Data & Insights Recap - Bitcoin ETFs thrive, recent rally showing signs on-chain

Flow-MG

Source: etf.com

• Unless you’ve been living under a crypto-shaped rock for the past week, you’re likely aware of the fact that bitcoin came barreling past $60,000 last week for the first time in over two years. 
  • February of this year marked the largest monthly candle in the asset’s history, with bitcoin climbing roughly $20,000 in the shortest month of the year.  
• Unsurprisingly, a lot of this rally seems to be tied to the new spot bitcoin ETFs in the U.S., which continued to smash records last week.
  • On the 28th, BlackRock’s IBIT, which has been the most prominent of the new ETFs by volume and inflows, set a new record for just how much money had flowed into its trust at $520 million, only for that high to be surpassed the next day with $612 million pouring into IBIT at the month’s close. 
  • The flows into IBIT have helped it amass over $10 billion in assets under management, an impressive feat given that only roughly 150 out of 3,400 ETFs have reached that status, according to The ETF Store President Nate Geraci. It’s also the fastest ETF to reach that milestone. Other ETFs are also quite accomplished, with Fidelity’s FBTC boasting over $5 billion in AUM and 21Shares and Ark Invest’s ARKB and Bitwise’s BITB both sporting assets over $1 billion.
  • February 29th also marked a new peak for the net inflow across all the ETFs. The investor interest in the newer funds has been competing against outflows from GBTC, which is a trust converted to an ETF, granting the products’ existing shareholders a means of redemption. Since the conversion, GBTC has faced net outflow every day, which has sometimes overshadowed the inflows to the other ETFs. Despite over $200 million flowing out from GBTC on the 29th, a net of $673 million came in across the ETFs, bolstered by IBIT’s strong performance and coinciding with bitcoin continuing its run to its nearly $63,000 peak on Thursday. 
  • Volumes across the ETFs also surpassed launch day peaks, reaching $7.64 billion on February 28th. 
  • In a certain sense, it seemed like a self-fulfilling cycle: the spot bitcoin ETFs fueled investor interest, which helped push bitcoin’s price up, which then spurred more investor interest, and so forth. The upturn did not last forever, though, with bitcoin’s price pattering out around $61,000 coming into March after surging the final few days of February, but the asset has held on to most of its gains and began rising again today.
• Not everyone is optimistic about bitcoin’s future as an investment, though. Analysts at JPMorgan see bitcoin dropping as low as $42,000 in the wake of the halving in April due to higher production costs.

A tale of retail

Source: Sensor Tower

• After a January where it seemed like Coinbase metrics were lagging behind relative to the exchange’s successes, February seemed to bring it more fortune.
  • For one, its Q4 earnings report beat analyst estimates and helped boost its stock price. COIN rose from below $120 on February 6th to over $200 by the end of February, eliminating the losses posted from late December into the start of last month. 
  • Coinbase’s ranking in the App Store has also recently seen some reprieve, reaching spot 130 across all free apps on the last day of February, the highest it's been since the late spring of 2022. Earlier in February, there were days when Coinbase was not even cracking into the top 500. 
• There was a sharp turnaround in Coinbase’s position. The app climbed 300 spots in 4 days, unsurprisingly coinciding with the days when bitcoin and other crypto asset prices surged. 
  • More people downloading Coinbase’s app is indicative of more retail interest pouring into crypto, which is to be expected, especially as bitcoin’s price is now so close to its previous all-time high. 
  • But there is still quite a ways to go, as Coinbase claimed the top spot in the App Store in the heat of previous cycles. 
  • Regardless of the fact that Coinbase has not broken the top 100 apps, it still faces some difficulties in the wake of increased demand. CEO Brian Armstrong took to X to explain that traffic increased by more than the 10x level the platform had load tested, which led to a glitch that showed customers having a $0 balance. 
  • But despite the incident, Coinbase’s stock still performed well in the wake of the crypto upturn and daily spot volumes on the exchange also reached the highest since May 2022. 
  • It does seem like even though there were fears about what spot ETF approval could mean for the future of Coinbase (new exposure avenues to crypto, no need to use COIN as a bitcoin-proxy stock anymore), it does seem like there is demand for typical spot trading in the U.S., especially as assets beyond bitcoin post gains in the recent upswing. 

Is Blast built to last?

