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A look back at February: Bitcoin approaches its all-time high

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Crypto markets extended their gains in February, boosted by stock markets reaching record highs and steady inflows into the nine spot Bitcoin exchange traded funds (ETFs) launched mid-January.

Bitcoin’s upcoming halving in April and the expected approval of spot Ether ETFs in May also supported the crypto sphere. Concerns about the financial health of some US regional banks triggered some investors to switch some their stocks to crypto assets.

In February, the monthly cryptocurrency exchange volume was around $1 trillion, somewhat below January’s $1.1 trillion.

Bitcoin approaches its all-time high on strong ETF demand, institutional interest

Bitcoin reached a 26-month high above $59,470 on Feb 28, approaching November 2021’s all-time high of $68,789. Experts mention four main catalysts behind this rally: the launch of the spot Bitcoin ETFs in the US, Bitcoin’s up-coming halving in the second half of April, increasing institutional acceptance, as well as regulatory developments in the US and EU.

As of Feb 26, the assets under management in the nine newly launched Bitcoin ETFs totaled roughly $16 billion, with BlackRock’s $IBIT ETF in the lead with more than $7.2 billion, followed by that of Fidelity’s $FBTC with more than 5.3 billion, data from BitMEX Research shows. If the assets under management of Grayscale’s Bitcoin ETF (which was formerly a Bitcoin trust) are included, the total figure reaches 40 billion dollars.

“It’s one of the best ETF launches of all time,” the President of 21Shares, Ophelia Snyder, told Bloomberg in an interview. To tap into this demand, some of the asset managers have further slashed their ETF fees.

BlackRock, the world’s largest asset manager, has reaped the largest part of this new market and held 132,282 Bitcoins on Feb 26, its ETF fact page shows. This compares to the 193,000 Bitcoins held by MicroStrategy, the listed company holding most Bitcoins. The enterprise software company upped its stake by 3,000 Bitcoins during the month. Its potential capital gain on this investment is worth around $5.4 billion on Feb 28. MicroStrategy now holds almost 1 percent of all Bitcoin that will ever exist.

Meanwhile, Fidelity, the world’s third largest asset manager, added a 1 percent Bitcoin stake to its All-in-One Conservative ETF, pointing toward an increasing institutional acceptance of crypto assets.

Upcoming Bitcoin halving also supports its price

The upcoming Bitcoin halving is expected to take place between April 18 and April 28, according to analysts. The rewards reaped by Bitcoin miners will be cut by half to 3.125 Bitcoin per mined block. Read more about Bitcoin’s upcoming halving here.

“Considering Bitcoin’s performance in the previous pre-halvings, the odds for another leg being higher are increasing,” the Head of Research at 10x Research, Markus Thielen said. “This time will be no different as the perception within the crypto community is high that the halving is bullish. This perception is undoubtedly flowing into the TradFi community, which is aggressively buying these Bitcoin ETFs ahead of the halving.”

However, two ECB officers remain unimpressed and wrote on the central bank’s blog that Bitcoin’s fair value remains zero despite the Securities and Exchange Commission’s (SEC) ETF approval in the US. The world’s largest cryptocurrency is not suitable as an investment as the asset does not generate cash flow, nor dividends, nor can it be used productively nor does it offer social benefits, they said. The price of Bitcoin rose 41 percent over the past month.

Ethereum’s Dencun upgrade confirmed for March 13

The upcoming upgrade of the Ethereum blockchain, referred to as Dencun, has been scheduled for March 13 by its core developers. The activation of the Dencun upgrade on Ethereum’s mainnet will make the data processing on the blockchain far more efficient, secure and  likely to cut the transaction costs (its gas fees) by as much as 90 percent. Read more about the Dencun upgrade here. Ether now trades at a 22-month high above $3,300 and is up 47 percent over the past month.  

Another factor driving its price are expectations that the eight spot Ether ETF applications being reviewed by the SEC will be approved on May 23. The Hong Kong-based asset manager Venture Smart Financial Holdings (VSFG) plans to apply for a spot Ether ETF in Hong Kong during the second quarter, conditional on the approval of its spot Bitcoin ETF during the first quarter.

