News Updates January 03, 2023
1. Happy birthday to Bitcoin! What will it become when it’s all grown up?
It takes a village to raise a child, and Bitcoin is no different — we must support its growth but also set firm boundaries, writes Justin d’Anethan of Amber Group.
This week, Bitcoin is celebrating its 14th birthday. As the most well-known cryptocurrency in the world eases into teenhood, it faces a future that, while seemingly tainted with uncertainty, is also brimming with endless possibilities.
After all, it was the genesis of Bitcoin in 2009 that birthed the emerging technology of blockchain and marked the start of the decentralization revolution across the globe. With blockchain and cryptocurrency having cemented their place in the mainstream, and Bitcoin even likened to gold due to its utility as a store of value — its potential for growth is evident to all.
But much like every coming-of-age story, what lessons might the industry learn from its tumultuous journey thus far, and what can we look forward to in a new world that is discovering meaning and sense?
Bitcoin’s birth: a story of hope
Amid what was arguably one of the most devastating financial crises in history, public distrust of central governments and financial institutions grew to an all-time high following the colossal collapse of Wall Street behemoth Lehman Brothers in 2008 — but from the ashes rose Satoshi Nakamoto, the pseudonym of a person or group of individuals who brought forth Bitcoin, a trustless model for electronic cash transactions.
Nakamoto’s white paper painted a rosy and hopeful picture of the future at a time when loss and distrust were rampant in the financial world. At the heart of it all, Bitcoin was created to solve long-standing issues that had plagued the financial system by offering anonymity and transparency in peer-to-peer payments — effectively eradicating the need to go through intermediary parties like banks that we had deemed to be “trustworthy” and “necessary” prior to the Wall Street fallout.
Indeed, interest was piqued with Bitcoin’s first financial use case — when hungry programmer Laszlo Hanyecz paid 10,000 BTC for two pizzas from fast food chain Papa John’s. But when more use cases beyond commercial transactions emerged, the world sat up and listened. Bitcoin did not just promise a better future — it delivered — when crypto began to solve wider socioeconomic issues across the globe.
2. BUSD worth $6.2B withdrawn from exchanges in 30 days.
Currently, $13.2 billion is sitting on exchanges, with the majority on Binance.
In the last 30 days, $6.2 billion worth of BinanceUSD (BUSD) was withdrawn from exchanges, according to Glassnode data as analyzed by CryptoSlate.
The chart below represents the exchange net position change of BUSD on exchanges. The green spikes indicate a BUSD inflow, while the red ones represent an outflow. According to the chart, BUSD outflows started in late November 2022 and surged massively throughout December 2022.
During this period, BUSD’s supply dropped below $20 billion for the first time since September 2022.
The Binance-backed stablecoin’s market cap declined by over 15% following a surge in withdrawals on the exchange. Crypto investors massively converted their BUSD holdings into other stablecoins like USD Coin (USDC) and Tether (USDT) as FUD was raised about Binance’s financial health.
In mid-Dec., Binance recorded unprecedented outflows from its reserves –at the peak of the FUD, it processed $6.6 billion in withdrawals over a seven days period.
Further analysis showed that $2 billion BUSD was withdrawn since Dec. 15. According to Glassnode data, the stablecoin supply shrunk to $16.42 billion from $18.64 billion as of press time.
Meanwhile, the above chart shows that BUSD’s balance on exchanges dipped below $16 billion. According to the chart, $13.2 billion is currently sitting on exchanges, with the majority on Binance.
Nansen’s data showed that over $11 billion BUSD sits on Binance –this is roughly 24% of the exchange’s $53.85 billion reserve. Another $26.83 million is currently on Crypto.com.
3. Grayscale Ethereum Trust (ETHE) Currently Trading At A Record 60% Discount.
The investment product’s market price is currently down by 85.26% year-to-date.
The Grayscale Ethereum Trust (ETHE) has been on a steady decline, currently trading at a remarkable 60% discount to Net Asset Value (NAV) – its lowest premium rate since inception. The current metric underlines a general investor capitulation and decline in market sentiment as investors seek to sell off their shares at discounted rates.
