Monthly Review of February 2024

This monthly review examines the most significant cryptocurrency-related news in February. The most significant cryptocurrency news in February was related to the strong popularity of US Bitcoin spot ETFs, Fidelity's positive outlook on cryptocurrencies, ETF issuers' decision to bring transparency through Chainlink's solution, Reddit's bitcoin and ether purchases, MicroStrategy's bitcoin purchases, and Coinbase's issues.

              
February in the cryptocurrency markets
February was a historically good month for cryptocurrency price development. The best-performing cryptocurrencies offered by Northcrypto were Bitcoin, Ethereum, and Dogecoin, whose prices rose approximately 45-48 percent during the month. Bitcoin's price crossed the important $60,000 mark and is now not far from the all-time-high dollar price set in November 2021. Both Bitcoin and Ethereum saw their highest-ever euro-denominated increases during the month. Additionally, the percentage increases were the highest in over three years. ApeCoin saw a price increase of about 35 percent, while Litecoin, Chainlink, Aave, and Polygon prices rose approximately 23-27 percent. The surge in Bitcoin and the broader cryptocurrency market was likely most influenced by the high popularity of US Bitcoin spot ETFs, which will be discussed next.
US Bitcoin spot ETFs in high demand
The combined net inflows into US Bitcoin spot ETFs exceeded $3 billion on February 12th, just about a month after the ETFs began trading on January 11th. This is a significant achievement, as it took nearly two years for gold ETFs issued in the early 2000s to achieve the same level. Inflows into ETFs accelerated towards the end of February, reaching over $670 million per day at the end of the month. On average, ETFs attracted over $300 million in net inflows per day in February. By the end of February, nine new ETFs had raised over $21 billion in total. The ETF with the most assets was from the world's largest asset manager, BlackRock, with assets exceeding $10 billion at the end of February. BlackRock surpassed the $10 billion mark faster than any previously issued ETF.
Fidelity's positive outlook on cryptocurrencies
In February, Fidelity Investments Canada, the subsidiary of the world's third-largest asset manager, Fidelity, added its Bitcoin spot ETF to its four All-in-One ETF portfolios. In addition to the Bitcoin spot ETF, these ETFs consist of stocks and fixed-income products. Depending on the ETF, the share of Bitcoin spot ETF ranges from 1 to 3 percent. According to Fidelity, such an allocation of cryptocurrencies increases portfolio's diversification. Additionally, Fidelity believes that such an allocation can achieve higher returns and act as a hedge against risks associated with traditional markets.
Another interesting news related to Fidelity emerged in February, as the asset manager's cryptocurrency-focused Fidelity Digital Assets division published a report discussing various metrics of Bitcoin and Ethereum. Based on the metrics, Fidelity provided a positive, neutral, or negative outlook on Bitcoin and Ethereum in the short term (less than 1 year), medium term (1-5 years), and long term (over 5 years). Fidelity had a positive outlook on Bitcoin across all mentioned time frames. For Ethereum, Fidelity had a positive outlook in the short and long term and a neutral outlook in the medium term.
ETF issuers bring transparency through Chainlink's solution
The asset managers behind one of the Bitcoin spot ETFs launched for trading in January, Ark Invest and 21Shares, announced in late February that they would make the bitcoin holdings behind the ETF public. This will be achieved using Chainlink's Proof of Reserve platform. According to comments from the asset managers, the collaboration with Chainlink provides ETF investors with security and transparency, among other benefits.
Reddit buys bitcoin and ether
Social media platform Reddit, used by over 50 million daily users, announced in February that it had purchased bitcoin and ether with its excess cash reserves. The amounts of purchases were not disclosed in the announcement. Reddit also mentioned receiving ether and Polygon's MATIC tokens from the sales of virtual products. These likely refer to proceeds from sales of NFTs on Reddit's platform. As part of its New York Stock Exchange listing application, these matters were disclosed in Reddit's submission to the SEC, the regulator overseeing US securities markets.
MicroStrategy buys more bitcoin
US-based company MicroStrategy, which offers business intelligence solutions, cloud-based services, and mobile software, announced two bitcoin purchases in February. The total value of the purchases was just under €180 million. With these purchases, MicroStrategy's bitcoin holdings reached 193,000 bitcoins, valued at around €11 billion at the end of the month. The average purchase price for MicroStrategy is just over €29,000. This means that MicroStrategy's bitcoin holdings were approximately 95 percent, or over €5.3 billion, profitable at the end of the month.
Coinbase faces issues amid cryptocurrency market surge
The largest US cryptocurrency exchange, Coinbase, faced issues as Bitcoin's price rose above $63,000 on February 28th. This was at least partially responsible for the temporary downturn in the cryptocurrency market around the same time. Many Coinbase users were unable to trade at that time, and the balances of several user accounts showed zero, even though there were funds in the accounts. According to a post by Coinbase's CEO and founder Brian Armstrong on community platform X, the issues were due to the massive growth in Coinbase's usage at that time. Coinbase had reportedly tested its operations under ten times the load, but this tested load was exceeded on February 28th. Coinbase returned to normal operation within a few hours, and the cryptocurrency market also recovered quite quickly from the sudden downturn.
Summary
February was an exceptionally good month for cryptocurrency price development. This led many to speculate whether Bitcoin's dollar-denominated price could reach a new record high even before April 20th, when Bitcoin's block reward halving is expected to take place, for the first time in the history of the market's first cryptocurrency. The most significant reason behind the surge in Bitcoin and the entire cryptocurrency market was the hundreds of millions of dollars in daily net inflows into US Bitcoin spot ETFs. ETFs broke several records, and net inflows accelerated towards the end of February. It will be interesting to see how the interest in ETFs evolves in the coming months.
Regarding asset managers, there was also other positive cryptocurrency news in February. Fidelity's decision to add its Bitcoin spot ETF to its four ETF portfolios is a significant positive signal of Bitcoin's rise alongside traditional investment products. Fidelity's positive outlooks on Bitcoin and Ethereum across different time frames also increase confidence in the near future of the two largest cryptocurrencies in the market. The decision of ETF issuers, Ark Invest and 21Shares, to leverage Chainlink's Proof of Reserve platform is a positive step for both ETF investors and Chainlink. Two new well-known actors have been added to the long list of traditional actors utilizing Chainlink's solutions.
Reddit's announcement of buying bitcoin and ether didn't come as a big surprise to many, as Reddit has been involved in the cryptocurrency market in the form of NFTs introduced to the platform. In addition, Reddit is a popular social media platform among cryptocurrency investors. Similarly, MicroStrategy's bitcoin purchases weren't surprising, as the company has committed to buying bitcoin whenever it has excess cash reserves. This has so far been a very successful strategy, as, for example, the company's stock has risen over 50 percent since the beginning of this year.
The issues faced by US exchange Coinbase reflect the recent increased interest in cryptocurrencies among so-called retail investors. Increased interest is also supported by search engine Google's search trends, which show growing interest in cryptocurrencies in February.

Ville Viitaharju
Cryptocurrency specialist
            

Last updated: 04.03.2024 15:30