Bitcoin takes ‘lion’s share’ as institutional inflows hit 7-month high

February 7, 2023 Coin Telegraph

Bitcoin

$117 million heads into crypto investment products in a single week, and the vast majority went straight into Bitcoin.

Bitcoin (BTC) rebounding 40% in January sparked the largest inflows of institutional cash since June 2022, data shows.

In its "Digital Asset Fund Flows" Weekly" report on Jan. 30, digital asset investment and trading group CoinShares confirmed $117 million headed into crypto in the last week of the month.

Institutions "not sold" on post-merge Ethereum

Bitcoin is still on the radar as an institutional investment opportunity.

As demonstrated by CoinShares’ latest data, it took a matter of weeks of BTC price action recouping prior losses to spark a major turnaround in investment habits — and not just in the United States.

“Last week's US bears seem to have changed their mind with US$117m inflows, including US$26m from the United States,” CoinShares wrote in a Twitter thread accompanying the report.

“This is 3x the amount from last week. Total AuM had risen to US$28bn, up 43% from their November 2022 lows.”

Germany was the surprise leader, responsible for 40% of the week’s tally, followed by Canada.

Despite altcoins rallying in line with Bitcoin, however, institutions appear mainly interested in BTC when it comes to cash.

In the words of CoinShares, “the focus was almost entirely on Bitcoin,” a fact not lost on market participants eyeing a potential shift in preferences away from the Ethereum-centric DeFi arena.

“This is evidence that institutional money isn't sold on the Ethereum thesis,” popular Twitter account Pillage Capital argued.

The numbers likewise belied testing times for certain altcoins, with CoinShares singling out Bitcoin Cash (BCH), Stellar (XLM) and Uniswap (UNI). Solana (SOL), Cardano (ADA) and Polygon (MATIC) nonetheless saw net inflows.

“Multi-asset investment products saw outflows for the 9th consecutive week totaling US$6.4m, suggesting investors are preferring select investments,” it commented.

*Weekly Crypto Asset Flows chart. Source: CoinShares/ Twitter*

GBTC sinks towards new record discount

After staging a marked comeback of it own, meanwhile, the largest Bitcoin institutional investment vehicle seems to be running out of steam once more.

The Grayscale Bitcoin Trust (GBTC) traded at a 43% discount to Bitcoin spot price on Feb. 7, having recovered to 36.2% in mid-January.

As Cointelegraph continues to report, Grayscale currently finds itself caught up in difficulties impacting parent company Digital Currency Group following the disintegration of FTX in November.

Even before that, however, GBTC was struggling, as Grayscale attempts to force U.S. regulators to allow it to convert it to the country's first Bitcoin spot price exchange-traded fund (ETF).

*GBTC premium vs. asset holdings vs. BTC/USD chart. Source: Coinglass*

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Osprey sues Grayscale for misrepresenting likelihood of GBTC ETF approval

January 30, 2023 Coin Telegraph

Coin Telegraph

Osprey alleges its only competitor on the BTC OTC trust asset market gained its 99.5% market share by misrepresenting the likelihood of its trust becoming an ETF.

Digital asset manager Osprey Funds filed suit against Grayscale Investments in Connecticut Superior Court on Jan. 30, alleging violation of the state’s Unfair Trade Practices Act. The suit concerns Grayscale advertising and promotion of the Bitcoin (BTC) exchange-traded fund (ETF) it is seeking to create.

Osprey stated in the suit that it is the only competitor to Grayscale on the over-the-counter traded Bitcoin trust asset management market, and Grayscale maintained its leading position through deceit:

“Only because of its false and misleading advertising and promotion has Grayscale been able to maintain to date approximately 99.5% market share in a two-participant market despite charging more than four times the asset management fee that Osprey charges for its services.”

Specifically, Osprey alleged that Grayscale promoted participation in its Grayscale Bitcoin Trust (GBTC) as a means of accessing a spot-based Bitcoin ETF through the conversion of its $12-billion GBTC. Grayscale presented the conversion as “a foregone conclusion, when it knew that access was never likely to happen,” according to the suit.

