Major developments for the week
- Bitcoin halving is in 10 days, set for April 19th at 00:14 UTC
- Bitcoin ETF products saw net inflows of $484.5 million last week
- Fantom announces its canonical stablecoin $USDC.e
- Vote on fees to Aave stakers could happen as early as this week, hints founder
- Goldman Sachs, Citadel, Citigroup & UBS authorised participants for BlackRock’s spot Bitcoin ETF
- The FTX bankruptcy estate plans to start repaying creditors by the end of 2024
- Ethena Labs incorporates Bitcoin as backing for USDe
Breaking down Bitcoin’s price movements: Insights from Historical Trends
With Bitcoin having recently corrected as much as 20% from its recent all-time highs, one aspect of market structure that is important to understand is the asset’s historical price volatility and in particular, price corrections during parabolic advances. Taking a look at the 2015-2017 bull run, Bitcoin had eight 30%+ price corrections on its way from ~$200 in 2015 to $20,000 at the peak of 2017.
Past performance is not an indication of future results
During this most recent cycle, the asset underwent 6 20%+ drawdowns from the 2018 lows of roughly $3,000 to late 2021 highs of roughly $70,000.
Past performance is not an indication of future results
Fast forward to this current bull run, the asset has undergone 5 corrections of roughly 20% or more. This bears the question: What drives Bitcoin’s volatility and what should we expect this to look like moving forward?
Past performance is not an indication of future results
Bitcoin’s volatility has historically been driven by the nature of the asset, lacking an agreed upon valuation methodology which makes it susceptible to extreme price swings in both directions. This was especially true in its early days when the asset had no institutional infrastructure including market makers to keep price spreads tight and provide liquidity for the market.
As the market matured, the rise of perpetual swaps pioneered by Bitmex in 2015 opened the floodgates for up to 100x leverage for Bitcoin futures trades, further enhancing the volatility of an already volatile asset class. Fast forward to today, one may speculate that the volatility of the asset class may come down over time with new institutional infrastructure and participation. We believe this likely holds true for Bitcoin with the rise of ETFs and new liquidity providers such as Ken Griffin’s Citadel recently being approved as authorised participants for Blackrock’s IBIT spot Bitcoin ETF. However, for other crypto assets, this extreme volatility is likely far from over.
Synthetix will launch its perpetual contracts on Solana and Sui
Past performance is not an indication of future results
Another interesting development last week came from Synthetix which is set to launch its perpetual contracts on both the Solana and Sui blockchains, following the approval of STP-18 “Solana Perps Working Group” and STP-17 “SUI Perps Working Group”. These initiatives aim to broaden the protocol’s reach by integrating its main offering, perpetual contracts, into these blockchains. The strategy involves creating specific infrastructure on each platform to replicate Synthetix Perps functionality, with Solana’s vibrant community and Sui’s advanced developer tooling being key factors in their selection. Funding has been allocated for development, deployment and management on both chains, with 430,000 SNX and 400,000 USDC earmarked for Solana over 12 months and 290,000 SNX for Sui. This expansion represents a strategic shift from focusing solely on EVM-compatible chains to adapting Synthetix’s offerings for a broader blockchain ecosystem, potentially increasing user engagement and market penetration for perpetual contracts.
It will be interesting to monitor this expansion’s effects on the below metrics once they are operational;
Past performance is not an indication of future results
Aave preliminary fee switch discussions
Marc Zeller, founder of the Aave Chan Initiative, has hinted that a preliminary vote on allocating fees to Aave stakers might be on the horizon as early as this week. This comes in light of his discussion surrounding Aave’s treasury and profitability in which he notes the Aave treasury, consisting of Ethereum and stablecoins, now holds $50 million, covering 2.5 years of operational expenses. Additionally, the net profits of the DAO are at $50 million per year and are on an upward trajectory.
Bitcoin ETF products saw net inflows of $484.5 million last week
Past performance is not an indication of future results
Last week witnessed a net inflow of $484.5 million into Bitcoin ETF products, with BlackRock’s IBIT leading the charge, securing $811.2 million in net inflows. Additionally, BlackRock has considerably broadened the reach of its iShares Bitcoin Trust by welcoming five new authorised participants, increasing the total to nine. This expansion includes the entry of Wall Street giants Goldman Sachs, Citadel Securities, Citigroup and UBS, along with clearing house ABN AMRO, as revealed in a filing with the U.S. Securities and Exchange Commission. These firms join the existing roster of authorised participants: Jane Street Capital, JP Morgan, Macquarie and Virtu Americas. Authorised participants play a pivotal role in the ETF ecosystem, essential for ensuring liquidity by modulating the supply of shares to meet market demand.
Ethena Labs incorporates Bitcoin as backing for USDe
Ethena has garnered considerable attention over the past week, reaching a significant milestone on April 2nd. The significance of this day was marked by the ENA airdrop and the initiation of its second campaign.
Past performance is not an indication of future results
This new phase signifies a strategic pivot from “Shards” to “Sats”, introducing one of the protocol’s boldest advancements yet; the adoption of BTC as a reserve asset.
This development paves the way for Ethena to tap into an additional ~$25 billion in open interest for delta-hedging purposes, effectively more than doubling the volume from ETH perpetual futures. This figure is exclusive of an extra $11 billion in open interest from the CME.
The alignment of BTC funding rates with those of ETH highlights a substantial, yet underexplored, avenue for yield generation within the cryptocurrency domain. Historically, BTC funding on major exchanges has averaged ~22% across roughly $25 billion of open interest. Given that half of this interest could translate into fee revenue from short positions, there’s a prospect of generating approximately $2.75 billion in annual gross cash flow.
It is essential for the protocol to maintain scalability to meet market demands, and incorporating BTC perpetual futures significantly bolsters USDe’s scalability potential.
The “Sats Campaign”, designed to foster this growth, is set to run for five months, concluding on September 2nd or when the USDe supply hits $5 billion, whichever occurs first.
In a post from Ethena’s founder Guy Young, we can see that Ethena’s growth has been tremendous, beating all other major stablecoins to $2 billion in total supplies.