Crypto markets surging to the upside after a quiet start to the week

What happened this week

Quiet start to the week

After a quiet weekend, BTC closed the previous week at $42’570, culminating the week with a commendable performance of +1.3%. ETH closed the week at $2’290, achieving a weekly performance of +1.4%.

In the realm of Traditional Finance, the outcome of last week's news on tech stock earnings yielded an overall positive outlook. Tech companies, collectively, presented positive financial metrics that surpassed expectations. Consequently, the Nasdaq and S&P indices achieved all-time highs last Friday.

On the first days of the week, the crypto markets were rather quiet, with LINK being the exception, reaching a 22-month high early in the week.

On Tuesday, the news broke that the Solana network experienced a significant outage, leading to a block progression halt. Despite the outage, the price of SOL only dropped slightly by around 2.5% below $94 and has recovered since, trading above $105 today and likely closing the week in the positive.

Michael Saylor announced on Tuesday that MicroStrategy acquired an additional 850 BTC for $37.2 million and now holds 190’000 BTC. Interesting to note here is that the nine new Bitcoin ETFs have now reached almost the same level of BTC holdings as MicroStrategy, accomplishing this in less than 30 days.

New 4-week high for BTC

On Wednesday, BTC surged past $44’000, marking its highest point in four weeks. This increase aligned with substantial accumulation of BTC through spot ETFs and new highs in U.S. equity indices.

ETH surged above $2’400 for the first time in two weeks, propelled by renewed optimism surrounding spot ETFs, as asset managers Ark Invest and 21Shares amended their application to permit cash creations, aligning it more closely with the recently approved spot bitcoin ETFs. The updated filing also hinted at the potential inclusion of staking some of the fund's tokens to generate rewards.

In the TradFi markets the S&P 500 achieved a new record close, nearly reaching the 5’000 threshold. The Dow Jones approached its all-time high, while the Nasdaq Composite edged closer to its own record high.

On Wednesday, the news of Fidelity now allocating 1-3% spot Bitcoin to their ‘All-in-One’ Conservative ETF came out, which seems to have sparked further positive sentiment in the markets.

Further BTC price increases over night

Yesterday, Bitcoin surged past $46’000 trading at $47’450, the highest price since January 12th, the day after the Bitcoin spot ETFs launched. Bitcoin is up 11.5% for the week, which is the highest weekly increase since the beginning of December 2023. It has yet to be seen how the weekly candle closes on Sunday night. This increase in Bitcoin’s price comes alongside an increase in market dominance, accounting for over +51.9% of the crypto market.

ETH and other major altcoins have also profited from Bitcoin’s surge with ETH trading at $2’500, reaching a new monthly high but still trading well below its January high at around $2’700. A major outperformer among the realm of altcoins is Dymension, DYM has been airdropped to various groups of stakers (e.g., Celestia), Solana DeFi users and ETH layer-2 users. Alongside the surge in DYM, TIA the native token of Celestia has reached a new all-time high at almost $21, likely profiting from the airdrop hype.

The outflows from Grayscale’s GBTC has once again decreased on February 8th, with Grayscale transferring BTC worth approximately $67 million, according to Arkham. The decrease in outflows is potentially a reflection of a change in sentiment.

Crypto Fear & Greed Index, the Bitcoin Halving & the Dencun upgrade

The Crypto Fear & Greed Index is increasing in line with the crypto markets, sitting in Greed levels at 72, the highest level since January 12th, after a period of a little more uncertainty with the index reaching numbers below 50 at the end of January for the first time since mid-October of last year.

While the whole cryptocurrency sphere is still mainly focused on the developments with the spot ETFs, the Bitcoin halving is inching closer with 70 days left until the halving, projected to take place on April 19th, 2024.

Before the halving, the Ethereum community is patiently waiting for the much-anticipated Dencun upgrade, which is projected to happen mid-March and is designed to reduce costs for layer-2 transactions and data availability on Ethereum.

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Our take

Over the past few weeks, a predominant focus has been on the inflows and outflows from the newly approved BTC spot ETFs in the United States. While the outflows, particularly from Grayscale's ETF, appear to be tapering off, thereby alleviating selling pressure on the spot markets, market activity was relatively subdued in the initial half of this week. However, towards the middle of the week, the market sentiment turned positive, with BTC trading comfortably above the $46'000 mark. This uptrend can be attributed to the diminishing ETF sell-off and favorable developments in the crypto sphere, such as the anticipated Dencun upgrade on Ethereum, which promises reduced transaction fees, further bolstering the positive trajectory of crypto assets. Moreover, there's speculation that Bitcoin and cryptocurrencies, in general, experience upticks around the Chinese New Year, potentially contributing to the prevailing positive sentiment.

Looking ahead, we expect an increase in volatility in the coming week, as the latest Consumer Price Index (CPI) figures in the United States are set to be released. These CPI numbers will provide market participants with valuable insights into what to expect regarding the Federal Reserve's interest rate decision in March. Thus far, the prevailing sentiment has been bullish, as major stock exchanges have been hitting all-time highs nearly every day since last week. With the upward momentum in traditional finance complemented by the positive momentum in the crypto space, there are currently no indications suggesting that this trend will reverse in the coming days.

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The week ahead

Monday, 12 February 2024

• China - Holiday, Chinese New Year

Tuesday, 13 February 2024

• China - Holiday, Chinese New Year
• Switzerland - CPI
• U.S. - CPI, core CPI

Wednesday, 14 February 2024

• China - Holiday, Chinese New Year
• U.K. - CPI, core CPI
• EUR - GDP

Thursday, 15 February 2024

• China - Holiday, Chinese New Year
• Switzerland - PPI
• U.S. - Initial jobless claims
• U.S. - FOMC member Bostic speaks

Friday, 16 February 2024

• China - Holiday, Chinese New Year
• U.S. - PPI, core PPI
• U.S. - FOMC member Daly speaks