Market Insights: FEB 2025 | Week1
Wavebridge Research/
Bitcoin Price Correction, ETF Outflows, and Institutional Influence
Bitcoin prices corrected in the wake of the dips and the US imposition of foreign tariffs. Bitcoin spot ETFs saw outflows of $457.6 million, while Ethereum spot ETFs saw outflows of $136.2 million. Institutional investors have become increasingly influential, with the Chicago Mercantile Exchange holding an 85% share of the Bitcoin futures market. CME's monthly open interest in Bitcoin futures reached $18.6bn. ‘Bitcoin could act as ‘portfolio insurance’ against the risk of sovereign default amid rising government debt and fiscal concerns globally,’ Bitwise analysed, adding that US President Trump's cryptocurrency executive order could break Bitcoin's four-year cycle. Bitcoin has typically followed a four-year cycle, with bull markets lasting three years and bear markets lasting one year, but Trump's pro-crypto executive orders could change that. MicroStrategy bought an additional 10,107 BTC, bringing its Bitcoin holdings to 471,107 BTC. In total, MicroStrategy has invested $30.4 billion in Bitcoin over the past four years. ‘Bitcoin is not just a speculative asset, but a store of value for long-term economic stability,’ said Representative Cynthia Loomis, emphasising the need for the legislation. In the US, at least 14 states have introduced legislation to create Bitcoin strategic reserves.
Ethereum Supply Growth and Surge in Crypto ETF Proposals
Ethereum's circulating supply has increased significantly recently. Ethereum's circulating supply increased by 12,353 ETH over the course of the week, totalling 1.051 million ETH, the highest level since February 2023. The US Securities and Exchange Commission has officially recognised Canary's application for a Litecoin ETF and has begun the review process. Tuttle Capital filed a proposal with the SEC to launch 10 2x leveraged cryptocurrency ETFs. Asset manager 21Shares filed an S-1 registration statement with the SEC to launch a Polkadot (DOT) ETF. Grayscale filed for an XRP spot ETF on the New York Stock Exchange, aiming to convert an existing XRP trust into an ETF. Ondo Finance plans to offer a US Treasury fund tokenised on XRP Ledger, a blockchain developed by Ripple. XRP Ledger's decentralised exchange has seen rapid growth since its launch in 2024, with swap volumes totalling more than $1 billion. The stablecoin market reached an all-time high, surpassing $211bn. The current stablecoin market capitalisation is up 73% from $111.8 billion in August 2023.
US Regulatory Shifts: Crypto Banking, Bitcoin Reserves, and New Standards
The chairman of the US Federal Reserve has said that banks can serve cryptocurrency customers if they can manage the risks. ‘The bar is a little higher for banks when it comes to participating in crypto, but the Fed is not opposed to central bank innovation,’ Powell said. The US Securities and Exchange Commission's repeal of SAB 121 opened the door for banks to hold bitcoin. The repeal of SAB 121 ‘marks the beginning of the Bitcoin banking era,’ according to the analysis. The new rule removes the obligation for banks to record their customers' crypto assets as liabilities. The US Financial Accounting Standards Board (FASB) has introduced a new standard requiring companies to value digital assets at market value rather than acquisition cost, which will be mandatory from 2025. The state of Texas is moving forward with legislation to introduce a Bitcoin reserve. The Texas lieutenant governor has included the creation of a Bitcoin reserve as one of his legislative priorities for 2025. Ripple CEO Brad Garlinghouse discussed making Ripple a US strategic reserve asset with President Trump.
Global Push for Digital Currencies and Rising Institutional Adoption of Crypto
Japan's Financial Services Agency is discussing revising the Financial Services and Exchange Act, which regulates fintech operators, in 2025 in light of changes in the environment since it was enacted in 2010. The bill will also include the issue of regulating cryptocurrencies. The European Central Bank is actively pursuing the introduction of a digital euro. ‘President Trump's executive order has the potential to cause banks to lose customers and fees,’ said an ECB board member, emphasising the need for a digital euro for this reason. The governor of the Czech central bank said that the board of directors plans to discuss the possibility of buying bitcoin. This would be the first instance of a central bank holding bitcoin in reserve. El Salvador was previously buying 1 BTC per day, but recently doubled the rate. El Salvador now holds a total of 6055 BTC and has purchased more than 50 BTC in the last 30 days. Poland has installed 219 digital asset ATMs, making it the fifth-largest digital asset ATM holder in the world. Globally, there are now 38,100 digital asset ATMs in operation across 65 countries. Kraken resumed blockchain staking services for US customers. Customers in 39 US states are now able to participate in bonded staking using Kraken Pro.