A look back at November: crypto boosted by ETF approval optimism

Dec 1, 2023 – Crypto markets ended in positive territory in November, supported by both macroeconomic and regulatory news. The US Federal Reserve (Fed) signaled on several occasions that its rate cycle may have peaked, to the joy of many investors. Pro-crypto winds also blew over Argentina, with the presidential victory of Javier Milei.

There were also numerous encouraging signs of the approval of the spot Bitcoin exchange traded fund (ETF) applications filed by 12 leading asset managers in the US by early next year. Billions of US dollars are forecast to flow into these ETFs within weeks of their approval, thereby driving the price of Bitcoin higher.

Inflows into the crypto universe so far this year now exceeded 2022’s. The monthly cryptocurrency exchange volumes rose to 806 billion US dollars in November – the highest level since March when several crypto-related banks collapsed in the sector, data from the Block shows.

Meanwhile, the US regulators have flexed their muscles against the world’s largest exchanges during the past month. The founder and CEO of the now bankrupt FTX crypto exchange, Sam Bankman-Fried, was found guilty on all seven charges against him and faces a lifetime in jail, while Binance agreed on a record 4.3 billion dollar fine to resolve the criminal charges brought by US regulators. A second enforcement action was also brought against Kraken in the US.

Bitcoin hits year-high, spurred by ETF fever

Bitcoin hit a year high during the month at 38,407 dollars. The largest cryptocurrency is still 44 percent below its all-time high reached in 2021. It’s worth noting that a majority of the Bitcoin supply has not been traded over the past 12 months, according to data from Glassnode. This limited liquidity is partially behind Bitcoin’s recent price rally.

But the main driver has been sparked by signals that the Securities and Exchange Commission (SEC) will approve the spot Bitcoin ETF applications on its table in one go by Jan 10, when the first deadline lapses. (Read more about the SEC’s lengthy handling of the ETF applications here). Spot ETFs hold the actual underlying asset, in this case Bitcoin, contrary to futures ETFs that provide exposure to it through futures contracts predicting the asset’s future price.

In November, the SEC met with the asset managers to discuss the changes made to their applications, in order to address the regulator’s concerns about the risk of market manipulation and fraud, and lack of investor protection. A 13th asset manager, Switzerland-based Pando Asset, joined the 12 assets manager when it filed its ETF application on Nov 29.

“We still believe 90% chance by Jan 10 for spot #Bitcoin ETF approvals. But if it comes earlier, we are entering a window where a wave of approval orders for all the current applicants *COULD* occur,” said Bloomberg’s ETF analyst James Seyffart. It would then take a couple of weeks before their launch, taking us to February or March. Valkyrie’s Chief Investment Officer Steven McClurg expects inflows into these ETFs around 50 billion dollars over the first five years.

Bitcoin rose 11 percent during the month, trading at around 38,230 dollars, in line with leading stock market indices such as Nasdaq, up 11 percent, and the S&P 500, up 8.9 percent. The world’s largest crypto currency outperforms stocks by a wide margin, being up 131 percent since the beginning of the year, while Nasdaq is up 46 percent and the S&P 500 up 21 percent.

MicroStrategy is among the main beneficiaries of this price rally. The listed company with the largest Bitcoin holding raised its holding to 174,530 Bitcoins during the third quarter. On Dec 1, The unrealized average gain is estimated at roughly 1.37 billion dollars. 

“Once #bitcoin pushes past $40-50k, regular people will begin to wake up – feeling like a giant bullet train is whizzing by their doorstep,” the founder of Adamant Research, Tuur Demeester forecast.

Ethereum boosted by equivalent ETF filings

Ethereum also recorded a strong performance during November, as BlackRock and then Fidelity – two of the world’s largest asset managers – registered their applications for a spot Ether ETF with the SEC. “This development could significantly influence Ethereum's market dynamics and the wider altcoin ecosystem,” Glassnode wrote in a research note.

The price of Ether soared X percent during the month, trading at 16 dollars, and is now up 75 percent since the beginning of the year.

Separately, the Ethereum blockchain accounted for roughly 90 percent of the layer-1 (L1) revenues during the third quarter, Messari’s quarterly report on the state of the L1 shows. L1 blockchains provide the basic infrastructure and security that Layer 2 (L2) blockchains need to function.

Binance settles a record fine with US regulators – CEO fired after admitting fraud

Binance was fined 4.3 billion dollars by the US Department of Justice (DOJ), the Treasury as well as the Commodities Futures Trading Commission (CFTC) on Nov 21. More than 100,000 transactions supporting terrorism, drug dealing and violating sanctions imposed by the US have been traced to Binance. The crypto exchange’s CEO, Changpeng Zhao (CZ), stepped down with immediate effect after having pleaded guilty to the money laundering charges.

