Cryptocurrency markets experienced significant losses this week, particularly Bitcoin (BTC), which saw a rollercoaster ride that included a surge to $46,000 to a nearly $5,000 dump. Altcoins also suffered, leading to a $150 billion decline in the total crypto market cap. The speculation around the potential rejection of spot BTC ETF applications by the SEC contributed to this sharp drop.

A Sudden Drop

Ethereum dropped over 6%, hovering just above $2,200, while BNB went down to $300 within hours. Other major cryptocurrencies like Ripple, Solana, Cardano, Avalanche, Dogecoin, Polkadot, Polygon, and Chainlink faced losses of up to 12%, with MATIC being particularly affected.

As a result, the total crypto market cap, which was at a near 2-year high of $1.750 trillion, plummeted by $160 billion, standing at $1.650 trillion on CoinMarketCap as of the time of this writing. Furthermore, the market dominance of Bitcoin rose to 51.2%, indicating a larger impact on altcoins.

Other Markets

Meanwhile, in traditional markets, European equity futures declined, Asian stocks were mixed, and investors awaited crucial US jobs data to gauge the interest rate decisions taken by the Federal Reserve. Oil prices rose due to tensions in the Middle East and North Africa, despite signs of weakening US demand, with Brent crude near $78 a barrel.

Lastly, around the time that the various IT services giants within India begin their respective reporting sessions next week, earnings are expected to be the lowest in years, making it difficult for them to justify their valuations.

 

The United States Securities and Exchange Commission (SEC) is alleged on the verge of granting approval to several spot Bitcoin exchange-traded funds (ETFs). In crucial meetings with major stock exchanges such as the New York Stock Exchange (NYSE), Nasdaq, and Chicago Board Options Exchange (CBOE), the SEC is reportedly in the final stages of reviewing applications for eagerly awaited spot Bitcoin ETFs.

Final Discussions Underway

The discussions primarily revolve around the revision and finalization of 19b-4 filings. These filings, submitted by exchanges on behalf of ETF issuers, necessitate SEC clearance before the public sale of ETFs. Moreover, these discussions signify a positive signal, suggesting that the SEC may give the green light to some, if not all, of the dozen applications by significant money managers and crypto firms seeking spot Bitcoin ETF approval.

Although a final decision is pending, insiders indicate that the agency might commence notifying issuers of their approval as early as this weekend. If this occurs, spot Bitcoin ETF trading could commence next week. ETF analysts and issuers maintain optimism, anticipating a favorable SEC decision on or before January 10th, 2024.

A Matter Of Time

This potential approval comes amidst varying confidence levels in the crypto market. The approval of spot Bitcoin ETFs by the SEC would also represent a significant milestone for the cryptocurrency industry, providing retail investors with increased access to the world's largest digital asset at a lower cost compared to currently approved futures ETFs.

Additionally, the introduction of ETFs through trusted and highly regulated money management firms like BlackRock or Fidelity could broaden the investor pool, attracting more individuals to include cryptocurrency in their investment portfolios. An SEC spokesperson mentioned that any decisions related to the registration statement or 19b-4 orders would be reflected on EDGAR and published on the SEC website and the Federal Register.

Senior ETF analyst Eric Balchunas has indicated that a minimum of three out of the five SEC commissioners support the endorsement of Bitcoin spot ETFs. Balchunas explained that the SEC staff, guided by Chairman Gensler, has collaborated with issuers for months, even during holidays. His remarks were in response to Markus Thielen of Matrixport, who published two opinion pieces simultaneously, one predicting approval and the other forecasting rejection.

Mixed Signals

Thielen asserted that he altered his stance to bearish, not for the sake of making accurate predictions, but due to well prepared arguments. Despite Thielen lacking concrete information on the matter, his rejection opinion piece gained attention when published by Coindesk with a seemingly factual title.