Osprey alleged that Grayscale continued to call the conversion “‘likely,’ despite knowing that such a description was false, as the SEC had consistently rejected the possibility of such conversion for a Bitcoin commodity fund since in or before late 2020.” Osprey claimed that statements in emails, press releases and Twitter, as well as Grayscale executives’ television appearances, contained the false information.

Dear @BarrySilbert, I have an idea for $GBTC. Give me a buzz when you’re ready. We’re just up the road from you in Connecticut. pic.twitter.com/zVFHBLxSl0
— Greg King, CFA (@GregKingOsprey) January 13, 2023

The United States Securities and Exchange Commission officially denied Grayscale’s application to convert its GBTC into an ETF on June 29, 2022. Grayscale filed a petition for review in the District of Columbia Court of Appeals the same day. The court is expected to hear oral arguments in the case on March 7.

Grayscale is part of Digital Currency Group, which also owns Genesis Global Capital, the crypto lender that declared bankruptcy on Jan. 19. Osprey has also seen hard times recently. It has reportedly laid off 15 staff members since last summer, leaving it with a staff of less than 10. Osprey is seeking an award for damages from Grayscale and injunctive relief.

Total crypto market cap rises above $1T, and data suggests more upside is in store

January 27, 2023 Coin Telegraph

Total crypto market cap rises above T, and data suggests more upside is in store

Bithumb

Bad news continues to dominate crypto media headlines but Bitcoin and the wider market appear to not care.

Despite the recent negative crypto and macroeconomic newsflow, the total cryptocurrency market capitalization broke above $1 trillion on Jan. 21. An encouraging sign is that derivatives metrics are not showing increased demand from bearish traders at the moment.

*Total crypto market cap in USD, 1-day. Source: TradingView*

Bitcoin (BTC) price gained 8% on the week, stabilizing near the $23,100 level at 18:00 UTC on Jan. 27 as the markets weighed the potential impact of Genesis Capital's bankruptcy on Jan. 19.

One area of concern is Genesis Capital's largest debtor is Digital Currency Group (DCG), which happens to be its parent company. Consequently, Grayscale funds management could be at risk, so investors are unsure if the Grayscale Bitcoin Trust (GBTC) assets could face liquidation. The investment vehicle currently holds over $14 billion worth of Bitcoin positions for its holders.

A United States appeals court is set to hear the arguments relating to Grayscale Investment's lawsuit against the Securities and Exchange Commission (SEC) on March 8. The fund manager questioned the SEC's decision to deny their asset-backed exchange-traded fund (ETF) launch.

Regulatory concerns also negatively impacted the markets after South Korean prosecutors requested an arrest warrant for Bithumb exchange owner Kang Jong-Hyun. On Jan. 25, the Financial Investigation 2nd Division of the Seoul Southern District Prosecutor's Office sentenced Kang and two Bithumb executives on charges of conducting fraudulent illegal transactions.

The 7% weekly increase in total market capitalization was held back by Ether's (ETH) 0.3% negative price move. Still, the bullish sentiment significantly impacted altcoins, with 11 of the top 80 coins gaining 18% or more in the period.

*Weekly winners and losers among the top 80 coins. Source: Messari*

Aptos (APT) gained 91% after the smart contract network total value locked (TVL) reached a record-high $58 million, fueled by PancakeSwap DEX.

Fantom (FTM) rallied 50% after the announcement of its new database system, Carmen, and a new Fantom Virtual Machine, Tosca.

Optimism (OP) faced 21% gains after a sharp increase in transaction volumes during an NFT incentive program called Optimism Quest.

Leverage demand slightly favors bulls

Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

*Perpetual futures accumulated 7-day funding rate on Jan. 27. Source: Coinglass*

The 7-day funding rate was positive for Bitcoin and Ethereum, meaning the data points to slightly higher demand for leverage longs (buyers) versus shorts (sellers). Still, a 0.25% weekly funding cost is not enough to discourage leverage buyers.

