Bitcoin

Bitcoin has experienced another week of volatility, managing to maintain support at $65,000 before climbing above $72,000, approaching its all time high. This upward trend led to the liquidation of over $58 million in short positions within a single day, as traders who bet on a decline in Bitcoin's lost. Across the wider cryptocurrency market, this movement resulted in more than $121 million in short positions being liquidated.

Bitcoin Weekly Price Chart

The momentum behind this surge is difficult to overlook, especially with the Bitcoin halving event now just 10 days away, which has stirred a bullish sentiment and a sense of urgency among investors. The Bitcoin Fear and Greed Index currently stands at 80, signalling a high level of 'extreme greed' within the market. This often goes hand in hand with a fear of missing out (FOMO) among investors, a psychological state driven by the anxiety of missing out on exciting or lucrative opportunities. While this sentiment can drive prices higher, it also opens the door for market manipulation, as larger players may exploit this collective greed and FOMO for their own advantage.

US Inflation Data

Crypto investors await the release of the U.S. inflation data for March, scheduled for Wednesday. The anticipation revolves around the potential impact of consumer price movements on the Federal Reserve's monetary policy. Should the inflation figures not show a significant decrease as anticipated, it could prompt the Federal Reserve to reconsider or delay any planned reductions in interest rates. More critically, it could also lead to the perception that the benchmark cost of capital will remain fixed at 5.5%. This would be a bearish result for both equities and Bitcoin as these asset classes tend to perform better when rates fall.

Bitcoin Mining Still Profitable After Halving?

The profitability of cryptocurrency mining, particularly for at-home miners, has come under significant scrutiny amongst the volatile market conditions. As Bitcoin surges towards a near all-time high, the challenge for smaller miners becomes increasingly pronounced. As the halving reduces miners' incoming supply by 50%, statements from individual miners have highlighted the financial strain. One miner indicated he will have "a break-even point at $70,000 post-halving", while another sets their sights on "$79,000 just to break even and $140,000 to sustain current profit margins".

This reality contrasts sharply with the position of top mining corporations, which continue to yield profits, highlighting the widening gap between large-scale operations and individual miners. This is because these large companies can mine Bitcoin at a much smaller cost basis compared to individuals, as they usually have very low cost of electricity (renewable) and equipment. One of the largest Bitcoin mining companies, Hut 8, claims to have been contacted directly by Wall Street banks interested in acquiring some of its Bitcoin. This is significant because its shows the interest of mainstream institutions who are taking the growth potential of bitcoin seriously.

The contrasting profits between individual miners and large mining corporations like Hut 8 Mining Corp highlight the evolving landscape of cryptocurrency mining. While at-home miners grapple with the financial feasibility of their operations, top-tier mining firms are not only remaining profitable but are also attracting attention from mainstream financial institutions.

Bitcoin ETF Flows

The Grayscale Bitcoin ETF (GBTC) has experienced a slight decrease in selling pressure, with an average weekly outflow dropping slightly to $267.9 million from the previous $275.5 million. Concurrently, the average net flows have also seen a decrease, coming in at $209.6 million, indicating a reduction in total volume over the week. In contrast, the Blackrock Bitcoin ETF (IBIT) continues to outpace its competitors in terms of net inflows, capturing $927.6 million in the last seven trading days (March 28 to April 8), marking an uptick from the previous week's figures.

Furthermore, ​​BlackRock has expanded the iShares Bitcoin Trust (IBIT) by adding five new authorised participants (APs), including prominent Wall Street firms like Goldman Sachs and Citigroup, raising the total to nine. This development, aimed at enhancing liquidity and attracting more investment, shows the trust's rapid growth. This is particularly interesting as the wealth manager of Goldman Sachs recently stated that they see “no value” in Bitcoin and have no desire in participating with the space.

Adding to the landscape, Harvest Fund Management and Southern Funds, through their Hong Kong subsidiaries, have recently filed applications with the Securities and Futures Commission (SFC) for Bitcoin ETFs. This move by two major China-based asset management firms, which collectively manage assets exceeding $200 billion, introduces fresh momentum into the market. Their entry through the Hong Kong subsidiaries for spot Bitcoin ETFs has sparked anticipation, potentially why we saw the renewed surge in Bitcoin's price.

Bitcoin ETF Flow Table (US$m)

Solana Congestion  

Solana has faced a challenging week, seeing an 11% decline in its value from $191 to $170, a significant dip in contrast to Bitcoin's upward price action. This downturn is primarily attributed to a critical bug causing significant network congestion, resulting in a 70% transaction failure rate. The Solana development team is actively working on fixing this issue, with a fix planned for deployment by mid-April. The network's growing popularity and the surge in transaction failures have been attributed to high activity and the exploitation by automated bots.

Austin Federa, head of communications at Solana, has pointed out that this scenario serves as an unprecedented stress test, identifying the problem as one of implementation rather than a fundamental flaw. Consequently, this has led to numerous Solana-based projects, such as Surge Finance and Sky Hause, postponing their launches and updates indefinitely until the network can reliably handle the increased traffic and operations can proceed smoothly.

Solana Weekly Price Chart

VC Funding

In Q1 2024, the landscape of venture capital funding experienced a shift. Overall fundraising volume saw a decline of 23% quarter over quarter (QoQ), yet the number of deals surged by 45%, reaching 720.

Notably, Eigen Layer stood out with the largest fundraising round of the quarter, securing $100 million in its Series B raise. EigenLayer has gained plenty of attraction in the last few months as it launched its restaking model allowing users to restake there Ethereum across multiple protcols. It recently passed over 13.3 billion in total value locked (TVL), marking it as the second largest protocol in terms of TVL after Lido. Eigenlayer allows you to earn more rewards on your staked Ethereum by restaking your eth and improving security on additional applications. Furthermore, today EigenLayer also announced its mainnet launch bringing more eyes on the project.

Fundraising by Stage

The rise in deals this quarter reflects a broader engagement across ventures, particularly at the early stages, where both the volume and deal count witnessed substantial growths of 73% and 53% QoQ, respectively. The quarter marked a significant uptick in pre-seed and seed investments, especially in March, indicating a growing confidence among VCs in investing in the next generation of technology built on the blockchain.

Fundraising by Sector

A closer analysis of the funding trends reveals a renewed interest in the real world asset sector, significantly propelled by Larry Fink's endorsement and support of the growing narrative, demonstrating the sector's potential to attract substantial investment. Meanwhile, exchanges and lending projects continued to dominate the funding scene, showcasing their central and critical role in the digital asset ecosystem.

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