RAISING NEW CRYPTO VC FUNDS HARDER THAN EVER

last quarter, crypto VC fund managers saw experienced a challenging fundraising environment with the fewest new funds (8) raising the least money ($140m) since Q3 2020 🧵 all the data in this thread comes from our new quarterly VC report w/ @hiroto_btc read it here. note that fund data comes from galaxy research's visiontrack database. learn more visiontrack.galaxy.com galaxy.com/insights/resea…

NEW EVIDENCE THAT @KamalaHarris WILL CONTINUE CRYPTO CRACKDOWN

her advisor choices suggest she will keep biden’s hostile attitude to crypto

harris is working w/ brian deese & bharat ramamurti, 2 key anti-crypto officials from biden admin..

thread 🧵 we got some intel on the harris campaign’s current posture on economic policy, and who they are working with, from some bloomberg @business reporting this morning

deese and ramamurti are two key architects of the biden admin’s anti-crypto crusade, including chokepoint 2.0

creditors have been stuck in mt gox bankruptcy for 10+ yrs--finally trustee says in-kind distribution of #BTC #BCH will begin in july. we think fewer coins will be distributed than people think & that it will cause less #bitcoin sell pressure than market expects

here's why 👇 the data in this thread is based on reviewing bankruptcy filings, talking with creditors, and a variety of assumptions. please note that these are estimates and are intended to be directional rather than definite. this is not investment advice and please do your own research.

Why We Aren't (S)Topping

(for my first ever long X post, I'm releasing a note I sent early this this morning to Galaxy counterparties and clients)

The sun hasn’t yet risen in NYC, but I know it will. From Galaxy HQ north of Battery Park, the Hudson River looks like a sea of black but for the occasional glow of ferry lights appearing from or receding into the darkness. But Bitcoin is awake. If you want to sleep in this market, you better not wake up for a glass of water at 3am and look at the Bitcoin price, because you’re liable to be greeted with a fat green candle that makes returning to bed difficult. BTC is trading above $59k, and apparently traded as high as $59.5k in the early hours on the Eastern seaboard of the United States.

There are reasons – if you’re reading this you probably know a lot of them. The BTC ETFs took in a whopping net $576m of BTC yesterday (Tuesday Feb. 27), with BlackRock alone seeing $520m of inflows, its largest ever day. Saylor is still buying for MSTR; Reddit is going public and said it may continue to add BTC, ETH and MATIC to its balance sheet. Fidelity Canada (different from Fidelity Investments) is recommending a 1-3% allocation. Every day we see news that another RIA platform has added support for the ETFs. A wave of new demand is smashing against a programmatically scarce asset of which 75% is held by long-term holders, many of them diamond-handed zealots forged in the fire of several volatile market cycles.

One big question I’m hearing this week – where are we in the “cycle?” Notably, Bitcoin is trading just 12.16% below its prior all-time high. Bitcoin’s 4th halving will occur in about 52 days. At this point prior to the last two halvings, BTC was still down 60%+ from its previous all-time highs. Effectively, the bull runs of 2017 and 2020 hadn’t yet begun at this stage in Bitcoin’s supply schedule.

52 days before 2nd Halving (9-JUL-16)
BTCUSD $455.22 (-59.86% from ATH)

52 days before 3rd Halving (11-MAY-20)
BTCUSD $6,174 (-68.56% from ATH)

52 days before 4th Halving (20-APR-24)
BTCUSD $59,330 (-12.16% from ATH)

Although there have only been 3 halvings, and at 15 years old Bitcoin is still young by the standards of any asset class, some have raised worry that we may be speedrunning the “cycle” this time around. I suppose the notion is that the run we’ve seen over the last year might be the bull run, and that the normal course of post-halving bullish cycle may not occur. If we make a new ATH before the expected halving date of Apr. 20, 2024, that would further exacerbate this view, some say.

I’m here to say that I don’t believe that for a second. This time is different. The advent of Bitcoin ETFs in the United States is truly a monumental shift that will disrupt everything we know about Bitcoin price cycles, how to assess holder behavior, and intra-crypto rotational dynamics. But before I get into that, here’s a pile of data that suggests we are not yet topping.

