Original author: Joyce
After experiencing a new round of market shocks, as the price of Bitcoin rebounded, the panic sentiment in the entire market has eased a lot.
With the repeated collapse of altcoins, from the question of "Are there any more altcoins?" to the voices of various professional investors leaving the market, the past one or two months have been shrouded in gloom for the crypto market other than Bitcoin.
But no matter how panicky the market sentiment is, when asked which track the market is most optimistic about in the future, "Bitcoin ecosystem" is still the most popular.
In particular, the recent large-scale purchases of Bitcoin by institutions, the continued increase in the number of Bitcoin held by ETFs, and the rapid development of the Bitcoin ecosystem such as Stacks and Fractal Bitcoin, have the potential to drive a new round of market conditions.
1. Institutional Holdings and ETFs
As a major Bitcoin holder on Wall Street, MicroStrategy has been buying again recently.
According to the latest SEC documents, MicroStrategy has purchased 18,300 bitcoins in the past month, with a total investment of approximately $1.11 billion, at an average price of around $60,655. Currently, MicroStrategy's total bitcoin holdings have reached 244,800, accounting for 1% of the total bitcoin issuance.
Three years later, MicroStrategy once again spent 1.1 billion to buy Bitcoin, which is undoubtedly a shot in the arm for the crypto market that has just shown signs of recovery.
Although the market has looked shaky in the past few months, and voices of "bull market is over" have been heard everywhere, the 13F documents disclosed by the SEC for the second quarter of 2024 show that as the price of Bitcoin fell, US institutions have been increasing their holdings of Bitcoin ETFs against the market trend:
According to Bitwise Chief Investment Officer Matt, the number of institutions holding Bitcoin ETFs increased from 965 to 1,100 in the second quarter, with more than 130 institutions purchasing Bitcoin ETFs for the first time in the second quarter. The proportion of Bitcoin ETFs held by these institutions also increased from 18.74% to 21.15%.
Therefore, despite the sharp market fluctuations and even when the trend is not clear, these institutions are not scared away, but continue to increase their positions. It is conceivable that if it is a bull market, the number of institutions entering the Bitcoin ETF and the amount purchased will be even more impressive.
Judging from the trend chart of the number of bitcoins held since the issuance of the Bitcoin ETF, this data has generally maintained a continuous upward trend over the past 9 months. Even during the period of drastic fluctuations in the crypto market, the number of bitcoins held by the entire Bitcoin ETF has not changed much.
Therefore, despite market fluctuations, Bitcoin's fear and greed index once entered the extreme panic range, and large US institutional investors continued to test the waters and buy.
Bitcoin ETF holdings of Bitcoin, source: Dune
2. Fractal Bitcoin
Fractal Bitcoin is one of the most eye-catching projects in the market recently. In addition to the generous Airdrop that attracted a lot of attention, Fractal Bitcoin has exceeded 241 EH in total computing power within just a few days of its launch, accounting for 38.1% of Bitcoin's total computing power, which shows its popularity.
Fractal Bitcoin price and hashrate, source: UniSat Explorer, September 16, 2024
Fractal Bitcoin was launched by the Unisat team. As a team that has been deeply involved in the Bitcoin ecosystem and has received investments from top institutions such as BN, it was expected that it would receive such popularity after its launch.
Fractal Bitcoin is also Layer 2 of Bitcoin, known as "the only native Bitcoin expansion solution at present". It focuses on stronger compatibility with Bitcoin and shared security. Without changing the original Bitcoin code, it increases transaction speed and increases transaction confirmation time to 30 seconds. Compared with the at least 10 minutes of the Bitcoin main network, TPS is increased by more than 20 times.
Regarding the difference between Fractal Bitcoin and other Layer 2 and sidechains, its founder was quoted as saying, "If other L2 and sidechains are like building another highway, then Fractal can build countless highways parallel to the Bitcoin mainnet. Each road can be used to expand the Bitcoin mainnet or to expand another road."
Of course, there are many plans for expanding Bitcoin. The ultimate goal is definitely to share the security of Bitcoin to the greatest extent possible and greatly improve TPS, just like the goal of Fractal Bitcoin, but currently almost no plans have been implemented.
Ever since the Bitcoin ecosystem became popular, the Layer 2 track has been crowded with various players. In addition to the original old-fashioned Layer 2 such as Stacks, RSK, etc., there are also the transformed RGB++, as well as a number of new Layer 2 such as BEVM and Merlin. It can be said to be very lively.
However, who can truly take up the banner of Layer 2 of the Bitcoin ecosystem, bring DeFi, GameFi, NFT, etc. into the Bitcoin ecosystem, and at the same time introduce the massive amount of dormant Bitcoin into the entire pool of encrypted liquidity, currently requires further observation and verification.
3. Stacks Nakamoto Upgrade
As the most well-known Layer 2 in the Bitcoin ecosystem, Stacks ushered in the Nakamoto upgrade on August 28.
For Stacks, this upgrade is of great significance for four reasons:
1) STX production is halved: After the Nakamoto upgrade, Stacks’ production will change from 1,000 STX rewards per Bitcoin block to 500 STX, greatly reducing the inflation pressure of STX.
2) More than 60 times TPS improvement: Through this hard fork, Stacks’ block production will be decoupled from Bitcoin’s block time, and the block confirmation time will be reduced from more than 10 minutes to 10 seconds, and TPS will be increased by more than 60 times.
3) Better security: After the Nakamoto upgrade, the new consensus mechanism writes the historical data of the Stacks chain into the Bitcoin block. Without changing the Bitcoin block data, the Stacks block data cannot be tampered with, further enhancing the security of the Stacks chain.
4) Decentralized pegged coin sBTC is launched: sBTC will be launched about one month after the upgrade. This is the first fully decentralized Bitcoin-pegged coin that does not require permission and is open to participation, making it more attractive to Bitcoin whales.
With the official completion of the Stacks Nakamoto upgrade, the battle for Bitcoin's Layer 2 will become more intense. After all, the security of the Stacks main chain has withstood the test of the market for quite a long time, and the security has been greatly improved after the upgrade, while the TPS optimization has also been greatly improved. In addition, Stacks itself has high recognition in Europe and the United States, and is the first SEC-compliant Token project. At present, the level of ecological development is also the best among all Layer 2s, and it already has a certain first-mover advantage. It is obviously a heavyweight player in the Bitcoin Layer 2 hegemony.
IV. Summary
Of course, in addition to these, the Bitcoin ecosystem has recently made many other new moves, such as the Babylon mainnet launch in late August, which opened up staking, reaching the staking limit of 1,000 BTC in just three hours. The Airdrop expectations plus Babylon's luxurious financing background have attracted considerable market attention. In addition, the recent launch of several OP_CAT protocols in the Bitcoin ecosystem is also in full swing.
In any case, compared with the dullness or even shutdown of other ecosystems, the wealth-creating effect and popularity of the Bitcoin ecosystem are visible. After the inscriptions and runes have been shut down one after another, there has been continuous innovation and vitality, and a large amount of resources and funds have flowed in, which is indeed worth looking forward to.
