Spot ETH ETF net inflow of $349 million shows strong performance, and ETH may become the best-performing mainstream token in the next quarter.
Article Author, Source: Matrixport
Last week, BTC showed an 'M shape' top retracement trend, with significant price fluctuations. Despite multiple instances of sharp rises and falls, there was still some buying support at lower levels. From December 25 to 26, BTC briefly surged to $100,000 twice, with a clear peak at $99,963.7, after which BTC's price oscillated within a downward channel, repeatedly stopping its decline near $91,530.45, forming a long-term key support level. Bulls attempted to resist, but the overall trend remained downwards, accompanied by increased volume, and the rebound was on reduced volume, indicating that the market is still dominated by bears. The current price of BTC is $94,540.02 (data sourced from Binance spot, December 31, 16:30).
Since Trump's election, the inflow of funds into spot ETH ETFs has significantly increased, with the growth trend even surpassing that of BTC spot ETFs during the same period. Last week, the net outflow from spot BTC ETFs was $388 million, while the net inflow into spot ETH ETFs was $349 million. With Trump's upcoming inauguration in January, it may further push ETH to become the best-performing mainstream token in the next quarter.
Market Interpretation
The surge in South Korean cryptocurrency investors, coupled with the depreciation of the won, has driven premium trading.
On December 28, CryptoQuant CEO Ki Young Ju pointed out that the won's exchange rate has fallen to its lowest level in 15 years, prompting South Korean investors to exchange won for BTC and USDT at a 3-5% premium through exchanges like Upbit to avoid exchange rate risks.
As of November, the number of cryptocurrency investors in South Korea has exceeded 15.59 million, accounting for more than 30% of the total population. This growth is closely related to Trump's promise to support the crypto industry after being elected president, and the rise in BTC prices has further driven this trend. The total cryptocurrency holdings of South Korean investors reached 102.6 trillion won (approximately $70.8 billion), marking a substantial increase from October.
As interest among South Korean investors in cryptocurrencies increases and exchange rate risks rise, the premium trading in the crypto market is becoming more significant, with growing demand for safe-haven assets like BTC and USDT.
The U.S. debt ceiling crisis may trigger downward risks for BTC.
On December 30, U.S. Treasury Secretary Yellen warned that the debt ceiling will be reached in mid-January 2025, and the risk aversion sentiment in global markets is heating up. She stated that the Treasury will take 'extraordinary measures' to cut borrowing after the ceiling is reached but urged Congress to act quickly to maintain the U.S. credit rating. This news triggered volatility in risk assets, with major U.S. stock indices falling about 1%, while BTC also dropped 4% from its intraday high.
In addition, the debt issues in the macroeconomic background are also a core variable. Since the U.S. established a debt ceiling in 1939, its total national debt has exceeded $36.2 trillion. In the current environment of global macroeconomic turmoil and political uncertainty, the BTC market may face greater pressure.
In 2024, institutional BTC adoption is accelerating, with KULR Technology purchasing 217.18 BTC for $21 million.
Since the U.S. approved the spot BTC ETF, more companies have included BTC in their asset reserve plans, and BTC is becoming a mainstream asset. This year, BTC has risen nearly 130%, approaching the psychological barrier of $100,000. In January, the net inflow into ETFs reached $36 billion, with holdings exceeding 1 million BTC.
This trend began with MicroStrategy in 2020 and has attracted more companies to participate. The latest addition is KULR Technology, which produces energy storage products for the aerospace industry and has purchased 217.18 BTC for $21 million, planning to invest up to 90% of its surplus cash into BTC. At the same time, Bitwise has submitted an application for a BTC Standard Company ETF that will track stocks of companies holding over 1,000 BTC. Additionally, Strive Asset Management has submitted a BTC Bond ETF that provides exposure through holding corporate bonds targeting BTC, further promoting diversification in BTC investments.
With continued institutional participation, the mainstreaming of crypto assets is rapidly developing, with BTC seen as a long-term investment tool for hedging inflation and geopolitical risks.
