Data & Insights: Bitcoin ETFs in Review and DeFi’s Comeback

Ending Q3 on a High Note?

• On Thursday, September 26, 2024, the Bitcoin ETFs cumulatively saw over $373 million worth of daily inflows.
  • Out of the $373 million, ARKB, IBIT and FBTC contributed to over 75% of the day’s inflows.
  • This represents the largest amount of single-day net inflows for the Bitcoin ETFs in nearly 2 months since $377.5 million of net inflows on August 8.
  • These inflows reflected positively on the price of BTC itself, which rose by 3.2% on the day. This was also the largest single-day price increase for BTC for the week, as the previous 3 days and the subsequent weekend saw relatively muted returns for the asset.
  • As for the broader week, it saw over $740 million worth of inflows, which means Thursday alone made up roughly half of the week’s total.
  • It is worth noting that this past week, excluding Monday, September 30, represents the last trading days to round off Q3 2024.
• This also capped off what was the highest returning two-week period for BTC since its run towards its all-time high in March 2024.
  • These past two weeks saw BTC climb nearly 16%, nearly completely erasing the mass sell-off that occurred in the previous two weeks from late August to the first week of September 2024. 
• It will be worth watching how the ETFs perform in October, especially considering how, in terms of historical performance and seasonality, it represents one of the best returning months for BTC.
  • October has returned a positive gain for BTC 9 times out of the past 11 years, with an average and median monthly return of 22.9% and 27.7%, respectively.

Babe, wake up, a new top signal dropped

• On Friday, September 27, 2024, the BTC Long/Short Ratio on Binance reached 0.73.
  • This figure represents the proportion of net long and net short accounts relative to the total accounts of the top 20% of users with the highest margin balance for BTC on Binance over time.
  • This metric’s lowest level in recent memory was 0.59 on Wednesday, February 13, 2024.
• It is worth noting that since BTC recorded its all-time high of $73,650 on March 13, 2024, whenever this ratio approaches 0.9, it often aligns with local highs in BTC’s price.
  • For example, the ratio was at 0.9 on March 11, 2024, and the price BTC proceeded to fall by ~6% over the following week. A month later this figure went back to 0.99 on April 8 and the price of BTC fell by ~11% in the next 7 days.
  • A similar pattern occurred on May 5 when the ratio reached 1.14 after falling from 3.39 just 4 days prior as the price of BTC subsequently fell by ~5% over the week. Again, a ratio of 0.97 on June 6 was followed by another 5% drop in BTC.
  • Most notably, when this ratio reached, what was at the time, a 5-month low of 0.79, BTC experienced an 18% crash over the following week.
  • Most recently, on August 24, the ratio fell below 1 (at 0.96), and BTC faced an 11% decline in the week that followed.
• The data may seem repetitive, but it highlights a pattern. Whenever Binance’s BTC Long/Short Ratio falls near or below 1, BTC often sees a notable drop shortly after.
  • Even more interesting, though, the ratio doesn’t seem to be as reliable when predicting price bottoms.
  • Out of the last five instances where the ratio climbed above 3.0, only two coincided with local BTC price bottoms.
  • Of course, while correlation doesn't equal causation, it’s certainly a trend worth keeping an eye on.

Blooming DeFi Boomers

• AAVE V3, the latest iteration of the popular decentralized lending protocol, has marched past the $10 billion mark in Total Value Locked (TVL) on Ethereum as of September 28th. This milestone represents a remarkable 197% increase from its $3.36 billion starting point at the beginning of the year.
• AAVE V3's impressive growth is part of a broader resurgence in the DeFi sector:
  • The GMDEFI Index, which tracks DeFi coin price performance, has climbed from a low of 60 on September 6th to 79 on September 28th, marking a 31.67% increase in just over three weeks.
  • This uptick coincides with generally positive market trends over the past week, suggesting renewed investor confidence in the DeFi space.
• AAVE V3 brings several key improvements over its predecessors:
  • Enhanced capital efficiency: New features like isolation mode and high-efficiency mode optimize capital usage, allowing users to extract more value from their assets.
  • Improved risk management: The introduction of new risk parameters and a robust risk management framework bolsters the protocol's stability, a crucial factor for institutional adoption.
  • Cross-chain functionality: AAVE V3's ability to operate across multiple blockchain networks enhances interoperability, a key development in an increasingly multi-chain world.
• Looking ahead, AAVE V3's growth trajectory and the overall DeFi resurgence suggest increasing confidence in decentralized financial protocols.
  • The protocol's focus on cross-chain functionality positions it well for a future where interoperability between different blockchain ecosystems becomes increasingly important.
  • As traditional finance continues to show interest in DeFi, protocols like AAVE that prioritize risk management and efficiency may be well-positioned to bridge the gap between these two worlds.

