Market analysis

The State of Crypto Report: January 2024 Edition

6 min read

The start of the year is usually a time for optimism and January presented a positive start for the crypto world when the SEC’s long-awaited approval of spot Bitcoin ETFs finally came. However, it has also been a challenging time for markets with price falls and numerous data breaches. In our monthly State of Crypto Report, we review January’s top headlines and how they affected the cryptocurrency market.

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January was very much a mixed bag for crypto’s fortunes. However, though there were many high-profile data breaches and further regulatory frustrations for innovators in the space, good news appears to have outweighed the bad.

The good: ETF approvals and healthy flows

The main good news in January was the landmark move by the SEC to finally approve spot Bitcoin ETFs, after numerous delays and many adjustments to submissions. Spot ETFs give investors live exposure to the Bitcoin price, whereas pre-existing products were forced to use derivatives to offer synthetic exposure to the cryptocurrency.

The approval represented a big step towards establishing legitimacy for the crypto world as several of these new spot ETFs are managed by established Wall Street names – including BlackRock, Fidelity, Invesco and Franklin Templeton. Due to the excitement around these new ETFs, billions flowed into these products in quick order. According to BitMEX Research, after the first six days of trading spot BTC ETFs recorded net inflows of $1,178 million.

Throughout January, healthy trading levels were recorded across crypto markets. Major platform reported soaring spot trading volume over the month, helping position it as the 9th largest crypto exchange in the world with over $30 billion in trades being placed in January. Demand was broad-based, and not confined to BTC. For instance, Arbitrum’s ARB token recorded a TVL of $2.5 billion and Pandoshi achieved a $2 million sellout of its Stage 3 presale.

The bad: Falling prices and costly breaches

Despite the long-awaited approval of Spot Bitcoin ETFs and the inflows these attracted, the landmark news failed to boost the coin’s price as some had predicted. Despite an initial flurry, Bitcoin traded lower the month from a high of $48k to under $39k at its lowest point. Although it has since partly recovered, as of 26 January, with most coins also recording price falls for the month.

Over the same period, Ether, Tether, BNB and Solana are all down from the start of 2024. This has been impacted by several factors, from high-profile data breaches that cooled sentiment to the US dollar strengthening due to improving economic data. A strong dollar creates selling pressure on cryptocurrencies, which has forced many traders to liquidate their derivative positions. According to Coinglass, in the 24 hours before 26 January, $106 million in derivative positions had been liquidated. It should be noted, however, that crypto prices are highly volatile and subject to amplified moves.

There was also significant selling activity in the Grayscale Bitcoin Trust, a pre-existing Bitcoin strategy that has since converted to a Spot Bitcoin ETF. The trust, which went into 2024 with $23bn in AUM, has been the target of mass sales by the FTX estate. The holdings in the trust, like all assets of the failed exchange, are now being targeted by debtors since the firm declared bankruptcy 2022. In January, this led to a sale of nearly 22 million shares formerly held by FTX for $600 million. This targeted selling activity has been one of the drivers for the trust to convert, though outflows have continued with investors eager not to be stuck if liquidity wanes. According to reports, the trust has recorded $2.2 billion in net outflows.

Several high-profile data breaches haven’t helped matters. Firms including Manta Network, HTX, CoinsPad, OKB, Trezor, MailerLite and Concentric were all targets of cyberattacks. These weren’t just costly to the individuals and companies involved, but cast the sector in a poor light and may discourage new adopters from engaging with cryptocurrencies.

Aside from the approval of spot Bitcoin ETFs, sentiment from regulators and policymakers has not seen any material change. The SEC, despite approving spot Bitcoin ETFs, has ruled out similar approvals anytime soon for spot Ether ETFs. Elsewhere, other regulators may not be inclined to follow the SEC’s progress, and regulators in South Korea reaffirmed their stance of banning Bitcoin ETFs, whilst applications for Ether ETFs are under consideration in Hong Kong.

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January altcoin review

While there were losses almost across the board in January, BNB has held up solidly out of the universe of altcoins hosted on Yield App. As of 26 January, its price was up 0.86% to $302. BNB (Binance Coin), has returned to favor since Binance agreed to pay a record fine in December 2023 to US regulators over money laundering charges. With this matter settled, investors can now be cautiously confident in having exposure to the coin. Meanwhile, Ethereum – ETH – also held up. Despite falling from a mid-month high of $2,528, the price is up 0.13% over the month at $2,248. Fortunes were much worse for MATIC, AVAX and DOT – the prices of which all fell between 20% and 30% during this timeframe.

February outlook

Going into February, the narrative around crypto markets will likely continue to be dominated by spot Bitcoin ETFs. Their approval and start to trading has been met with a frenzy of media scrutiny, though this excitement will surely calm down as time goes on.

In February, the novelty of spot Bitcoin ETFs will fade as they cease becoming the newest trend in ETFs and simply another part of the market. This will hopefully be a positive catalyst and attract organic demand and start to drive down volatility in the price of Bitcoin. New entrants will likely enter the market as it continues to mature.

It is less clear what will happen to crypto prices and other risk assets in general, but they will continue to be influenced by the strength of the dollar, the broader macroeconomic and geo-poltical backdrop. There has already been a raft of new product and business launches in January, and it will be interesting to see how these trends continue during February.


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