Interestingly, Aptos was the only exception as the altcoin presented a negative 0.6% weekly funding cost — meaning short sellers were paying to keep their positions open. This movement can be explained by the 91% rally in 7 days and it suggests that sellers expect some sort of technical correction.

The options put/call ratio shows no signs of fear

Traders can gauge the market's overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A 0.70 put-to-call ratio indicates that put options open interest lag the more bullish calls by 30% and is therefore bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be deemed bearish.

*BTC options volume put-to-call ratio. Source: laevitas.ch*

Even though Bitcoin's price failed to break the $23,300 resistance, the demand for bullish call options has exceeded the neutral-to-bear puts since Jan. 6.

Presently, the put-to-call volume ratio stands near 0.50 as the options market is more strongly populated by neutral-to-bullish strategies, favoring call (buy) options by 50%.

Derivatives markets point to further upside potential

After the third consecutive week of gains, which totals 40% year-to-date when excluding stablecoins, there are no signs of demand from short sellers. More importantly, leverage indicators show bulls are not using excessive leverage.

Derivatives markets point to further upside potential and even if the market revisits the $950 billion market capitalization from Jan. 18, there is no reason for panic. Currently, Bitcoin option markets show whales and market makers favoring the neutral-to-bullish strategies.

Ultimately, the odds favor those betting that the $1 trillion total market cap will hold, opening room for further gains.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Crypto Giant Grayscale To Face SEC in Court To Push for Converting Its Bitcoin Investment Product Into ETF

January 26, 2023 The Daily Hodl

DCG companies laid off over 500 employees as contagion spreads

January 25, 2023 Coin Telegraph

Coin Telegraph

Cryptocurrency exchange Luno fired 330 employees on Jan. 25, joining other DCG companies in cutting headcount.

Hundreds of people have lost their jobs at companies owned by crypto venture capital firm Digital Currency Group (DCG), as the longer crypto winter boosted by the FTX collapse continues to affect the sector.

Amidst the recent layoffs, London-based cryptocurrency exchange Luno announced on Jan. 25 a reduction of 35% in its workforce, letting go nearly 330 professionals as a result of turbulence in the tech and crypto industries, which affected the firm's overall growth and revenue members.

Luno was part of DCG's portfolio alongside HQ Digital, an asset management subsidiary incubated by DCG since 2020 that managed $3.5 billion in assets as of December 2022. HQ operations were shuttered in January 2023, affecting at least 26 employees, according to its LinkedIn profile. In a letter to shareholders on Jan. 10, DCG CEO Barry Silbert noted that "while we still believe in the HQ concept and its outstanding leadership team, the current downturn is not conducive for the near-term sustainability of that business."

The current downturn cited by Silbert also affected DCG employees. The company downsized by nearly 13% at the start of this year, cutting 66 jobs. The crypto conglomerate said it was looking to revamp its finances and promote several senior executives as part of a restructuring process.

Another 115 jobs were axed by DCG's Genesis subsidiaries. On Jan. 5, Genesis Global Trading announced it was cutting 30% of its team, or 63 employees, less than six months after disclosing plans to trim 20% of its staff in August, or 52 employees.

Facing liquidity issues after FTX collapse, Genesis’ lending entities — Genesis Global Holdco, Genesis Global Capital and Genesis Asia Pacific, collectively known as Genesis Capital — have filed for bankruptcy protection on Jan. 19, estimating liabilities up to $10 billion. Genesis Global Trading and Genesis’ spot and derivatives trading entities remain operational.

DCG's portfolio also includes digital currency asset manager Grayscale, trading platform Tradeblock, financing and advisory company Foundry, and media outlet Coindesk, which is reportedly considering a sale to strengthen DCG's balance sheet.