Pump.Moodeng

• Everyone's favorite baby hippo has been making waves through the internet, and we see it in the charts too. Pump.fun, the meme token launchpad, is riding high once again, with daily revenue reaching $1.1M on September 28th after the launch of $MOODENG on September 11th. This marks a return to peak levels not seen since August 9th, signaling a resurgence in the meme token market.
• The platform's recent success highlights its popularity in the crypto ecosystem:
  • Pump.fun has become a go-to destination for meme token enthusiasts and speculators alike.
  • The platform's user-friendly interface and quick token launch process have contributed to its appeal.
• A key driver of the recent revenue spike was the launch of $MOODENG on September 11th:
  • At the time of writing, $MOODENG boasts a market cap of $260M, showcasing the potential for explosive growth in the meme token space.
  • This successful launch has had a ripple effect, reinvigorating interest in other meme tokens and driving up platform activity.
• The sustained popularity of pump.fun points to a curious form of product-market fit. While most launched tokens don't achieve long-term success, the platform continues to attract users and generate significant revenue.
  • This suggests that for many participants, the thrill of the launch and the potential for short-term gains outweigh the risks associated with highly speculative assets.
  • The platform's ability to consistently draw users and launch new tokens, despite the typically short lifespan of meme coins, indicates a robust demand for this type of high-risk, high-reward product in the crypto market.
• The cyclical nature of meme token popularity suggests we may see continued waves of activity on pump.fun. However, regulatory scrutiny of such platforms could increase, potentially impacting future operations. 
• As the crypto market matures, it will be interesting to see how platforms like pump.fun evolve to balance user demand with sustainability and regulatory compliance.

Paxos gold passes $500M in TVL 

• Paxos Gold (PAXG) has quietly been stacking TVL, recently surpassing the $500 million mark and now sitting at $508 million. This milestone comes a few months after its launch on July 9th, when its initial TVL was $434 million.
• For those unfamiliar, Paxos Gold is a digital token backed by physical gold. 
  • Each PAXG token represents one fine troy ounce of London Good Delivery gold stored in professional vault facilities.
  • Users can redeem their tokens for physical gold or trade them on various crypto exchanges.
  • The token combines the stability of gold with the flexibility and accessibility of blockchain technology.
• The steady growth of PAXG since its launch highlights a growing trend: Traditional finance (TradFi) investors are increasingly looking for ways to dip their toes into the crypto water, and gold-backed tokens like PAXG offer a familiar asset in a new digital wrapper, making them an attractive entry point for risk-averse investors.
• This could signal potential partnerships between the tradfi and crypto worlds.
  • Bridging between worlds: PAXG serves as a gateway, allowing traditional investors to engage with blockchain technology without fully departing from familiar assets.
  • Increased liquidity: As more traditional assets become tokenized, it could lead to increased liquidity and trading opportunities in the crypto space.
  • Legitimacy boost: The involvement of regulated entities like Paxos in creating gold-backed tokens lends credibility to the broader crypto ecosystem.
• The success of PAXG could pave the way for more real-world asset (RWA) tokenization projects. As TradFi continues to show interest in crypto, we may see an acceleration in the development of products that bridge the gap between traditional and digital finance.
  • While PAXG's growth is impressive, the broader crypto market remains volatile. The steady rise of gold-backed tokens amidst this volatility could offer some stability within the crypto space.