Insiders, such as Balchunas, assert that approval is still imminent, with the SEC potentially announcing the decision following a meeting with various exchanges. The exact meeting time is unclear, but this marks the first instance where a reporter claims three commissioners are in favor. Given that two of these are Republicans, expected to support, and Gensler, appointed by Joe Biden, has indicated a court mandated approval, a decision favoring the ETFs seems imminent if three commissioners are indeed in favor.

More Complications

Matrixport attributes potential rejection to the cautious stance on crypto compliance adopted by Gensler, emphasizing his focus on regulatory standards and non-compliance within the crypto industry. Matrixport contends that Gensler choosing to focus on stringent compliance signals a probable disapproval, impacting widespread cryptocurrency investment potential.

Additionally, Matrixport notes that most voting commissioners associated with the Democratic party, generally skeptical of cryptocurrencies, further complicate ETF approval. Furthermore, regulatory authorities lack compelling political reasons to endorse a spot ETF, casting doubt on swift approval. As a result of these recent developments, BTC experienced a sudden drop in price which also adversely affected all of the altcoins.

Popular decentralized exchange dYdX has released a post mortem report regarding a targeted assault on its v3 platform which occurred this past November that also resulted in a $9 million loss from its insurance fund, constituting approximately 40% of the total fund.

The post revealed that the attacker, whose identity has since been uncovered, engaged in extensive 5x leveraged long positions in USD across over 100 wallets. The native token for DeFi protocol Yearn Finance, YFI, experienced a 215% surge in price as the attacker, utilizing various addresses, acquired spot YFI tokens.

What Happened

The assailant leveraged their unrealized profits to establish additional YFI-USD positions, peaking at approximately $50 million. On November 17th, 2023, dYdX responded by reducing the base and incremental position sizes to constrain the attacker. The subsequent day witnessed a nearly 30% plunge in the price of YFI within an hour, yet the attacker failed to close their positions. As their holdings turned negative, the insurance fund automatically offset their losses.

Notably, a week before the YFI incident, the attacker executed a similar strategy targeting USD, withdrawing about $5 million in profits. However, this did not impact the v3 insurance fund, as dYdX had raised the initial margin requirement to 100%, preventing further earnings for the attacker.

Damage Control

The exchange has assured that customer funds remained unaffected and suggested the attacker did not profit from manipulating the YFI market. In response to potential future attacks using similar tactics, dYdX announced enhancements to the v3 trading platform, emphasizing improved open-interest monitoring and alerting capabilities.

Moreover, the forthcoming v4 chain is designed to mitigate risks like those witnessed in this incident. The upgrade incorporates a new software feature automatically adjusting the initial margin fraction in the event of abnormal price movements. As of now, the company has not responded to any requests for additional comments.

Binance, the biggest cryptocurrency exchange in the world, has expanded its Margin offerings by introducing NFPrompt (NFP) and Enzyme (MLN) as newly available assets for borrowing on both Cross and Isolated Margin.

Margin trading in crypto, like in traditional financial markets, involves borrowing funds to increase the size of a trading position. While it can offer potential advantages, it also comes with increased risks.

Multiple Pairs Added

The trading pairs on Cross and Isolated Margin have been broadened, presenting users with increased opportunities for diversified trading. Moreover, users on Binance Margin can now utilize NFPrompt and Enzyme as loanable assets, enhancing flexibility and choices for margin trading.

The newly listed trading pairs on Cross Margin include BNB/USDC, NFP/USDT, and SOL/ETH, while Isolated Margin features pairs like BNB/USDC, MLN/USDT, NFP/USDT, and SEI/TUSD. The proactive development approach of Binance Margin, evident in its continual addition of assets and trading pairs, underscores its dedication to enhancing the user experience and staying ahead in the dynamic cryptocurrency market.

Benefits Of Margin Trading

One of the main advantages of margin trading is the ability to leverage investments. By borrowing funds, traders can control a larger position size with a relatively smaller amount of capital. With leverage, potential profits can be magnified. If the market moves in a desirable direction, the return on initial investments can be higher as opposed to trading without leverage.

