Market updates

Bitget Hot Takes (April 15 - April 21, 2024) - Happy Bitcoin Halving

Intermediate

2024-04-23 | 10m

Bitget Hot Takes is the exclusive weekly newsletter series by Bitget Academy, which sums up BGB performance, what's new at Bitget, and the latest market movements.

The latest Bitget Hot Takes can be found here: All About Bitget | Market Updates

Central Themes

• Bitcoin Halving didn't bring down transaction fees as expected as Runes protocol launched on the same day.

• IBIT achieved net inflows for 70 consecutive days.

Week 16: Bitcoin Halving... And Runes Protocol

The recent launch of the Runes protocol coinciding with Bitcoin's halving event has significantly altered the economic landscape for Bitcoin miners. Typically, a halving reduces the block reward by 50%, which should theoretically cut miners' revenue similarly. However, the Runes protocol has introduced a new mechanism for creating fungible tokens directly on the Bitcoin blockchain, leading to an unexpected surge in transaction fees. On the day of the halving and the Runes launch, average transaction fees skyrocketed to record levels, more than compensating for the reduced block reward. This has not only cushioned miners against the expected drop in income but has actually increased their earnings compared to pre-halving figures.

Furthermore, Runes represents a pivotal development in the functionality and utility of the Bitcoin network. Traditionally viewed as a digital gold-like store of value, Bitcoin’s capabilities are expanding, bringing it closer to networks like Ethereum, which are known for their tokenisation features. Runes allow for the creation of various types of tokens, which could include everything from memecoins to more traditional asset-backed tokens, thus broadening the potential use cases of Bitcoin. This enhancement is likely to attract a new wave of developers, users, and investors, poised to explore and expand the new functionalities introduced by Runes. Mining stocks did not follow the broader negative trend as intensely thanks to the launch of Runes protocol.

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Bitcoin and other major cryptocurrencies have been impacted by a variety of macroeconomic factors, including a strong U.S. Dollar Index (DXY), hawkish Federal Reserve rhetoric, and geopolitical tensions. The strong dollar and high-interest rates make riskier assets like cryptocurrencies less attractive, prompting investors to pull out in search of safer havens or better yields elsewhere. Additionally, geopolitical tensions can increase market volatility, leading to rapid sell-offs as traders seek to reduce exposure to uncertain market conditions. As a result, Bitcoin and Ethereum saw rapid outflows from exchanges and both spot and futures Bitcoin ETFs experienced a net outflow last week.

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BlackRock's spot bitcoin ETF, known as IBIT, has witnessed a significant trend of consistent inflows, achieving net inflows for 70 consecutive days, positioning it among the top ten exchange-traded funds for the longest daily streaks of inflows. This impressive sequence coincided with the period leading up to and including the Bitcoin halving event. The total inflows into IBIT last week stands at US$247 million, followed by FBTC's US$38.7 million and HODL's US$10.7 million. It's also worth noting that BITX, the only leveraged Bitcoin fund sofar, saw US$82,972,000 in inflows last week, which is 2.5 times higher than the number recorded in W15.

All of these, when combined with the fact that Bitcoin ETFs, although also affected, show a lower magnitude of decline compared to broader indices like the NASDAQ Composite and S&P500, demonstrates robust interest and strong investors' confidence amidst broader market conditions.

Setting The Tone: Monday Performance

The negative funding rate of -0.0185% for Bitcoin indicates a prevailing bearish sentiment, where more traders are paying to hold short positions than long. This is primarily influenced by the above-mentioned macroeconomic conditions, which strengthen the U.S.-Dollar, diminishing the appeal of non-yielding assets like Bitcoin.

The long/short ratios for Bitcoin (49.76% long vs. 50.24% short) and Ethereum (47.01% long vs. 52.99% short) also reveal a market that leans slightly towards bearishness. This slight dominance of short positions is likely due to the same macroeconomic and geopolitical pressures impacting funding rates. Additionally, some may have adopted short positions to hedge against possible volatility or disappointment post-halving.

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Overall, these metrics reflect a cautious market environment, with traders showing a preference for defensive strategies amid economic uncertainty and potential market downturns influenced by external macroeconomic and geopolitical factors.

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