Long & Short-Term Holders

Long-term holders are still mostly holding strong, currently possessing about 75% of all BTC supply. In just the last few days, we have seen a small decline – signifying a marginal transfer of coins from long to short term hands – the magnitude is nowhere near what we’ve seen in prior cycles.

MVRV Z-Score

Another way to visualize the cyclicality of Bitcoin price action is to examine the aggregate cost basis of the Bitcoin supply. While market value (market capitalization) is calculated by multiplying the current circulating supply by the last known price, realized value (realized capitalization) sums the value of coins at the time they last moved onchain. For example, if I bought a coin for $100 in 2012 and haven’t moved it since, that coin contributes $100 to the aggregate realized market cap. If we calculate a Z-score, the ratio between the difference of market cap and realized cap, and the standard deviation off market cap, we can evaluate whether Bitcoin is overvalued or undervalued.

Futures Open Interest

While BTC futures open interest is nearing all-time highs, so too is CME’s market share at more than 25% of all OI. Whereas prior peaks coincided with market tops, those futures markets were dominated by offshore crypto-collateralized exchanges, and market participants were much less institutional. They used volatile cryptoassets as collateral, sometimes an exchange’s native token (RIP FTT), and took on crazy amounts of leverage. Today, CME dominates and traders must post cash. And you have bigmarket players now – such as the authorized participants for the Bitcoin ETFs – that are using futures to hedge rather than for leverage.

Indeed, as @DylanLeClair_ pointed out (), the futures complex is completely different to prior cycles. The percent of crypto-margined futures open interest is “down only.”

More on leverage – shout out to Hannah Burgess who flagged this chart from @cryptoquant_com for me. The leverage ratio across exchanges is lower than it was just 2 months ago, let alone last summer. By dividing futures exchanges’ open interest by their total BTC reserves (i.e., custodied assets), you can get an idea of what user leverage. Increasing values indicate more investors taking leverage risk, while decreasing values suggest lower risk. (Image omitted due to 4-image max on X, see subsequent tweet)

Retail Interest

There’s definitely some retail interest, as exhibited by ETF inflows (more on ETFs below), but some of the toppy metrics haven’t yet rebounded. Google Trend data shows still minimal search interest, app store rankings show the retail crypto apps are not peaking as they have during prior runs, Twitter mentions are well below prior peaks, etc. (Image omitted due to 4-image max on X, see subsequent tweet)

Bitcoin ETFs

The ETFs have added assets on a net-basis over 21 of the last 22 days – and incredible feat. Yesterday was the third largest day of net inflows, and Monday was the 4th largest day. Flows appear to be accelerating, not stagnating or subsiding.

Bloomberg Intelligence (@JSeyff)

Despite incredible volumes and flows, there’s plenty of reason to believe that the Bitcoin ETF story is still just getting started. As we wrote in our October 2023 report “Sizing the Market for the Bitcoin ETF,” () the primary net new accessible market for these vehicles are wealth managers and financial advisors, who have not had a real way to allocate client capital to Bitcoin exposure. While we are periodically seeing headlines of this or that RIA adding support for the ETFs, there is $40tn of AUM at banks and broker/dealers that has not yet turned on access. We are likely to see a constant drip of headlines over the next 3-18 months about these platforms adding access – and these won’t just be catalyzing headlines, they come with the chance of new inflows too!

US Wealth Management - By Platform Type
Broker-Dealer = $27.1tn
Bank = $11.9tn
Registered Investment Advisors = $9.3tn
Total US Wealth Management AUM = $48.3tn
Source: Galaxy Research; Data: Dakota (Oct. 2023)

In April, we will also get the first round of post-ETF-launch 13F filings, and (I’m just guessing here…) we are likely to see some huge names have allocated to Bitcoin. New platforms, new investments, and higher prices compound on each other, creating a feedback loop.

Declining Volatility

Over time, BTC’s volatility has declined, and it is likely to continue declining over time. ETF buyers, especially advisor-managed accounts, are much less likely to day trade than cryptocurrency exchange users. Said another way, if a large portion of BTC ends up inside ETFs, these assets will likely be stickier than BTC held on a crypto exchange. (Image omitted due to 4-image max on X, see subsequent tweet).