CZ faces a prison sentence of a maximum of 18 months given he waived his right to appeal and has been barred from leaving the US – at least temporarily. A sentence hearing is scheduled for Feb 23. He is also sentenced to a 50 million dollar fine and barred from returning to Binance during a three-year period. Footballer Cristiano Ronaldo has meanwhile been sued in the US for his high-profile collaboration with Binance.

Binance’s Global Head of Regional Markets, Richard Teng, took over the reins of the world’s largest crypto exchange. Binance saw outflows of roughly 1.7 billion dollars in the 24 hours that followed the settlement, the data provider Nansen said. Binance’s total holding value stood at 65.5 billion dollars on Dec 1, Nansen data shows. Teng announced he wants to drive growth and the adoption of Web3 to build an ecosystem that provides access to world-changing financial technologies.

The Filipino SEC issued a stark warning to its residents on Nov 28, reminding them Binance is not registered nor an authorized crypto exchange, threatening people promoting or enabling Binance with both fines and jail.

Binance Coin, the fourth largest crypto currency, added 2 percent during the month, but is down 7.1 percent since the beginning of the year, underperforming its peers. Binance nevertheless remains the world’s largest crypto exchange.

Ripple’s XRP cleared by Dubai’s regulator & Solana, Chainlink, Avalanche outperform

The Dubai Financial Services Authority (DISA) has approved Ripple Lab’s cryptocurrency XRP for use within its financial center, following the earlier approval of Bitcoin, Ether and Litecoin. Ripple has also teamed up with the African fintech Onafriq to facilitate digital asset cross border payments between Africa and the Gulf region, the UK and Australia. XRP, the fifth largest cryptocurrency added 4.2 percent during the month.

Solana is the top performer among the ten largest cryptocurrencies, up 60 percent in November. The CEO of ARK Invest, Cathie Wood, hailed Solana, the sixth-largest crypto currency, as being even faster and more cost-effective than Ether.

Chainlink, the 12th largest crypto currencies also outperformed in November, being up 33 percent on the release of its staking v0.2, while Avalanche, the 13th largest crypto currency, rallied 103 percent during the month on news that JP Morgan and Citigroup will leverage Avalanche’s Evergreen Subnet.

SEC slams yet another enforcement action against a crypto exchange

Following charges against Binance and Coinbase, the SEC launched another enforcement action against the crypto exchange Kraken. Ten months after a settlement where Kraken agreed to halt all its staking services and pay a 30 million dollar fine, the SEC charged Kraken with operating a crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency. Cardano, Solana and Polygon are being considered as securities in the filed lawsuit.

The regulator’s crack down on the US financial markets, and the crypto universe in particular, turns out to be highly lucrative for the US state, with roughly 5 billion dollars imposed in financial remedies in its fiscal year ending in Sept 2023. This figure includes fines imposed on non-crypto companies.

Tether’s market cap reaches an all-time high – Circle plans IPO next year

The market cap of the world’s largest stablecoin Tether reached an all-time high in November, now totalling 89.4 billion US dollars, far ahead of USDC with a market cap of 24.5 billion dollars. The issuer of the stablecoin USDC, Circle, plans an initial public offering next year. Tether plans to acquire stakes in existing Bitcoin miners or build its own mining facilities in Uruguay, Paraguay and El Salvador for a total of 500 million dollars. The company also had to freeze a record amount of USDT (225 million dollars) as links to human trafficking in Asia emerged.

Meanwhile, governments show an increased interest in stablecoins as the Bank of England (BoE) and the Financial Conduct Authority (FCA) released a discussion paper setting out rules for systemic payment systems using stablecoins, focusing on those pegged to the British pound. The Singaporean equivalent granted an in-principle approval to three stablecoins, one pegged to the Singapore dollar and the others to the US dollar.

CBDCs pilot schemes launched in Asia

When it comes to central bank digital currencies (CBDCs), China currently tests its digital yuan in 26 regions, while South Korea announced its pilot digital won scheme would be launched at the end of 2024.

Eleven countries, including Bahamas, Jamaica, and Nigeria have already introduced CBDCs. And more than 100 countries are in the exploration stage, according to the Atlantic Council’s CBDC tracker.

Crypto taxation transparency alignment planned

Forty jurisdictions including the US, Germany, France, Switzerland, South Africa and the UK agreed to implement the OECD’s Crypto-Asset Reporting Framework (CARF), which is a tax transparency standard, aiming at ensuring tax compliance and clamping down on tax evasion. In the US, nine Congress members criticized the planned national crypto tax rules, alleging  they will threaten the digital asset US ecosystem due to their breadth and “unworkable” definitions.

Crypto fever grips France

Nearly a 10th of the French population owns crypto assets, according to the French market supervisor AMF. Only 2 percent own ETFs, while 7 percent own stocks. Half of these investors have entered the markets since 2020.