The Market
Second week after the BTC spot ETF launch. BTC price is trending down, briefly touching $40,000 last Friday, discouraged by the strong outflows out of GBTC. BTC spot price is entering a new price discovery mode as we live with a world with spot ETFs and with halving approaching in April. The market seems to find support at $40,000 but struggles to break the resistance level of $43,500. The next move depends on how the spot ETFs are gathering assets and whether GBTC bleeding might slow down. More importantly, the FOMC meeting on Jan 30 will determine whether the macro environment can be supportive for risky assets.
On the spot ETF inflow side, beside the $200M initial seed capital for Bitwise’s BITB, the rest of the flow seems organic, with steady inflows to the top 5 issuers.
The initial flows are most likely retail-driven as it takes a bit of time for wealth management firms to approve the ETFs for their financial advisors to use. Unlike the crypto community where investors are mostly self-directed, the wealth management industry has many intermediaries that will go through various approval processes to get the spot ETF “approved” to be used on their platform. There is usually a checklist, and the approval could also come with restrictions based on the client's risk tolerance level. We expect small-mid sized RIAs to come online next as the approval process could be quicker, followed by wirehouses and private banks who tend to have longer processes. We expect small to mid-sized RIAs to come online next as the approval process could be quicker, followed by wirehouses and private banks who tend to have longer processes. If BITO flow can be served as a reference, in the first week of launch, it has gathered $1.2B of assets, which the collective suite of spot ETFs, at $3.9B already eclipsed. BITO continued to grow assets at a 32% rate in the first two months and slowed down as BTC price experienced a major correction. The good thing is mainstream flows are less sensitive to BTC price; we saw BITO share count doubled 8 months since inception, right when BTC price bottomed after the Terra-Luna crisis.
On the outflow side, Grayscale has seen ~$500M outflows a day for the past 5 days. It is estimated that $3B capital went into the GBTC discount trade. According to the most recent 13F filings (required for funds that hold more than $100M in assets), they collectively held ~17M shares of GBTC, a mere 3% of the total GBTC shares outstanding. If they all decide to liquidate, that is about ~$800M at the current BTC price level. We expect the outflow to slow down next week, as the quick money takes profit and exits GBTC.
The market could overreact to the ETF news and flow behavior in the short term. Although the price action has been more muted compared to the movement around BITO launch in October 2021 when BTC was around its ATH level and the Terra-Luna crisis that happened shortly after.
We still believe the bigger driver for BTC price is the macro with the January 30th FOMC meeting setting the tone for the ongoing monetary policy. The market has adjusted its optimism and assigns a <50% probability of March rate cut.
DeFi Update
Solana on-chain transaction volume has quietly eclipsed Ethereum since the beginning of this year according to Sonarverse on-chain data. The recent Solana Mobile Chapter2 sale has hit its 7-day sales target within 24 hours, and the 30,000 pre-orders in the first 30 hours has already eclipsed the 12 months’ worth of sales of Solana’s first handset, Saga.
The upcoming airdrops for some of the leading Solana projects in their respective categories are worth watching, indicating the Solana summer might have just started rather than fading:
Jupiter - leading Solana DEX aggregator announced the airdrop on Jan 31
MarginFi & Kamino - leading Solana borrowing and lending protocol have both launched points programs in preparation for future airdrops
Tensor - leading Solana NFT marketplace. The speculation that owning Tensorian NFTs could qualify Tensor airdrops has pushed the floor price 6X since last November.
Drift - leading perp DEX on Solana
The increasing stablecoin transfer volume on Solana indicated by Artemis also shows external capital coming to the Solana ecosystem, propelling further growth opportunities.
Our research analyst, Ben Harvey, has pointed out these new generations of DeFi protocols are getting smarter in designing user incentives. Following Blur’s success, many DeFi protocols are using the points system to give users points as rewards for future airdrops. On one hand, they have better control over what user behavior to encourage by assigning different scores; on the other hand, they can test and refine the efficacy of the incentive system before committing to an exact formula of how to give out airdrops. It is harder for investors to farm airdrops nowadays, but it’s better for the growth of the protocol as they are attracting real users who are willing to learn more about the product and test it out. We believe the points system will help DeFi protocols grow more efficiently and retain long-term users even when short-term incentives fade.
Top 7d Gainers and Losers
Top 100 MCAP Winners
Flare (+31.19%)
Pyth Network (+27.77%)
Siacoin (+26.29%)
Ronin (+23.88%)
Chiliz (+21.03%)
Top 100 MCAP Losers
Bonk (-22.59%)
SATS (-19.18%)
Arbitrum (-17.45%)
Sui (-16.51%)
Optimism (-16.11%)
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.