The liquidity crisis at Digital Currency Group has sparked fears of upcoming crypto company crashes and their contagious effects on traditional finance. While the industry was experiencing a bull market in November 2021, DCG's valuation topped $10 billion with the sale of its shares to SoftBank, Alphabet's CapitalG, and Ribbit Capital. A year later, the company was seeking to raise $500 to fund its portfolio amid liquidity issues.

"We’ve been aggressively cutting costs over the last few months in reaction to the current state of the market, which has included cutting operating expenses, and regrettably, reducing the DCG workforce," Silbert explained to DCG's shareholders.

SEC’s ‘one-dimensional’ approach is slowing Bitcoin progress: Grayscale CEO

January 24, 2023 Coin Telegraph

Bitcoin

Grayscale’s chief was the latest to take a swing at the authority for its so-called “regulation by enforcement” actions.

The approach to crypto regulatory enforcement by the United States Securities and Exchange Commission (SEC) stalled the advancement of Bitcoin (BTC) in the country, according to the CEO of Grayscale Investments.

In a letter published in The Wall Street Journal on Jan. 23, the chief of the cryptocurrency asset management firm, Michael Sonnenshein, said he agreed with an assertion that the SEC was “late to the game” regarding crypto regulation and preventing the bankruptcy of FTX, adding:

“‘Late’ doesn’t capture what transpired here. The problem is the Securities and Exchange Commission’s one-dimensional approach of regulation by enforcement.”

Grayscale is currently suiting the SEC for denying the conversion of its Bitcoin trust to a spot-based Exchange Traded Fund (ETF).

He clarified the SEC “should certainly try to eliminate bad actors” but it shouldn’t hinder “efforts to develop appropriate regulation.”

Doing our part to re-instill trust and confidence in #bitcoin and #crypto cc @Grayscale @CraigSalm @jenn_rosenthal $GBTC pic.twitter.com/u72RHmGTmJ
— Sonnenshein (@Sonnenshein) January 23, 2023

The inaction by the regulator to stop such bad actors from entering the crypto industry “prevented Bitcoin's advancement into the U.S. regulatory perimeter” according to Sonnenshein.

This has thus forced American investors to offshore crypto businesses “with less protection and oversight," he said.

“We are seeing the consequences of the SEC’s priorities play out in real-time — at the expense of U.S. investors.”

Cointelegraph has reached out to the Securities and Exchange Commission for comment.

Sonnenshein’s opinion piece comes amid an ongoing lawsuit between Grayscale and the SEC for having “arbitrarily denied” Grayscale’s plans to convert its Grayscale Bitcoin Trust (GBTC) to a spot ETF.

The SEC argued Grayscale’s proposal did not sufficiently protect against fraud and manipulation. Grayscale countered saying the SEC was arbitrarily treating spot-traded products differently from futures-traded products.

Grayscale is owned by the crypto conglomerate Digital Currency Group (DCG), which is currently undergoing financial difficulties.

DCG also owns the bankrupt Genesis Trading which was charged by the SEC on Jan. 12 for allegedly selling unregistered securities.

Over the weekend, John Reed Stark, a crypto skeptic and former SEC chief lambasted the term “regulation by enforcement” labeling it a “Bogus Big Crypto Catch Phrase.”

In a Jan. 22 post on Linkedin, he said the term was a “misguided, deflective effort designed to tap into sympathetic libertarian and anti-regulatory mores” calling it “utter nonsense.”

He argued that “litigation and SEC enforcement are actually how securities regulation works.”

1inch Network Launches Hardware Wallet for Storing Users’ Private Keys in a Secure Offline Setting

January 19, 2023 Bitcoin.com

Bitcoin holds $20K while flirting with a neutral futures premium for the first time in 6 months

January 17, 2023 Coin Telegraph

Bitcoin holds K while flirting with a neutral futures premium for the first time in 6 months

Asia

Global and U.S. economic data and a few BTC derivatives-related metrics could determine whether Bitcoin retests the $20,000 level in the short-term.

After 66 agonizing days, Bitcoin (BTC) price finally broke above the $20,000 psychological resistance on Jan. 14. At the same time, the current $400 billion market capitalization gives BTC a position in the top-20 global tradable assets, surpassing giants like Walmart (WMT), Mastercard (MA) and Meta Platforms (META).

