing something that we noticed at the end of March, which is that noteworthy profit taking has begun for Bitcoin at these levels.
The chart above shows the SOPR for Bitcoin, which stands for Spent Output Profit Ratio, a ratio of spent outputs in profit at the time. It is a key metric that provides insight into whether people are making a profit when they spend their coins. It takes into account factors like aggregate profit and adjusts for spent coins that may not re-enter circulation. The version we're showcasing is adjusted Spent Output Profit Ratio (aSOPR), which is not taking into account short-lived coin movement in order to reduce noise in the metric.
The key takeaway is that this metric has pushed to relatively high levels that were last seen at the height of the 2021 bull market. This indicates that the market is accelerating their volume and magnitude of profit taking in spot markets. We wanted to dissect each of the last few times this level has reached these heights (SOPR > 1.25) and see the immediate impact of this indicator flashing.
In this instance, we see SOPR breached the 1.25 level and saw an immediate drop in the price of Bitcoin by roughly 14%. However, BTC would recover to reach its 2017 peak of ~$19.3k before dropping by 35% to end the year. This would mark the end of the bull market that stemmed from the 2016 Halving.
In this instance, we also saw a similar 13% drop in BTC as soon as the SOPR metric surpassed 1.25. Furthermore, we saw a similar scenario where BTC recovered to breach $13k before eventually dropping by roughly 28% a month later. SOPR over 1.25 would register a 2nd time in this case, and the only other observation to note was that price would continue trending downwards for the rest of the year before showing slight signs of recovery in December.
In the first instance of 2021, SOPR would register multiple times before the eventual decline in BTC price, but in this case, it was a drop of 26%. After, price recovered to reach the first peak of the 2021 bull market at roughly $63k. The subsequent drop from this first peak of 2021 would be just over 50%.
We had a 2nd period of SOPR registering in 2021 just over half a year later, but the drop of 23% would take just over a month to occur. As per the usual pattern, we would see a rise follow to the 2nd peak of 2021 at $69k before the subsequent decline of 48%.
It is only 4 instances in Bitcoin's history, but we just found the similarities in patterns interesting. In all 4 cases, we see an initial drop in the price of Bitcoin. Soon after, we get a rise in the price of BTC that ranges from a 30-100% increase followed by declines. Since the indicator itself is showing when profit taking begins at significant levels, it could be seen as a sign to consider that a short-term top is very close and more importantly, that the eventual mid if not long-term top is approaching.
The point of this pattern recognition is that we registered our first reading of SOPR close to 1.25 that took place mid-March. It coincided with a drop of roughly 16% but has recovered since then. A larger SOPR reading took place a week after, but so far no additional reaction in price has occurred yet. We must also note that this is the first time SOPR readings are coming in before a Halving date. In the previous 4 instances, the readings came well-after the Halving occurred for that period of time, so we must consider what an approaching Halving date could mean for the future reaction in BTC's price.
Nevertheless, if we go by the pattern's that have played out so far in the past, we can envision a few scenarios for the near future:
- Short-term Bull / Mid-term Bull: Bitcoin has experienced its typical small drop following a SOPR reading and will begin its recovery that could take it anywhere from 30-100% higher, giving it a price range of somewhere between $80-120k.
- Short-term Bear / Mid-term Bull: Bitcoin will see a further drop that would take it to somewhere in the mid-$50k range before following the same 30-100% price appreciation that is has done in previous bull markets.
- Brevan Howard Digital and Galaxy Digital invest in crypto accelerator Alliance aiming to raise $100 million for a new fund Commentary: Brevan Howard Digital, the crypto arm of the global asset management giant, and Galaxy Digital, the crypto firm founded by billionaire Mike Novogratz, have both invested in crypto accelerator Alliance's third fund. According to the meeting slides, Fund III is looking to raise an additional $80 million by July, capping it at $100 million. It is expected to invest $500,000 per startup.
- Morgan Stanley wants to beat UBS to become the first Bitcoin ETF bank Commentary: The launch of spot Bitcoin exchange-traded funds (ETF) in the United States has fueled rivalry between investment banks over which will be the first wirehouse to add the products. Morgan Stanley is hoping to beat UBS in becoming the first wirehouse to fully approve the Bitcoin ETF, crypto enthusiast Andrew reported on X on April 3. The latest speculation about Morgan Stanley’s potential rival move against UBS comes a few weeks after Andrew reported that the bank is set to approve Bitcoin ETFs. “Several sources confirm that Morgan Stanley is set to approve Bitcoin ETFs on its platform in the next two weeks,” the poster wrote on March 26.