Margin trading also allows traders to go short, meaning they can profit via a decline in the price of an asset. This is particularly useful in bear markets or when a trader expects a specific cryptocurrency to decrease in value. Margin trading additionally, provides opportunities to implement more sophisticated trading strategies, such as hedging and arbitrage, which may not be as easily executed with traditional spot trading.

Finally, traders can make use of their capital more efficiently by borrowing funds and increasing their exposure to the market. This can potentially lead to higher returns compared to trading with just the available capital.

CBOE Digital President John Palmer expresses confidence that the approval of spot Bitcoin exchange traded funds (ETFs) will attract a fresh influx of institutional investors. The Chicago Board Options Exchange, which is the largest options exchange in the United States, believes that the green light for these ETFs will open doors for new institutional and, eventually, retail interest in Bitcoin derivatives.

Significant Expansion

According to Palmer, the approval is set to facilitate pension funds and RIA based funds to invest in assets within a spot Bitcoin ETF, providing a direct exposure that is currently unavailable to many funds. An RIA, registered with federal or state regulatory agencies, offers investment advice.

With the SEC facing a January 10th deadline for deciding on the ARK Invest 21 Shares Bitcoin ETF application, Palmer anticipates a significant expansion in Bitcoin derivatives products if the spot ETF gains approval. He foresees institutional players increasingly relying on derivatives to hedge risks. While the breakdown of investor interest remains uncertain, Palmer notes that institutions are likely to lead in accessing hedging tools, with retail investors following suit.

More Exposure Anticipated

In related news, CBOE Digital, the crypto division of the exchange offering crypto futures and options trading, is scheduled to launch margined Bitcoin and Ethereum derivatives trading on January 11th, allowing investors to trade contracts without providing full collateral. Simultaneously, mutual funds are contemplating strategies to gain more exposure to spot Bitcoin ETFs once approved.

On January 2nd, Advisors Preferred Trust, a mutual fund manager, adjusted its prospectus to potentially invest up to 15% of its total assets indirectly in Bitcoin, utilizing shares of Grayscale Bitcoin Trust, ProShares Bitcoin Strategy ETF, and Bitcoin futures contracts.

Bitcoin (BTC) surpassed the $45,000 mark on January 1st, 2024, a level not seen since April 2022. This mirrors the volatility of January that year when the value of the flagship cryptocurrency fluctuated above this threshold multiple times, interspersed with drops as low as $36,000. As of the time of this writing, BTC stands at just above $45,300.

BTC ETF Seemingly On The Horizon

The anticipation for the potential approval of a Bitcoin Spot ETF seems to be a major driving force behind the current upward trend. However, despite numerous deadlines passing without formal action on pending ETF applications, many are wondering if 2024 will indeed be the year which sees the ETF finally be approved or will it be more of the same with the SEC delaying everything once again.

Conversely, everyone is waiting to see what the approval of the ETF will mean for the price of BTC, including both short and long term consequences. Round figures like $45,000 therefore hold significance as psychological barriers for investors. Achieving such milestones tends to boost confidence, encouraging more trading and potentially triggering a positive feedback loop, a prospect eagerly awaited by BTC holders.

BTC Continues Its Domination

In the broader context, Bitcoin is nearing its previous high when it began just below $50,000. Although it remained mostly above $40,000 for a few months, a significant drop occurred after the collapse of the algorithmic stablecoin TerraUSD led to a wave of liquidations and bankruptcies. The infamous FTX fiasco did not help matters either.

Still, as the rally continues, the market capitalization of BTC continues to expand, surpassing $855 billion and even overtaking Tesla, which has a market capitalization below $750 billion, according to CompaniesMarketCap. Additionally, Bitcoin now also exceeds the market capitalization of Berkshire Hathaway Inc. at $774 billion and Meta Platforms (formerly Facebook) at $815 billion.

Between December 30th, 2022, and December 30th, 2023, the Bitcoin (BTC) mining scene underwent a transformative phase marked by notable achievements and industry leading participants.