Intra-Crypto Cyclicality

That stickiness is also likely to dampen intra-crypto cyclicality. Long time crypto traders and observers will know that, historically, in bull runs BTC typically leads, then when it stagnates or tops money rotates further out the risk scale, culminating in an “altseason.” Bitcoin held on a crypto exchange can be easily swapped for Ether, and then for altcoins. But Bitcoin held in ETFs cannot be so easily swapped, nor are ETF holders – again if they are heavily comprised of advisor-managed accounts – likely to swap even if they could. The ascendancy of the Bitcoin ETFs will lower the likelihood of major intra-crypto capital rotations. And if Ether ETFs get approved, it will become increasingly difficult for other altcoins to see capital inflows relative to those two because, after all, BTC and ETH together comprise most of the capital and offer exposure to nearly all of the market narratives.

Bitcoin’s 4th Halving

Just a quick word on this. We all know that, historically, Bitcoin halvings have preceded major bull runs (usually by a few months). While the reduction from ~900 new coins to ~450 new coins per day is small in absolute terms (and relative to BTC’s daily float of $10-25bn over the past few months), nonetheless prices are set on the margin and there really aren’t many coins for sale at these prices. But beyond any supply impact – which again I believe is marginal– this will be the first halving in which major US asset managers have a marketing machine working to educate on Bitcoin, and there is no better Bitcoin education than learning about the halving. So it’s a narrative event first (a quadrennial marketing moment) and a supply event second, though I think both aspects will be impactful.

Can’t (s)top Won’t (s)top

All this is to say, my answer to that burning question – where are we in the cycle? – is that we haven’t even begun to reach the heights this is likely to go. The ETFs are genuinely a game changer and they are still just getting started. Given the flows we are seeing, both in the ETF complex and through our desk, I think it’s reasonable to see a new all-time high within a matter of weeks. We’re starting to hear Bitcoin spoken about alongside gold and treasuries as macro hedge assets – just this morning I heard a traditional finance research analyst suggesting Bitcoin is becoming a genuine “hedge to fiat debasement” on national television. Bitcoin is prime time now, and while it might be hard to believe, things are just starting to get exciting.

Alex Thorn
Head of Firmwide Research, Galaxy
New York City

https://x.com/DylanLeClair_/status/1762608995989115254?s=20

galaxy.com/insights/resea…


disclaimers below

Disclosure Regarding Coin Ownership
Coin: BTC
Author: YES
Galaxy (including its affiliates): YES

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this bill from @SenWarren massively expands the bank secrecy act, imposing bank-like KYC rules on non-custodial software products, including FOSS. and it’s gaining steam with 5 new co-sponsors 👀

this would be disastrous for #bitcoin and crypto in USA
warren.senate.gov/newsroom/press… specifically the bill calls for dramatically expanding the bank secrecy act to cover open source software, including non-custodial wallets, miners, and validating nodes

the #bitcoin gamma squeeze from last week could happen again 👀

if BTCUSD moves higher to $35,750-36k, options dealers will need to buy $20m in spot BTC for every 1% upside move, which could cause explosiveness if we begin to move up towards those levels

more 👇 when dealers are short gamma and price moves up, or when they are long gamma and price moves down, they need to buy spot to stay delta neutral. last week’s expiries will dampen potential explosiveness, but it’s still in play.

compare today’s gamma profile to last week’s. (thanks to @Amberdataio for helping us calculate this)

options market makers in #bitcoin are increasingly short gamma as BTC spot price moves up.

when you’re short gamma and spot px rises, you need to buy back spot to stay delta neutral.

this should amplify the explosiveness of any short-term upward move in the near term. more 👇 when dealers are short gamma and price moves up, or when they are long gamma and price moves down, they need to buy spot to stay delta neutral.

