Profit Rotation is BTC’s Next Narrative

Good morning. Here is what happens:

Prices: Amid Bitcoin’s Role Debates and Halving Concerns, Bitcoin and Ether Are Starting Flat in East Asia; Data from Cobo points to a recovery in market confidence and Bybit links memecoin’s surge to reinvestment, warning of mining impacts if Bitcoin fails to stabilize above $30,000 after the halving.

Knowledge: Reduced bitcoin congestion impacted altcoin rallies and demand for BRC-20 tokens led to high fees and increased miner revenue with no new users, possibly altering bitcoin’s relationship with ether and its market dynamics.

Both bitcoin and ether start the trading day in East Asia flat, with the world’s largest digital asset down 0.6% at $27,037 and ether up 0, 4% to $1,824.

According to Asset Under Custody (AUC) data from Cobo, an institutional custodian, confidence in the cryptocurrency market bottomed out in February 2022, followed by a rapid recovery starting in March. Cobo’s AUC has already rebounded to November 2022 levels, indicating funds are returning to the market, the company shared with CoinDesk in a note.

“The recent surge in memecoins that has occurred alongside a decline in general interest in crypto (measured by Twitter and YouTube Analytics), suggests that these inflows are likely the result of investor profit rotation from strong year-to-date crypto performance,” Charmyn Ho, head of crypto insights at Bybit, said in a note to CoinDesk.

Ho wrote that there could still be room for further depreciation and that these ranges represent attractive accumulation areas for long-term HODLers.

Meanwhile, macroeconomics continues to be the defining part of bitcoin’s story. But there is a debate over whether bitcoin is a store of value or a hedge against risk, which will not be resolved any time soon.

Then there is the halving. Expected in early 2024, it is believed to be the next chapter in the price narrative. But Cobo CEO Mao Shixing disagrees.

“From an economic perspective, the bitcoin halving does not currently play a significant role, but it makes good narrative sense,” he told CoinDesk in a note.

One thing to consider, he noted, is the impact this could have on miners.

The S19 mining machine remains the dominant choice for miners. However, he told CoinDesk, if the coin’s price does not stabilize above $30,000 after the next halving event scheduled for next year, these mining machines will inevitably have to stop mining. function.

Bitcoin clears the stack of unconfirmed transactions, but it’s still at record highs

This easing cut the wind from the rally in counterfeit bitcoins, bitcoin cash (BCH) and bitcoin SV (SBV). The two rallied last week as congestion on Bitcoin saw investors pour money into alternatives. Bitcoin continues to maintain its 1MB block size. In contrast, Bitcoin Cash and Bitcoin SV have expanded their block sizes to 32MB and 128MB, respectively. Therefore, these two protocols offer significantly lower transaction costs than the Bitcoin protocol.

With the episode over, we can take a look back at the final tally of fees paid during Bitcoin’s ordinal rally, as noted by Glassnode, which are huge.

The increase in demand for block space due to BRC-20 tokens has led to particularly high fees, with the average fee per block exceeding the subsidy per block for only the fifth time in Bitcoin’s history. This brought total daily fees to an all-time high of $17.8 million per day and resulted in an additional $100 million in revenue for miners, increasing revenue for paying miners to 11.5%, Glassnode wrote. .

Meanwhile, this resulted in a record number of transactions, reaching a new all-time high of 682,000, a 39% increase from the peak in 2017.

But does it attract new users? Not really. Despite the increase in transaction activity, the number of active addresses has decreased, indicating a tendency for BRC-20 users to reuse Bitcoin addresses.

A question on the minds of many is whether the introduction of BRC-20 powered tokens and NFTs on Bitcoin will transform the relationship between bitcoin and ether into something different.

As CoinDesk previously reported, the 30-day rolling correlation between bitcoin and ether prices fell to 77%, the lowest since 2021, indicating a possible long-term decoupling of the two largest cryptocurrencies. .

This weakened correlation could boost trading activity for bitcoin-ether pairs on major exchanges, creating new opportunities for traders to capture the relative value between the two without involving the dollar.

Or, for the Bitcoin narrative, is it just an annoyance or actually a big change?

Landmark new crypto rules were approved by European Union (EU) finance ministers on Tuesday. Laura Douglas, senior partner at Clifford Chance LLP, joined “First Mover” to discuss the significance. Separately, the crypto markets remained fairly calm as bitcoin (BTC) and ether (ETH) prices were trading below their 20-day moving average. 3IQ CEO Fred Pye shared his outlook on the crypto markets. And LandVault CEO Samuel Huber explained how partnerships are shaping up in the metaverse amid the crypto winter.

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