Market
The approval of the BTC spot ETF on January 10 marked a watershed moment for the crypto industry. This move signaled the beginning of mainstream crypto adoption, providing investors with a regulated and secure means of gaining exposure to the leading cryptocurrency. It occurred right around the 15-year birthday of Bitcoin, representing a long overdue recognition of Bitcoin's transformative impact on the financial landscape.
Many “buy the rumor, sell the news” predictions on the BTC price around the approval date have indeed played out in the market. The Jan 9 SEC Twitter incident acted as a dress rehearsal, as the fake news lifted the BTC price to close to $48,000 but the market quickly sold off afterwards. The official announcement came out right before market close on Jan 10, and the market reacted positively at the opening on Jan 11, sending BTC to its post-FTX ATH of $49,000. However, the rally was short lived and within a day, it had tanked almost 15% by the end of Friday.
The short-term BTC price movement will depend on how the 11 ETFs are gathering assets and whether they can meet some of the lofty expectations predicted by the street. According to Bloomberg, in the two trading days since the spot ETF launch, there is $3.6B trading volume, and $818M net inflows into the ETFs. While impressive, BITO, the first futures-based ETF, also gathered $550M in its first trading day, indicating strong interest from mainstream when BTC was trading around its ATH level above $61,000.
We expect fierce competition among the 11 issuers to sell the ETFs. Given it’s a single-asset fund with a new but controversial asset, we believe marketing will play a very big role, especially when selling to self-directed, young investors. We see issuers picking memorable ticker names and launching interesting ads. For the majority of institutional investors and wealth management platforms, larger issuers with long track record and established relationships have an edge and will focus on the fee, execution and quality of the service. These investors will bring significant assets to the BTC ETF, especially if their model portfolio makes an allocation, but that will take time. On the other hand, many issuers are offering “fee discount” in the first 6 months or for the first few billion assets, which could mean front-loaded inflows from retail, as long as BTC price shows resilience.
Amidst the Bitcoin-focused excitement, another noteworthy development unfolded as the ETHBTC ratio reached new highs. This surge in the ETHBTC ratio suggested growing interest in Ethereum, as investors look to rotate down the risk curve. ETH has underperformed both BTC and SOL in 2023. As we mentioned in the last weekly, the critical tech upgrade in ETH and the spot ETH spot ETF approval deadline coming in May 2024, will spur a new wave of interest and capital into the Ethereum ecosystem.
While micro events could dictate the price action and investors’ attention in the short term, let’s not forget about macro factors. Inflation edged up in December, while the employment report shows wage increase faster than expected. The 10Y treasury yield briefly rose above 4% on Jan 5 before coming back down to 3.94%. The futures market still indicates a 77% chance of a 25bps rate cut in March, which sounds aggressive in our view.
DeFi Update
Since the meteoric highs of 2021 and subsequent crash in 2022, Web3 gaming, on the whole, has been in build mode. Now, in 2024, we are witnessing those efforts bearing fruit with the emergence of a new generation of Web3 games. These games are built upon the lessons of the past and leverage fresh blockchain and graphics technologies to create efficient, high quality games with thoughtfully designed ecosystems.
There are 3 drivers shaping 2024 to be the year for Web3 Gaming:
Capital: Good games take anywhere from 1-3 years to build. The vast amount of venture capital invested in the gaming sector (thanks to the 2021 gaming bubble) will start to bear fruit.
Blockchain technology: With the development of faster and cheaper blockchain infrastructure, blockchains can be optimized for Web3 gaming development. We also see platforms such as Immutable X, Beam, etc. emerging that provide not only the infrastructure but also developer tooling, UX, liquidity and user network to support a thriving gaming ecosystem.
Mainstream adoption: According to the BGA Web3 Gaming Survey, Web2 gaming studios developing Web3 games will have the biggest positive impact on the Web3 gaming industry. Happily, we see that already happening. Among the top 40 gaming studios, 7 of them already have blockchain games, and an additional 22 of them have blockchain initiatives.
Furthermore, 41% of the Web3 gaming players are leveraging Web2 platforms for distribution, aiding them in mainstream adoption.
If 2021 is the summer for DeFi and 2022 is the summer for Alt L1s, we believe 2024 is increasingly shaping up to be the summer for Gaming. Stay tuned for more gaming insights from Decentral Park Capital!
Top 7d Gainers and Losers
Top 100 MCAP Winners
Ethereum Name Service (+80.37%)
Sui (+58.75%)
Ethereum Classic (+44.84%)
BONK (+40.96%)
HNT (+40.21%)
Top 100 MCAP Losers
Klaytn (-18.00%)
RUNE (-7.20%)
Oasis Network (-4.81%)
Injective (-4.60%)
Akash Network (-4.46%)
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.