With the strong BTC rally during the Lunar New Year holidays, Stacks ($STX) soared over 40% in the last seven days.
Stacks ($STX) is a Bitcoin layer 2 solution that enables decentralised apps and smart contracts. Stacks ($STX) has been running its native network since 2020, and the recent #BRC20 and #BRC404 innovations fuel the enthusiasm for different layers on Bitcoin dApp. And Stacks is one of the leading players in this field.
STX was trading at ~$0.63 in November 2023, and BTC was trading at~$36,000 at that time. It started to move higher along with the Bitcoin price, which was driven by the potential Bitcoin spot ETFs approval narrative.
With the BTC spot ETFs approvals by the SEC on January 10 and the resulting constant inflow, except the first 9 trading days on the FTX bankruptcy estate liquidation, BTC reclaimed a two-year high above $52,000. Consequently, STX, an L2 solution on the Bitcoin network and high beta relative to BTC, soared from $0.63 in November 2023, to $2.70 as of today, which is a 328% increase in three months.
Overall Market
The above chart shows the BTC price movement from December 2021.
Despite the Lunar New Year holiday, BTC price experienced a strong inflow and the price soared above the $52,000 level, before facing some resistance currently ranging between $52,000 and $53,800.
The long-awaited Bitcoin spot ETFs approved by the SEC released a tremendous amount of enthusiasm from US investors, especially asset managers who were lacking financial instruments to invest in cryptocurrencies due to the regulations and their investment policy. Although CME launched the Bitcoin Futures in 2017 and Grayscale offered a variety of products linked to cryptocurrencies, the liquidity and the scale of these products were very limited.
Bitcoin spot ETFs provided asset managers with an option to invest in Bitcoin with significant liquidity and a large scale of Assets Under Management (AUM). Unlike Grayscale Bitcoin Trust, the trust fund before it got converted to spot ETF, the nature of the ETF allows creation/redemption using the underlying asset, which eliminates the price difference between the ETF price and the underlying asset price. One of the differences between investing in Bitcoin itself and ETFs custody of the assets. With the better regulatory environment in the ETF marketplace, ETF investors were more reassured with less risks relating to custody of the assets while being able to gain exposure equivalent to holding Bitcoin.
That explains the strong inflows from the Bitcoin spot ETFs and the price action caused by it.
However, this morning, Bloomberg reported that Genesis Global Holdco LLC won bankruptcy court permission to sell the Grayscale Bitcoin Trust shares worth more than $1.3 billion to compensate clients who lent it digital assets.
This news could act as a headwind to the recent strong BTC price. When the FTX bankruptcy estate liquidated the $1 billion of GBTC back in January, BTC tumbled from $48,500 to a low of $38,500.
Will the sale from Genesis cause the same degree of selloff on the BTC price? The answer is less likely. Here are some of the reasons:
1) FTX bankruptcy estate was selling its stake in a rush, clearing its $1 billion position in only 9 trading sessions. Genesis might not be under the same time constraint as the prices are favourable and the momentum is strong.
2) The market sentiment was not as bullish as we are right now, getting closer to the 5th halving event in April. Back in January, the market was filled with “buy the rumour, sell the news” sentiment, and the FTX sale further increased pressure on the BTC price.
3) The total ETF AUM is now much larger than when the spot ETFs launched on January 11. The larger AUM and a border clientele base on spot ETF provide a stronger ability to cushion the selling pressure.
Therefore, our desk expects to see some headwinds on the BTC price due to Genesis’ $1.3 billion sale but not a large-scale correction.
Options Market
The above table shows the at-the-money implied volatility on BTC in the past week.
As the BTC price went in one direction, the implied volatility increased as expected. When the underlying price moves in one direction for consecutive days, the risk of any pullback increases, which is reflected in the elevated implied volatility (IV).
However, we did not see any large elevated IVs in the mid to long tenors, which tends to imply that options traders have either missed the chance to build their positions and are waiting for better entry levels, or have trimmed their positions along the way up. Either way, it suggests that options traders are not chasing this upward trend.
That being said, the current bullish momentum could continue for an extended time. If we see a sharp increase in IVs with a small rally on the underlying price, it could signal that the market sentiment is overextended, and a pullback is down the road.
Macro at a glance
Last Thursday (2024-02-08)
US initial jobless claims fell to 218k, down from 227k last week.
In January, the German CPI rose by 0.2% month on month, slightly higher than the 0.1% increase in December. On a yearly basis, the German CPI rose 2.9%, a significant decrease from December's 3.7%.
On Tuesday (2024-02-13)
The US CPI came in higher than expected in January. The CPI increased 3.1% year on year, 0.2% higher than the expected 2.9% increase, and slowed from 3.4% in December. It increased by 0.3% m/m in January, slightly more than the expected 0.2% and more than the 0.2% increase in December.
The US core CPI, which excludes volatile food and energy prices, rose by 3.9% year on year, exceeding the expected 3.7% increase and matching the reading from last December. It increased by 0.4% monthly, exceeding the expected increase of 0.3%.
After the CPI reading was released before the US market opened, risk assets such as US equities and cryptocurrencies experienced an immediate selloff, while the US dollar index ($DXY) rose as rate cut expectations eased.
The S&P 500 fell 1.37% on the day, while the Nasdaq fell 1.58% and the Dow Jones fell 1.35%. The CBOE Volatility Index (VIX) surged 13.64% and closed at a three-month high.
The US dollar index rose 0.70% and closed at 104.83. Gold prices fell below $2,000 and closed at $1,991.60.
Bitcoin fell 3% immediately following the CPI reading, but recovered gradually during the US session, closing with a loss of less than 1%.
Convert Portal Volume Change
The above table shows the volume change on our Convert Portal by zone.
The POW (Proof-of-Work) zone saw the highest overall increase in trading volume last week. The soaring BTC price brought in trading demands on Bitcoin ($BTC) itself and Bitcoin Cash ($BCH), with the trading volumes on both coins doubling over the last week.
The trading volume in the NFT zone also doubled. SuperVerse ($SUPER) and SuperRare ($RARE) are the two leaders in this category with over 400% and 200% trading volume increase, respectively.
The two tokens, Dogecoin ($DOGE) and Ordi ($ORDI), are the main contributors to the 55% volume growth in the Meme zone. The trading volume on both tokens jumped 52% and 82%, respectively.
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