Substantial Growth

A total of 54,002 BTC blocks were mined during this timeframe, with Foundry USA emerging as the top contributor, mining an impressive 16,492 blocks. The mining community faced 27 difficulty adjustments, mainly increases, resulting in a record setting hashrate on December 24th last year.

Unprecedented hashrates and advanced generation miners marked substantial growth compared to January 2016 when the hashrate of Bitcoin first reached one quintillion hashes per second. Key industry players, including Bitmain, Canaan, Microbt, and Auradine, played a pivotal role in this growth by introducing advanced generation miners in 2023. These cutting edge devices, boasting capabilities of over 375 terahash per second, demonstrated not only increased power but also superior efficiency, with ratings below 20 joules per terahash.

Adapting To The Times

Foundry, Antpool, and F2pool reported substantial increases in their hashrates in 2023, and as the year concluded, it became clear that last year marked a period of significant growth and innovation for the Bitcoin mining industry. The looming halving event in April 2024, set to reduce block rewards to 3.125 BTC, added an element of anticipation and signaled a significant shift for the sector.

However, the resilience and advancement shown by the crypto industry throughout 2023 positioned it well to navigate the changing landscape following the reduction in subsidies. The approach of the halving event adds a layer of intrigue, prompting a closer examination of how dominant mining pools will strategically navigate the evolving terrain. At any rate, the transformative year of 2023 in Bitcoin mining showcased increased hashrates, the introduction of advanced mining technology, and a concentration of mining power among key players.

On behalf of the Web3 community, we would like to extend our warmest congratulations to the companies that announced their success in fundraising between 26th December 2023 and 2nd January 2024. We are thrilled to see such tremendous support from all involved. Well done! 

Eclipse Fi raised $1.9M - Eclipse Fi is redefining the landscape of token launches, bringing the power back to the hands of early communities. A modular launch and liquidity protocol, revolutionising token launches, and supporting innovation across Cosmos and up-and-coming Layer2s.

Sleepless AI raised an undisclosed amount - Sleepless virtual companion game utilizing AIGC and LLMs to create rich story-based gameplay and organically evolving interactions with characters. The project is currently developing three games with its first title, HIM, a virtual boyfriend Otome game that features unique SBT characters that are immutable and on-chain.

BRC20.com raised $1.5M - The investment comes at a time of increased interest in the BRC-20 token standard, created in March 2023 to facilitate the creation and transfer of fungible tokens on Bitcoin through the Ordinals protocol.

CESS raised $8M - This funding will enable CESS to continue mission of providing the next-gen of global decentralized data services for Web3, which includes support for large-scale commercial use cases that require high-end security, performance, storage, CDN, high-frequency trading and millisecond data retrieval.

HIVE Blockchain raised 296.7M - HIVE is a partnership between Genesis Mining and Fiore Group to accelerate the development of the blockchain sector through traditional capital markets and develop the leading listed blockchain infrastructure company.

LeverFi raised $2M - Developer of decentralized leverage trading platform intended to provide users with the ability to trade with leverage permissionless and transparent platform. The company's platform is built on smart contracts, allowing users to maximize their trade size by using yield-bearing collateral as one.

To stay updated with news about future Web3 Funding Rounds, Follow CryptoWeekly
 

The proportion of extended ETH holders surged in 2023, surpassing Bitcoin for the second time in history. Based on insights via the on chain analytics platform IntoTheBlock, Ethereum has demonstrated notable progress in the percentage of investors maintaining their assets for over a year, marking a significant milestone for the blockchain, with the majority of current investors adopting a long term holding strategy.

ETH Long Term Holders Take Lead Over BTC

While the price performance of ETH lagged behind Bitcoin throughout 2023, this trend is expected, given the sheer dominance exhibited by BTC in bullish indicators and investor confidence. However, data indicates a growing number of Ethereum investors committing to holding ETH for an extended period, likely fueled by the anticipation of substantial future value appreciation.

Long term holders, characterized by their reluctance to sell during market volatility and price declines, play a crucial role in sustaining blockchain health, contributing to stability and mitigating price fluctuations.