CryptoQuant verified author JA Maartun recently pointed out the bearish performance, highlighting the trend of decline suffered by the investment product.
Following a gradual improvement in September of last year, ETHE’s premium rate collapsed to new lows amid the poor price performance of ETH in October, which put investors’ confidence to the test. The FTX debacle of November was the final nail in the coffin, triggering a wave of capitulation that sent the fund’s premium rate on a constant decline, eventually leading to the current 60% discount rate.
The last time the fund’s premium rate traded above 100% was in June 2021. Despite the bull run of 2021, ETHE’s premium rate failed to reclaim the 100% territory. The underperformance persisted into 2022 and subsequently worsened. As a result of the year-long market downturns, it has steadily declined to new lows. Moreover, the broader Ethereum Fund Premium Index from CryptoQuant is in bearish territory, generally indicating weak buying sentiments from investors.
Grayscale’s Unique Issues
Besides the underlying bear market, unique issues facing Digital Currency Group (DCG), Grayscale’s parent company, have contributed to the fund’s woes. Genesis, a leading crypto lending firm and a subsidiary of DCG, announced a decision to pause customer withdrawals last November due to a liquidity crunch amid the FTX collapse. Despite Grayscale’s attempt to publicly isolate itself from its sister company’s woes, concerns abound.
Grayscale’s affiliation with Genesis contributed to greater investor dread. As reported last month, this affected Grayscale’s largest product, the Grayscale Bitcoin Trust (GBTC). GBTC’s premium rate suffered massive declines, eventually leading to record discounts.
At the time of reporting, ETHE’s market price has declined by 31.47% in the past month, with an 85.26% crash year-to-date. Additionally, the fund’s share has collapsed by 68.71% YTD. Despite these unfavorable metrics, shares have appreciated by 47.05% since inception, data from Grayscale suggests.
4. Rest of the Month May See Crypto Prices Continue to Rise.
The global crypto market cap has risen 1.21% over the last 24 hours according to the crypto market tracking website, CoinMarketCap. At press time, the total now stands at around $809.13 billion.
All of the top 10 cryptos by market cap have seen their prices rise over the last 24 hours. At press time, Bitcoin (BTC) is up 0.53% and Ethereum (ETH) is up 1.30%. Meanwhile, Binance Coin (BNB), Ripple (XRP) and Dogecoin (DOGE) have seen 0.95%, 5.35% and 2.44% price increases respectively.
Number 9 and 10 on CoinMarketCap’s top 10 list, Cardano (ADA) and Polygon (MATIC), have also seen their prices rise 1.67% and 3.67% over the last 24 hours.
A tweet made by Santiment yesterday suggests that the bullishness seen in the crypto market lately may continue leading up to the Fed meeting, which is more than 4 weeks out. The tweet also shared insights done by the Santiment team.
The insights stated that BTC’s price has been stuck in a range for 51 days, and that a breakout out of this range will likely ensue since the US stock market is positioned to move upward. In addition to this, the VIX chart indicates “volatility may start picking up again soon” according to the insights.
Lastly, Santiment Insights concluded that if BTC can break the 51-day range then it may attempt the $20-21k region again.
At press time, the price of BTC is trading at $16,733.72 following a 0.53% increase over the last 24 hours.
5. Roubini Lambasts Gemini and DCG as “Ponzi Cesspools”
In a recent tweet, economist Nouriel Roubini opined that crypto exchange Gemini and venture firm Digital Currency Group are both “scammy Ponzi cesspools” in light of heightened tensions between the two companies. As reported by U.Today, Gemini’s Cameron Winklevoss has accused fellow businessman DCG’s Barry Silbert of "bad faith stall tactics" and the intermingling of funds within his conglomerate, asserting that the latter has left $900 million in customer assets needlessly in limbo since FTX's meltdown. Winklevoss claims the $1.675 billion borrowed by DCG from Genesis was used for other business purposes, asking Silbert to commit to finding a solution for Gemini Earn customers.
Silbert responded that DCG did not borrow from Genesis, and is current on all loans outstanding. Moreover, DCG has offered a proposal for resolving the dispute on Dec. 29th. The most recent crypto feud highlights the complex network of connections between top firms in the crypto industry.
