Something to remember: 

“What you cannot control, you harness.”

The Week Ahead

What’s driving markets?

• Bitcoin spot ETF approval optimism, which has driven the market since at least mid-summer 2023, has reached its peak as the SEC’s approval process has become increasingly telegraphed and transparent. Last week, after meetings with prospective issuers, the final ducks are assumed to have been put in their rows and a group of the highest quality ETF applications are expected to be approved this week before January 10th. Risk seeking speculators have desperately levered up using perpetual futures in order to be as long as possible at the moment of approval, resulting in significant derivatives-driven froth, liquidations, and elevated volatility since the new year. January 2nd saw the largest 1hr liquidation event since 2022, but prices have quickly recovered as spot buyers picked up more coins on the dip. 

• All eleven prospective spot ETF issuers filed a 19b-4 amendment on Friday, signaling final preparations have been made for an approval.

• Crypto natives may have higher expectations for an approval than the broader market. It is being viewed as all but a foregone conclusion, and most likely a “sell-the-dip” event, while on Polymarket odds of a spot ETF approval being approved by Jan 15th trade close to 82c on the dollar.

• Bitcoin dominance had one of its biggest 7d gains in recent memory as traders derisked from altcoins and into the largest crypto asset.

• Meanwhile, the expected BTC halvening is calculated to occur in early May at current mining difficulty levels.

Catalysts

• Thursday, January 11th @ 8:30AM ET: US Core Inflation Rate.

• Thursday, January 11th @ 8:30AM ET: US Consumer Price Index.

Charts

• Bitcoin’s average 1% market depth since the collapse of FTX has still failed to recover even half of its former level, while liquidity has become increasingly concentrated on the top 3 centralized exchanges.

• The presence of Alameda in the market has not yet been filled by newer, opportunistic market makers.

• In terms of rent paid to L1 (transaction fees settled on L2 and sent to Ethereum’s validators), Linea surprisingly contributes a large relative share amongst the competitive L2 landscape.

• Compared to Binance, no centralized exchange can compete in terms of liquidity.

• US-based exchanges like the ones shown here could benefit from ETF-related arbitrage flows.

Research Content

• Digital Asset Fund Flows 2023 Report.

• Arthur Hayes bearish BTC trade idea.

• Ethereum validator withdrawal queue spikes to all-time-highs as Celsius unstakes ETH.

• ETF issuers would be ready to begin trading within days of an approval.

• Bitcoin ETF first week fund flows rumors.

• Coinbase secures a French license.

• Vitalik financial advice.

• OKX Blockdream Ventures 2023 annual investment report.

• James Seyffart Bitcoin ETF live-reporting updates.

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