- Ripple to launch US dollar stablecoin, aims to compete with USDT and USDC Commentary: XRP issuer Ripple has announced plans to launch a United States dollar-backed stablecoin and hopes to compete with Circle and Tether for a slice of the market share over the next five years. Ripple’s stablecoin will be pegged at a 1:1 ratio with the U.S. dollar, and the company plans to back the tokens with U.S. dollar deposits, short-term U.S. government Treasurys, and “other cash equivalents.”
- SEC asks for public comment for Grayscale, Bitwise, and Fidelity spot Ethereum ETFs Commentary: The Securities and Exchange Commission is soliciting comments for a handful of spot ether exchange-traded funds, according to filings. The SEC asked for public comment on three proposed ETFs: the Fidelity Ethereum Fund, Grayscale Ethereum Trust, and Bitwise Ethereum Trust. "The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons," the agency said in the filing about Bitwise. Comments for all three are due in 21 days.
- Galaxy Digital to launch $100 million fund for early-stage crypto companies Commentary: The Galaxy Ventures Fund I, LP, will funnel upwards of $1 million into each of as many as 30 startups over three years, with a focus on “financial applications, software infrastructure and protocols building in crypto,” according to the report. Galaxy's move to start up a new fund for early-stage digital asset companies comes amid a resurgence in funding rounds in the cryptocurrency industry.
- Aave launches proposal to counter MakerDAO DAI expansion risk Commentary: Lending protocol Aave launched a new Aave Risk Framework Committee (ARFC) proposal to adjust the risk parameters of the Dai stablecoin. The Aave Chan Initiative (ACI) team put forward the proposal, suggesting that DAI’s loan-to-value ratio (LTV) be adjusted to 0% on all Aave deployments. This action aims to counteract MakerDAO’s recent aggressive D3M plan, which rapidly expanded the DAI credit line from zero to an estimated 600 million DAI within a month, potentially reaching 1 billion DAI soon.
- Coinbase partners with Lightspark for Bitcoin Lightning payments Commentary: Coinbase is one step closer to integrating Bitcoin Lightning on its platform amid a new partnership with Lightspark, an enterprise-focused Lightning solution led by former PayPal president David Marcus. “Lighting up all Coinbase touchpoints with Lightning” will offload more transaction activity to Bitcoin’s second layer, which will combat the recent rise in fees on Bitcoin’s base layer, Lightspark explained in an April 3 post.
- $2B in Silk Road Bitcoin seized by DOJ moves to a new wallet Commentary: Roughly $2 billion in Bitcoin previously seized by United States authorities and connected to the Silk Road marketplace has moved to a new address. A wallet known to be associated with the U.S. Justice Department made a 0.001 BTC transaction to a Coinbase Prime address - possibly as a test transaction. Shortly thereafter, the same wallet transferred 30,174 BTC, or roughly $2 billion, to a new address. In March 2023, U.S. government authorities reported they had sold roughly 9,861 BTC of the crypto seized from Zhong for more than $215 million, leaving roughly 40,000 BTC. The April 2 transaction followed the price of Bitcoin dropping more than 7% to reach $65,475.
- Paradigm in talks of raising up to $850 million for new crypto fund Commentary: The web3 venture firm Paradigm is in talks with investors to raise between $750 million and $850 million for a new investment vehicle. If it reaches $750 million, the fund would be the biggest since the crypto market crash in May 2022. Paradigm recently led numerous raises for crypto startups, such as a $55 million financing round for the zero-knowledge proofs startup Succinct Labs in mid-March and an $18 million Series A for the web3 infrastructure startup Privy in November 2023.
- Singapore widens crypto regulation, introduces enhanced user protection requirements Commentary: Singapore is introducing regulations that appear to be more stringent for companies engaging in cryptocurrency services or digital payment token (DPT) services. Specifically, the MAS noted that the new rules would cover custodial services for DPTs, facilitation of the transmission of DPTs, and facilitation of cross-border money transfers between countries “even where moneys are not accepted or received in Singapore.”