Source: The Block

• Last week finally saw the launch of the famed native yield-generating layer 2, Blast.
  • Blast generated a lot of attention when it was first announced. It was created by the founder of Blur, who goes by the name Pacman online, and the new optimistic rollup was also backed by Paradigm. But it drew ire because of the fact that users could deposit as early as November to a multisig wallet controlled by five people but would not be able to withdraw until the mainnet launch in February. Many also criticized the “ponzi”-like schematics of its invite rewards program. 
  • The critiques did not slow Blast down, though, as the platform amassed over $2 billion in total value locked before the mainnet went live on February 29th. Blast did confirm an eventual airdrop for both community members and developers, with the community airdrop slated for May of this year. Many of the early adopters of Blast are likely hoping for some reward for their bridging in the future, willing to look past the initial risks. 
• Blast’s TVL makes it the third largest scaling network across the board, behind only Arbitrum and OP Mainnet, and notably ahead of older competitors like Base, Starknet, and zkSync Era. Time will tell where it begins to rank in terms of activity once the network has spent some time in action.
  • Funds pouring into a hyped-up layer 2 before a public opening is not new, and something similar happened with Coinbase’s Base over the summer. While not exactly the same situation, the optimistic rollup from the most popular exchange in the U.S. was slated for an August 9th public launch, but before then, the network was functioning and users used a portal proxy contract and other unofficial bridges to start using the network. And Base was notably not expected to do an airdrop itself, people were just excited about the new network from Coinbase. 
  • Blast has a big VC backer and is created by a well-known individual in the space, in addition to the expectation of an airdrop, so it would not be too surprising to see Blast drum up some excitement in its initial days, especially before Blast Points are able to be redeemed. 
  • The draw of Blast is also focused on its native yield, offering 4% interest on ether and 5% on stablecoins, which is also likely attractive to crypto market participants looking to earn stable rewards on their funds. This could also help Blast attract a strong user base.  

Not just bitcoin

Source: The Block

• While bitcoin was dominating a lot of headlines this week, other crypto assets were also getting a boost in the wake of the success of the top cryptocurrency by market cap.
  • And while we did see spot volumes on centralized exchanges jump up last week (particularly for bitcoin), we also saw on-chain activity light up during the rally. 
• The amount of ETH burned on Ethereum on February 29th was 7,370, the highest since a spike in May due to a surge in memecoin trading and surpassing the recent jump due to the excitement around ERC-404 tokens. More burned ETH is indicative of more network demand as fees rise and blockspace is more competitive. The 7-day moving average of the average transaction fee on the network reached $17.06, also climbing to levels not seen since last May. 
  • Other metrics like active addresses, new addresses, and transactions have also been on the rise more recently as sentiment turns around. The 7-day moving average of new addresses, in particular, is the highest it's been since October 2022 at 109k. Active addresses are also at a yearly peak.
• DEX volumes have also shown some pick-up, with the 7-day moving average of Uniswap volume on Ethereum and Polygon climbing to $1.96 billion last week, the highest since March of last year when trading jumped in the wake of the USDC depeg and surpassing May’s memecoin mania.
  • Unaveraged data for Uniswap on Ethereum shows volumes clocking in at $2.5 billion on February 28th, showing a similar trend of levels not seen since roughly a year ago. 
  • Memecoins have been performing well as of late, and while many popular memecoins are now hosted on Solana, a lot of the classics like PEPE that were hyped up last spring have seen some gains in the past week.
  • And, of course, ether itself is performing well, along with other big ERC-20 tokens, particularly in the DeFi sector after the Uniswap Foundation proposal from two weeks ago to start rewarding token holders. 
• While Uniswap still lags quite far behind Binance and did not get the same jolt in volumes as centralized exchanges this past week, it has historically supported volume levels comparable to Coinbase. And even though bitcoin has been the main focal point for a lot of discussions over the past few days, it is not the only asset worth trading, and we have seen more energy pour into the on-chain ecosystem with the recent rebound.

Chasing the yield

Source: The Block

• There is a new stablecoin on the market that has already made quite the name for itself: Ethena’s USDe.
  • While many take USDe to be a stablecoin since its price tracks the dollar, the team behind the token prefers it to be called a “synthetic dollar,” as unlike other stablecoins USDe earns a yield. 
  • Essentially, the token garners yield by shorting ether futures while simultaneously staking ether (taking a long position) so that gains and losses in each position are offset, or a sort of tokenized version of the cash and carry arbitrage as The Block’s VP of Research George Calle pointed out. 
  • Of course, yield is attractive to many crypto market participants, and the total supply of USDe sits at over 700 million already after announcing its public mainnet on February 19th, but the stablecoin itself stealth-launched back in December. 
  • The yield initially advertised was 27% (although now it is as high as 33%), but the project only paid out only 15% of the yield to USDe holders, for which Ethena received hefty backlash. The team reversed course and began to offer up the full yield its assets were generating. 
• A lot of love has been poured into Ethena Labs, the developer of USDe. On February 16th, the team raised $14 million at a $300 million valuation, co-led by Dragonfly and the family office of BitMEX co-founder Arthur Hayes. According to Ethena’s CEO, the firm received $50 million of commitments but did not need that much cash.
  • But with high yields often comes high scrutiny, and many are asking if the current levels are sustainable. 
  • Ethena’s founder is not worried about the yield at USDe’s current popularity level but conceded it might struggle with a larger market share. 
  • The protocol also puts pressure on funding rates, as it takes on more short ether positions. Typically, funding rates in crypto are positive (which means long traders have to pay funding fees to the short traders), which is part of how USDe acquires its yield, in addition to the staking rewards in accrues. But if USDe does cause a sizable rise in short open interest, it can push down the funding rate or even turn it negative. This could put pressure on the yield, which might make USDe look less attractive to hold in the future. 
  • But with a market cap still not even at 1 billion, USDe has a long way to go before it reaches the popularity of USDT or USDC and might begin to face some of the challenges some are predicting for it. It already boasts the title of sixth largest stablecoin by market capitalization, though, indicating it has become quite significant in the stablecoin space in a relatively short amount of time.