From one side, Bitcoin bulls have reasons to celebrate after its price recovered 34% from the $15,500 low on Nov. 21, but bears still have the upper hand on a larger time frame since BTC is down 52% in 12 months.

However, two events are expected to determine traditional finance investors' fate. On Jan. 16, China will announce its Gross Domestic Product figures and on Jan. 18, the United States Retail Sales will publish.

Fourth quarter earnings season will set the tone for this week's stock market performances, including Goldman Sachs (GS), Morgan Stanley (MS), Netflix (NFLS) and Procter & Gamble (PG).

In the cryptocurrency markets, there is mild relief stemming from some unexpected places — or people. Crypto entrepreneur Justin Sun is reportedly interested in acquiring assets from the troubled Digital Currency Group (DCG), the parent company of the crypto lender Genesis and the Grayscale funds' administrator.

On Jan. 16, Binance exchange launched its off-exchange settlement solution for institutional investors. The regulated digital asset custodial services enable additional security, allowing investors access to the exchange ecosystem without needing to deposit directly on the platform.

Another positive piece of news came from Bitcoin's mining difficulty rising 10.26% on Jan. 15, reflecting higher competition for block subsidies — typically a bullish indicator for the industry. This increases network security, but more importantly, it shows that miners can find strategic energy sources and are committed to the long-term investment required for Bitcoin mining.

Let's take a look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

The Asia-based stablecoin premium drops to a 6-month low

The USD Coin (USDC) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100%, and during bearish markets, the stablecoin's market offer is flooded, causing a 4% or higher discount.

*USDC peer-to-peer vs. USD/CNY. Source: OKX*

Currently, the USDC premium stands at 97.5%, down from 100% two weeks prior, indicating lesser demand for stablecoin buying from Asian investors. The data gained relevance after the 24% rally between Jan. 7 and Jan. 14, as one would expect a much higher demand from retail traders.

However, this data is not necessarily bearish because traders could be dumping stablecoins due to increased regulatory risks.

The futures premium is finally displaying neutral sentiment

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% to +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below such a range, it shows a lack of confidence from leverage buyers — typically, a bearish indicator.

*Bitcoin 2-month futures annualized premium. Source: Laevitas.ch*

The above chart shows positive momentum for the Bitcoin futures premium, now flirting with the neutral premium at 4% — the highest in five months. This indicator represents a drastic change from the backwardation, the bearish sentiment that had prevailed from the FTX collapse in Nov. 2022 until the first days of 2023.

Bitcoin's $20,000 support needs a retest

While the seemingly effortless rally to $20,000 looks encouraging, it hasn't been recently tested as a support level. At the same time, the absence of a stablecoin premium in Asia displays a lack of demand from retail buyers. However, the current 2.5% discount does not reflect discomfort or distress from sellers.

This data supports the thesis that Bitcoin needs to test the $20,000 support to prove to investors that regardless of how the stock market behaves, the bearish sentiment caused by FTX and Digital Currency Group (DCG) contagion risks are behind us.

There is still a chance that macroeconomic data will favor the continuation of a bull run, so either way could sustain the positive momentum.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Grayscale Replies to SEC, Argues That Bitcoin (BTC) Spot ETF Denial Is Illogical

January 14, 2023 The Daily Hodl

Osprey Vies for Control of Grayscale’s Bitcoin Trust; Tron’s Justin Sun Offers to Invest Up to $1B on DCG Assets

January 14, 2023 Bitcoin.com

Grayscale

Institutions "not sold" on post-merge Ethereum

GBTC sinks towards new record discount

Leverage demand slightly favors bulls

The options put/call ratio shows no signs of fear

Derivatives markets point to further upside potential

The Asia-based stablecoin premium drops to a 6-month low

The futures premium is finally displaying neutral sentiment

Bitcoin's $20,000 support needs a retest

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