Binance’s $4.3 billion fine greenlit by judge, sentencing of ex-CEO delayed

The $4.3 billion fine imposed by the US Department of Justice, Treasury and other regulators on Binance back in November on money laundering and sanctions charges was accepted by a Seattle-based court. This is among the heftiest criminal fines in US legal history. The exchange will be monitored over the next five years.

However, the fate of Binance’s former CEO, Changpeng Zhao (CZ) was postponed from Feb 23 to April 30. He faces a maximum 18-month sentence, given he pleaded guilty to the money laundering charges brought against him and has agreed to pay a $50 million fine, peanuts compared to his net worth valued at roughly 40 billion dollars, according to Bloomberg’s billionaire ranking.

The exchange faces other headwinds. Binance and CZ were sued by a group of families of victims who were murdered or taken hostage by the terrorist group Hamas on Oct 7. They seek damages under the US Anti-Terrorism Act. In India, the regulator dismissed Binance’s request to resume its Indian operations as it decided that Binance does not comply with the country’s anti-money laundering rules.

Binance has nevertheless managed to recoup market shares over the past months. Its market share in terms of volumes dropped during the month, to 52 percent on Feb 26 from 61 percent at the beginning of the month, Kaiko data shows. Binance Coin put on 33 percent over the past month.

Smaller altcoins also benefit from the positive crypto sentiment

The litigation involving the SEC and Ripple Labs continued, with Ripple being forced to disclose its financial statements for 2022-2023. Ripple Labs, the issuer of XRP, is accused of selling unregistered securities by the SEC. Separately, John Deaton, a pro-crypto lawyer that represents thousands of XRP holders, announced that he would run against the incumbent Democrat Senator, Elizabeth Warren, in Massachusetts. XRP added 12 percent over the month.

Uniswap rallied 79 percent over the month following the proposal of its governance forum to “upgrade the protocol such that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.” An on-chain vote will be held on March 8. Its v4 upgrade is scheduled for the third quarter now that the date for Ethereum’s Dencun upgrade has been confirmed to March 13.

Worldcoin reached an all-time high at $9.38 on Feb 25. The cryptocurrency backed by OpenAI’s founder Sam Altman has rallied since the text-to-video generating service Sora was launched during the month. Worldcoin, which was launched in July 2023, rose 210 percent during the month.

Crypto, one of the key issues in the ongoing US election campaign

Some 52 million Americans, if not more, own crypto nowadays and this may well affect the outcome of November’s presidential elections in the US. These voters are both younger and more diverse than the average US voter. The US crypto exchange Coinbase, Ripple Labs and venture capital firms are among the major donors to the political action committee (PAC), Fairshake, which supports pro-crypto politicians. Fairshake had raised 85 million dollars by early February.

Nigeria bans leading crypto exchanges, while China reinforces anti-crypto laws

Nigerian telecom companies have been told to block access to leading crypto exchanges by the country’s government. Binance, Coinbase, OctaFX are among the exchanges hit by this ban. Nigerian crypto investors thus turn to virtual private networks (VPNs) to circumvent the ban. In China, the overhaul of the country’s anti-money laundering (AML) rules will include even tougher measures against crypto-related transactions. China banned all crypto trading and mining in 2021, but investors use centralized crypto exchanges such as Binance or hold bank accounts abroad to circumvent it.

Bankrupt exchanges liquidate assets & see their managers extradited

The assets of the bankrupt FTX exchange founded by Sam Bankman-Fried will be liquidated. Clients will be fully reimbursed based on the value of their claims on the petition date. Meanwhile, Celsius Network emerged from bankruptcy in February and will distribute more than $3 billion of liquid cryptocurrency and fiat to creditors. Genesis Global Capital, another bankrupt company, has requested to sell off around $1.4 billion held in Grayscale Investment’s Bitcoin trust (GBTC) and its Ethereum fund.

As for Terraform Lab, a Montenegrin court ruled that Do Kwon can be extradited to the US, where its founder and CEO faces fraud charges. The company’s CFO was deported to South Korea, where Han Chang-Joon faces criminal charges, earlier during the month. Terraform Lab was behind the stablecoin TerraUSD and cryptocurrency Luna that both collapsed in May 2022.

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