History Repeats Itself

Ethereum has previously surpassed Bitcoin in this metric only once before, and it is noteworthy that during that instance, ETH went on to maintain leadership in this category over the subsequent months. Conversely, other metrics reveal that Bitcoin still maintains superiority over Ethereum in terms of profitability. Presently, nearly all BTC addresses show profitability at the current price, compared to ETH addresses which do show profitability albeit to a lesser extent.

In any case, the heightened profitability of Bitcoin is attributed to a significant number of early BTC assumed to be permanently lost. Consequently, the metric indicating holders who purchased at the current price places Ethereum ahead of Bitcoin.

The Cosmos community has given the green light for a substantial allocation of more than 975,000 ATOM tokens to create the ATOM Accelerator DAO (AADAO), representing a significant advancement in the development of the Cosmos ecosystem. This endeavor aims to establish a durable, community owned entity dedicated to fostering and progressing the Cosmos Hub and its intrinsic ATOM token.

Formation Of The ATOM Accelerator DAO

The ATOM Accelerator DAO is positioned as a cornerstone within the Cosmos ecosystem. Endowed with a substantial fund of 975,811 ATOM tokens, the AADAO is uniquely positioned to lead projects and initiatives that will fortify the Cosmos Hub. Its focus transcends immediate advancements, laying the foundation for sustainable, long term success.

The creation of the AADAO unequivocally signals the proactive stance of the community in shaping the future of the Cosmos network. By establishing a fully funded and community governed DAO, Cosmos takes significant steps towards a more inclusive and decentralized operational and decision making model.

Objectives And Impact of the AADAO

The primary goal of the AADAO is to stimulate innovation within the Cosmos ecosystem and drive the adoption of the ATOM token. This objective will be accomplished through strategic funding and resource allocation to projects and ideas aligning with the broader vision of the Cosmos Hub. The DAO aims not only to support existing projects within the ecosystem but also to attract fresh talent and ideas, cultivating an environment of continual innovation and development.

The anticipated impact of the AADAO is extensive. By providing a dedicated platform for funding and support, the DAO will play a pivotal role in expediting the growth of the Cosmos ecosystem. This includes augmenting the utility and market presence of the ATOM token, thereby fortifying its standing in the broader cryptocurrency market.

Finally, the long term vision for the AADAO is to forge a self sustaining and robust organization that not only supports the Cosmos ecosystem but also contributes to the broader blockchain and crypto industry. With a focus on innovation, adoption, and community governance, the AADAO is poised to become a pivotal player in advancing decentralized technologies and applications.

Decentraland (MANA), introduced in 2017, is an Ethereum (ETH) based virtual reality platform reshaping digital spaces through decentralization. Users not only interact with content but also influence and monetize it using unique digital assets, namely the LAND and MANA tokens. Decentraland was also among the first platforms to truly utilize the metaverse concept to its fullest potential.

The Evolution Of Decentraland

As such, Decentraland has had a very interesting journey thus far. It was a very simple Stone Age concept in 2015 but has now evolved to an envisioned Iron Age, demonstrating innovation and user empowerment. The technical infrastructure relies on blockchain for LAND ownership, decentralized storage systems, and a real time layer for immersive interactions.

Moreover, the economic model revolves around the LAND and MANA tokens, facilitating transactions and digital land acquisition. Within the virtual world, the economy encourages users to create, trade, and engage in various commercial activities, reflecting the overall vision of Decentraland which is the formation of a fully self sustaining virtual space.

Heading Into Web3

The Decentraland whitepaper outlines a vision of a decentralized virtual world where users are creators and entrepreneurs. Despite its evolution, Decentraland remains committed to its initial goal of establishing a decentralized virtual domain, showcasing dedication to cutting edge technology and community driven development.

However, the platform faces challenges in managing decentralized content distribution and scripting. Robust technology is crucial to address logistical complexities and ensure a seamless user experience. Still, with the world becoming increasingly digitized and pivoting toward a Web3 era, it could only be a matter of time before platforms like Decentraland are incredibly commonplace.