using data from @Amberdataio, we can calculate dealer positioning, and our analysis shows dealers are increasingly short gamma starting around $28.5k and above. at $32.5k, market makers need to buy $20m of delta for every subsequent 1% move higher. the positioning implies that market makers need to buy back increasing amounts of BTC as spot moves higher, which should add to the explosiveness if any upward move in the short term.

once and for all — this Unicoin thing is fake.

the IMF did not announce a new global CBDC with the “DCMA”

some likely fake org (DCMA) posted a press release on @PRNewswire and it tricked tons of people (including smart friends of mine!)

here’s to spot this fake news 🚩🚩🚩 some obvious red flags if you just read the press release. first, look at the end. fake person w/ generic press release distribution service (email4pr lol). if DCMA was affiliated with IMF, it would come from IMF, not a made up person with a greensboro NC phone number

the folks at @yugalabs just announced that their twelvefold #bitcoin #ordinals auction will start tomorrow. here are some of my initial thoughts on supply, auction style, and licensing

https://twitter.com/yugalabs/status/1632162026641342469

my guy @hiroto_btc wrote in friday’s @glxyresearch newsletter about the importance of yuga, the worlds largest issuer of NFT intellectual property (30%+ of global NFT market cap), entering the inscriptions fray. read gabe’s note at the top here: galaxy.com/research/insig…

NFTs on #bitcoin built w/ inscriptions & ordinals will be a $5bn market within two years

our new whitepaper has everything you want to know about: all the data, the history, how they work, the controversy, modeling their impact on bitcoin, projecting growth

let’s dive in 👇 everything in this thread comes from a new @glxyresearch white paper we released this morning, written by the teams at galaxy research & bitcoin mining

@FullNodeChuck @bitcoinbeezy @hiroto_btc @GuerillaV2 @SimritDhinsa galaxy.com/research/white…

looks like @yugalabs just started inscribing their TwelveFold collection in the last 15 mins at block height 777872 this is the first one ordinals.com/inscription/51…

markets are tumbling across the board, and #bitcoin and digital assets are among the hardest hit. btcusd correlation to equities is at an all-time high. some thoughts on where we could be headed in the near term this thread is a summary. i sent this note to our clients moments ago. conta.cc/3wjbUdB you can sign up to receive our newsletter here gdr.email

last quarter saw more than $10bn invested in crypto/blockchain startups by venture capitalists, the biggest quarter on record, despite a huge retraction in all markets

where did the money go? 🧵 this thread is a summary. read the full report i sent to clients friday here:

docsend.com/view/pcqedfadn…

#bitcoin fees are at all-time lows. the craziest thing? fall 2021 was the first bull run not accompanied by a major spike in fees.

how is that possible? what does it mean? here's a thread explaining the most confounding (and awesome) chart in bitcoin. (remember june 2021) i explain the low-fee environment in 5 key trends:

1 - Segwit adoption
2 - increased use of Tx batching
3 - reduced OP_RETURN usage
4 - growth of the Lightning Network
5 - reduced miner selling

i summarize each here, in detail in this report for clients: docsend.com/view/jsgnh3vns…

IT'S OFFICIAL: yesterday (june 27 2021), saw the slowest #bitcoin blocks in TEN YEARS (since 2010). blocks times avg. 23min, instead of the target 10min. the latest "china ban" is the most disruptive action the bitcoin network has ever faced, but it will survive, adapt, thrive 👇 june 27, 2021 was the slowest block time by a LONG SHOT since 2010. here are the top 25 SLOWEST days since 2010 for #bitcoin's average block time. (we exclude 2009 because few people even knew bitcoin existed and there were many days with slow blocks).

regarding the darkside / colonial pipeline ransom, we looked on-chain & found a pattern that seems to show the funds ultimately flowed to a trading desk or exchange willing to comply with a US warrant.

there’s no evidence of a #bitcoin or bitcoin wallet security vulnerability👇🏼 on sat may 8, ransom funds seem to have been sent from a US exchange to a darkside address & moved around in several other txs that day.

after lying dormant for several weeks, on may 27, ~69.6 BTC eventually landed at the warrant address.

Video games generate more annual revenue than music and movies combined. No one is talking about this. Smartphone games are generating an enormous amount of revenue. via @NewzooHQ