Trump will be inaugurated as president on January 20, and it is expected that he will issue at least 25 executive orders.
After Trump's successful election in early November, the market experienced a continuous rise for a month. Trump has presented a pro-crypto stance, and most of his nominated department heads are individuals friendly to the crypto market. The long-criticized SEC chairman is also about to step down, which has led the market to generally hold an optimistic view of the future of the crypto market.
According to data from Coinbase, the new class of incoming lawmakers shows a significantly higher proportion and number of supporters for cryptocurrency compared to the previous session. Michael Rosen, Chief Investment Officer at Angeles Investments, stated: 'Trump's inauguration may also bring some surprises to the market, as he is expected to issue at least 25 executive orders on various issues ranging from immigration to energy and cryptocurrency policy on his first day in office.'
Market Highlights
FTX is about to begin its first round of cash debt repayments, with compensation inflows indirectly reducing selling pressure in the market.
On December 17, FTX and its affiliated debtors announced that the Chapter 11 restructuring plan approved by the court would officially take effect on January 3, 2025. The first round of distribution will start within 60 days after the effective date, limited to approved creditors in the Convenience Classes. FTX has reached agreements with cryptocurrency custodians BitGo and trading platform Kraken to provide asset distribution services for retail and institutional clients.
According to data disclosed by HODL15Capital, FTX's first round of repayment distribution, effective January 3, includes $16 billion in cash. Previously, some tokens held by FTX/Alameda, such as SOL/WLD, have been mostly sold. Creditors are receiving cash compensation instead of tokens, indirectly reducing market selling pressure and increasing the probability of part of the compensation funds flowing back into crypto, thus boosting market sentiment.
Tether clarifies rumors of USDT being illegal in Europe.
Recently, rumors have circulated that USDT will be declared illegal in Europe on December 30, 2024, raising market concerns. In response, Tether CEO Paolo Ardoino clarified this on social media platform X multiple times on December 29, calling it 'FUD information' and clearly stating that USDT will not lose its legality on the aforementioned date or in the short term.
According to the EU's cryptocurrency asset market regulation (MiCA), stablecoin issuers must comply with specific regulations, but the regulation provides a transition period of 6 to 18 months, meaning USDT's legal status is currently not under threat. Additionally, Tether plans to launch new stablecoins (such as EURQ and USDQ) that comply with MiCA standards to ensure its compliance and continued operation in the European market.
It is worth mentioning that despite MiCA requiring stablecoin operators to hold more than 30% of liquidity in banks, Tether has expressed reservations about this rule, believing it may adversely affect stablecoin liquidity management. However, as of now, Tether has not encountered any financial problems or legal issues, and its market position remains stable.
Trump's inauguration as president of the U.S. has driven a surge in crypto OTC trading volume.
Recently, several crypto trading firms reported that OTC cryptocurrency volume has surged in recent months, with Trump's election being a key driving force. Tim Ogilvie from Kraken Exchange stated that OTC trading volume has increased by 220% year-on-year. Traders noted that market participants are actively preparing and initiating trades as the election approaches. The prices of mainstream currencies like BTC and ETH have risen, prompting projects and investors to manage funds and risks in the new price range. BitGo also pointed out that the election results are a dominant factor in the recent surge in trading volume, with some companies' trading volumes recovering to levels seen during the market peak in 2021.
The U.S., U.K., and EU are strengthening tax regulation on cryptocurrencies, and investors need to pay attention to tax rates and compliance requirements.
The U.S., U.K., and EU are strengthening tax regulation on cryptocurrencies, affecting investor operations. In the U.S., cryptocurrency transactions are subject to capital gains tax, with rates depending on holding period and income; miners and staking income are subject to income tax, and exchanges must report data starting in 2025. The U.K. imposes a capital gains tax of up to 24% on crypto asset transactions, with an exemption amount of £3,000; miners and salary income are also subject to income tax and national insurance. EU countries have different tax rates, with Germany offering tax exemption for holdings over one year, while Spain's rate is 28%. The MiCA regulation in 2025 will unify some rules and enhance tax transparency.
