A look back at January: Bitcoin at $43,000 as ETF fever faded away

Crypto markets presented a mixed picture in January, with Bitcoin edging higher following the long-awaited approval of spot Bitcoin exchange traded funds (ETFs), while smaller altcoins, including Binance Coin, Solana, Ripple Labs’ XRP and Cardano saw their prices fall during the month.

The price of Bitcoin hit a 12-month high on Jan 10 at 48,918 US dollars, when the Securities and Exchange Commission (SEC) approved 10 spot Bitcoin ETFs, more than a decade after a first filing was made. Thereafter, a typical sell on the news movement happened, putting pressure on Bitcoin and the other cryptocurrencies. Bitcoin lost 12 percent and ended the month up 1.7 percent at roughly 43,000 dollars.

The monthly cryptocurrency exchange volumes were unchanged at 1.1 trillion dollars in January compared to a month earlier.  

Bitcoin ETFs already the 2nd largest commodity ETF in the US

The SEC’s ETF approval gives both retail and institutional investors an easier access to Bitcoin. Their trading volume totaled 4.6 billion dollars on their first day on the New York Stock Exchange (NYSE), Nasdaq and the Chicago Board Options Exchange (CBOE) and nearly 10 billion dollars during their first three trading days – more than those of the 500 ETFs launched in 2023 combined.

BlackRock, the world’s largest asset manager, held 56,629 Bitcoins in their spot Bitcoin ETF on Jan 29. These are worth 2.44 billion dollars at today’s price. Meanwhile, Grayscale saw outflows of around 5 billion dollars from its competing Bitcoin ETF. GBTC, as it is named, was launched as a Bitcoin trust in 2013 and converted into an ETF in January. Fees imposed on GBTC are much higher than those of the nine competing ETFs.

“BlackRock + Fidelity bitcoin ETF AUM will pass GBTC AUM in a matter of weeks,“ the founder of the Bitcoin Layer, Nik Bhatia said.

The Bitcoin ETFs are now the second-largest ETF commodity in the US, ahead of silver and behind gold. Asset managers have already submitted applications for leveraged spot Bitcoin ETFs, as well as for options on the spot Bitcoin ETFs.

Venture Smart Financial Holdings, the first virtual asset manager approved in Hong Kong, aims to submit its application for a spot Bitcoin ETF with the island state’s regulator and launch it by the end of March. Singapore and South Korea take the opposite stance, banning their launch. Retail investors can still buy foreign spot Bitcoin ETFs through licensed financial institutions.

Spot Ether ETFs on their way & Dencun upgrade live

At least seven asset managers, including the world’s largest asset manager, BlackRock, have now filed applications to trade spot Ether ETFs with the SEC. Some analysts expect these ETFs to be approved by May 24, which is the final deadline for the first filed applications, those of VanEck’s and ARK Invest. Others don’t expect an approval prior to the US elections, so before next year.

The latest upgrade of the Ethereum blockchain, Dencun, went live on Jan 17. Its aim is to improve the blockchain’s efficiency. This should lead to a substantial reduction in transaction costs for decentralized applications (dApps) on Ethereum. The price of Ether rose 2 percent to 2,341 dollars during the month.

Ripple Labs IPO plans on hold as court battle against SEC drags on

Plans for an initial public offering (IPO) have been put on hold, the CEO of Ripple Labs, Brad Garlinghouse announced. The issuer of the cryptocurrency XRP has explored potential markets outside the US for this IPO, due to the hostile regulatory situation there.

Ripple is one of the many crypto players prosecuted by the SEC. The regulator amongst other things, demands that the company submits its financial statements for 2022-2023 and post-complaint contracts governing institutional sales to the SEC.

The price of XRP fell 17 percent to 0.5 percent during the month.

Crypto exchanges face both headwinds & tailwinds

The Indian Ministry of Information Technology blocked the websites of foreign centralized crypto exchanges, including that of Binance on Jan 12. In Thailand, Binance’s business is faring better with a regulated and licensed crypto exchange set up in a joint venture with Gulf Innova. Binance Coin lost 1 percent to 307 dollars during the month.

As for Binance’s legal issues in several jurisdictions, crypto investors seem totally unfazed. The world’s largest crypto exchange attracted more than 40 million new users last year, a 30% year-on-year increase. Its market share regained some ground during the month and reached nearly 50 percent, according to the latest available data.

In the US, a federal judge did not rule on Binance’s request for a dismissal of the SEC’s case against it following a hearing held on Jan 22. The regulator sued Binance back in June alleging the exchange, as well as its former CEO Changpeng Zhao (CZ), had violated securities laws, misled investors, corrupted trading volumes and much more.

Its competitor, Coinbase, faces similar charges. The largest US crypto exchange appeared at a separate court hearing in New York on Jan 17, where it also argued for a dismissal of the SEC’s case. The judge didn’t give a verdict here either.

Separately, the US-based crypto exchange Gemini obtained a digital asset service provider (DASP) license in France enabling it to cater to both retail and institutional clients.

Circle’s IPO & interest-bearing stablecoin are on their way

The issuer of the second-largest stablecoin USDC, Circle plans an IPO. A draft registration statement was filed to the SEC during the month. Separately, the crypto start-up Figure Technologies filed an application with the SEC to issue the first interest-bearing stablecoin.

In China, the authorities intensified their efforts to curb the use of cryptocurrencies, with a particular focus on stablecoins such as Tether (USDT), according to local media. The UN’s Office on Drugs and Crime went as far as warning that USDT is being widely used by criminals in Southeast Asia in pig-butchering scams where criminals randomly contact potential targets, gain their trust and then steal their crypto assets.

Tougher US crypto tax rules deferred & EU to sharpen AML transparency

In the US, the Internal Revenue Service (IRS) and Treasury delayed the implementation of new reporting rules with no further guidance given. Originally, all Americans receiving 10,000 dollars in crypto assets as part of a trade or business transaction would have been forced to declare this to the IRS within 15 days or risk criminal charges as of Jan 1.

In Europe, the European Council and European Parliament (EP) reached a provisional agreement on tougher anti-money laundering (AML) measures to include all crypto asset service providers (CASPs) when transactions amounting to 1,000 euros or more are carried out.

Investors returned to the cryptosphere in 2023, with inflows into crypto assets surging

The number of people investing in crypto assets reached roughly 600 million in 2023, up 34 percent compared to the previous year, boosted by the recovery of crypto assets and expected approval of the spot Bitcoin ETFs in the US, the trading platform Crypto.com reports.

Inflows into digital asset investment products reached 2.25 billion dollars in 2023, 2.7 times higher than in 2022, making it the third largest year since 2017, with Bitcoin being the greatest benefactor from this improving investor sentiment, data from CoinShares shows.

South Korea is one of the countries where the crypto fever holds the country in its grip. The trading volumes on the South Korean crypto exchanges Upbit and Bithumb now represent a 10th of the global volumes, though its population represents a mere 0.6% of the global population.

Meanwhile, total losses from hacks, phishing scams, and rug pulls in web3 more than halved during 2023, reaching 2 billion dollars compared to 4.4 billion the previous year. Successful hacks are down 61 percent, phishing 33 percent and rug pulls 9 percent, the blockchain security firm Beosin said in its annual report. Its competitor PeckShieldAlert confirmed this trend, reporting 600 major hacks last year resulting in losses amounting to 2.6 billion dollars. Roughly a quarter of these were recovered.