Bitcoin rose more than 6% on the week but that came after the coin crashed by $4,000 on the anniversary of the first-ever Bitcoin block.
The so-called Genesis Block occurred on 3 January 2009 and this time around traders were spooked by rumors that the Securities and Exchange Commission could strike down BlackRock’s ETF application. Bitcoin soared more than 100% in 2023 and will have to maintain some momentum or risk losing a chunk of those gains.
One prominent crypto executive fears BTC could drop by 20-30% by March as Federal Reserve stimulus dries up.
“I am preparing for a vicious washout of all the crypto tourists in March of this year,” Arthur Hayes wrote. “I loaded up on crypto in the second half of 2023, and I believe now until April is a no-trade zone in terms of the addition of risk.”
A drawdown of the Federal Reserve’s reverse repo program (RRP), where large banks and investment firms can park cash and earn interest, has been a big tailwind for risk assets in the last year, with investors taking cash from the facility and investing it.
However, the balance of the RRP is rapidly decreasing with the total at $700 billion, down from a record high of $2.5 trillion at the end of 2022. Hayes is now predicting that it will reach its historical average of $200 billion by around March.
“When this number gets close to zero…, the market will wonder what is next,” he said. “Without any other new sources of dollar liquidity, bonds, stocks, and I believe crypto will also get the stick.”
“The combination of a lack of liquidity gushing from the RRP and the lack of printed money to cover the bond losses on the non-TBTF too big to fail banks’ balance sheets will decimate the financial markets globally,” he said.
However, he did finish his speech with a positive, saying:
Bitcoin initially will decline sharply with the broader financial markets but will rebound before the Fed meeting. That is because bitcoin is the only neutral reserve hard currency that is not a liability of the banking system and is traded globally.
Bitcoin recovered from the losses to push into the $45,820 level and the chances of further gains this year are high.
The Bitcoin ETF “arms race” is heating up and investors expect to see the SEC approve the first spot BTC fund this week. Fidelity and Mike Novogratz’s Galaxy/Invesco ETF have already indicated how pricing will look with Fidelity setting a fee of 0.39%, while Galaxy set its fee at 0.59%. Bitwise, VanEck, BlackRock, and Franklin Templeton are among the other ETF applicants.
Ethereum lost ground this week after validator staking exits surged to an all-time high.
An exit waiting list for Ethereum validators jumped to over 16,000 on Friday, while it was only 26 the previous day, according to blockchain data from validatorqueue.com. The line represents more than $1 billion worth of staked ETH at current prices, but the large backlog means it could take more than 5 days for that ETH to return funds to depositors.
Celsius, the crypto lender that filed for bankruptcy in 2022, is now in the process of restructuring and is being blamed for the current delay.
The price of ETH is pushing toward the $2,350 level and could see further gains this week.
Akash Network was one of the market leaders in the last week with an 18% gain.
Akash is now at number 91 in the list of coins by market cap with a valuation of $660 million.
Hosted on the Cosmos blockchain, Akash Network is an open-source, decentralized cloud computing platform offering a different take on cloud solutions. The network increases price-performance and scalability for decentralized applications and organizations through the deployment of any cloud-native application.
The Cosmos SDK, a layer 1 protocol, underpins the Akash platform and uses a Proof-of-Stake consensus process and a network of decentralized validators to ensure network integrity.
AKT soared from $0.80 in late 2023 to trade at $3.00 with support clustered in the $2.00 area and upwards.
Celestia (TIA) jumped to new highs this week with a $2.17 billion market cap and a place in the top 50 coins by market cap.
Celestia was on the rise after a collaboration with Polygon. The two projects are partnering to integrate Celestia’s data availability layer with Polygon’s Chain Development Kit. It will mark a new advance in Layer 2 projects and fend off competition from OKX, Immutable, IDEX, and Palm Network, which are also part of Polygon 2.0.
“Combined with interoperability and unified liquidity provided by Polygon 2.0, Celestia’s out-of-the-box solution will make creating new L2 chains as simple and affordable as deploying a smart contract,” Polygon co-founder Sandeep Nailwal said.
The price of TIA has climbed over the last year and is showing buyer support at $12.00.