- Crypto. com to launch a platform in South Korea following the local exchange acquisition Commentary: Global digital asset exchange Crypto. com is launching its retail trading services in South Korea on April 29. Crypto.com’s South Korean trading platform will fill in the spot of locally licensed crypto exchange OK-BIT, which said it is winding down its services. Crypto. com acquired OK-BIT in 2022. Crypto. com said its services will start as a crypto-to-crypto exchange but will continue to make efforts to secure the local bank partnership to provide the full trading experience.
- Tether's Bitcoin holdings cross the $5 billion mark after the latest purchase Commentary: Stablecoin issuer Tether purchased another $627 million worth of bitcoins in the first quarter of 2024, bringing its total holdings to about 75,354 BTC, worth over $5.2 billion. This marks the first time Tether's bitcoin holdings have surpassed the $5 billion mark, coinciding with bitcoin reaching an all-time high this year and currently trading at around $69,500. With the latest Q1 purchase, Tether has now become the seventh-largest holder of Bitcoin from its previous rank of 11 earlier this year.
- Telegram channels are eligible for 50% ad revenue, but there’s a catch Commentary: Instant messaging platform Telegram Messenger will share half of its advertisement revenue with owners of public channels globally if they meet a specific condition. Telegram introduced a reward system that would allow channel owners with substantial subscribers to earn 50% of the revenue from ads shown in their channels in Toncoin (TON), the project’s native cryptocurrency. According to the company, Telegram channels generate over one trillion views every month, and its owners will be able to withdraw their share of the ad revenue with no fees.
- Andreessen Horowitz to invest $30M in tech-fueled gaming startups Commentary: Venture capital firm Andreessen Horowitz (a16z) has announced it will be investing $30 million in technology-centric gaming startups, including AI, VR/AR and Web3 games. The $30 million will be invested across the next 45 days via the firm’s early-stage accelerator “SPEEDRUN” program, Chen said in an April 1 X post, with $750,000 handed out to each startup that joins the program. “We are investing at the intersection of TECH x GAMES, which means AI/infra, 3D tools, VR/AR, web3 games, gamified consumer apps, and much more,”
- FTX bankruptcy estate aims to begin repaying creditors by the end of 2024 Commentary: The FTX bankruptcy estate has set a goal to begin repaying customers by the end of 2024, according to notes from a meeting of FTX Digital's Joint Official Liquidators in the Bahamas. Creditors have been able to submit claims on FTX's claims portal since Mar. 1, when the portal went live. The deadline is currently set for May 15 for creditors to choose one of the two bankruptcy processes and submit a claim, though according to the meeting, the deadline "is now expected to be extended to at least June 2024 based on recent developments."
- Grayscale introduces a crypto investment fund that prioritizes staking rewards Commentary: Grayscale Investments has announced an investment fund tailored to sophisticated clients eager to expose their portfolios to income generated from staking cryptocurrency tokens. The Grayscale Dynamic Income Fund is only available to clients with more than $1.1 million assets under management or a net worth of more than $2.2 million. The fund intends to convert staking rewards into United States dollars weekly, with distributions planned quarterly for investors. Additionally, Grayscale claims that careful analysis will be conducted to select the proof-of-stake (PoS) tokens included in the fund’s portfolio.
- Base transactions and DEX volumes surge to new all-time highs Commentary: Activity on the Coinbase-incubated layer two blockchain Base remains hot as March nears its close, with daily transactions and trading volumes surging to record highs. Contributing to activity on Base at the moment is the launch of mfercoin by Sartoshi, the founder of cc0 nonfungible token collection mfers. The mfercoin token was airdropped to mfer NFT holders late last night.
- April 10 - U.S. Consumer Price Index for March
- April 20 - Bitcoin Halving ETA Date
- April 26 - Bitcoin Apr 2024 Futures Contracts(BTCJ24) Expiration
- May 1 - U.S. FOMC Interest Rate Decision
- May 15 - BTC ETF Investors 13-F SEC filing disclosure
- May 23 - VanEck Ethereum ETF Filing SEC Next Decision Date
- May 24 - 21Shares & ARK Ethereum ETF Filing SEC Next Decision Date
- May 30 - Hashdex Ethereum ETF Filing SEC Next Decision Date
