Monthly Review of January 2024

This monthly review covers the most important cryptocurrency-related news from January. The significant cryptocurrency news in January was related to approved Bitcoin spot ETF applications in the United States, positive cryptocurrency comments from BlackRock's CEO, and FTX's intentions to repay its customers' funds. Positive progress was also made in relation to the Prospera Special Economic Zone, Tether's bitcoin purchases, and Bitcoin hashrate.

              
January in the Cryptocurrency Markets
The prices of the largest cryptocurrencies by market capitalization, namely Bitcoin and Ethereum, did not move significantly in January, as both prices were up about 2–3 percent. Among the cryptocurrencies offered by Northcrypto, Chainlink performed best, with its price up over five percent. The prices of other cryptocurrencies offered by Northcrypto were down in January. The price of Litecoin dropped over five percent, while Dogecoin and ApeCoin prices fell slightly over ten percent. The price of Polygon dropped over 15 percent, while Aave declined about 20 percent.
First Bitcoin Spot ETF Applications Approved in the United States
January 10 witnessed a long-awaited and historic event for cryptocurrencies when the U.S. Securities and Exchange Commission (SEC) approved the first Bitcoin spot ETF applications in the United States. A Bitcoin spot ETF refers to an exchange-traded fund whose shares are backed by actual bitcoins in the case of Bitcoin. The 11 approved ETFs started trading in the United States on January 11.
The popularity of Bitcoin spot ETFs surged exceptionally high in the first few weeks. Especially ETFs from the world's largest asset manager, BlackRock, and the third-largest asset manager, Fidelity, attracted a lot of interest. Both ETFs attracted net inflows of around 2.6 billion euros and 2.2 billion euros, respectively, during the first nine trading days of January.
The third ETF with significant trading volume was the Grayscale Bitcoin Trust (GBTC), which was converted into an ETF from a cryptocurrency trust. GBTC was the only approved ETF in January from which funds flowed out net. In the first few trading days, outflows were around 500 million euros per day, negatively impacting the price of Bitcoin. However, outflows decreased after the first few days, and by the end of January, they averaged less than 200 million euros per day. Overall, the situation regarding ETFs was better at the end of January than on the first trading days, with a total net inflow to ETFs of around 200 million euros per day.
BlackRock's CEO's Cryptocurrency Comments
Larry Fink, CEO of the world's largest asset manager, BlackRock, commented on cryptocurrencies in interviews following the approval of the company's Bitcoin spot ETF. Fink mentioned his belief in trends such as tokenization, which involves bringing traditional investment products into familiar token formats from cryptocurrencies. Fink also sees value in Ethereum spot ETFs awaiting approval in the United States. Also, Fink made positive comments about Bitcoin, stating that Bitcoin is not different from what gold was thousands of years ago, as Bitcoin is an investment that serves as a hedge for investors. By offering a Bitcoin spot ETF, BlackRock is trying, according to Fink, to provide investors with a tool to store wealth.
FTX Plans to Repay Customers' Funds
The resolution of the situation with FTX, which faced severe problems in November 2022, has been ongoing for over a year. In January, there was positive news about FTX's situation, as it was announced during a court hearing in the United States that FTX expects to be able to repay all its customers' funds. However, the full repayment of customer funds is based on FTX's situation at the time of bankruptcy, when the cryptocurrency market was quite low. This is naturally not a positive development for customers awaiting the return of their funds, as the cryptocurrency market has risen significantly since FTX's collapse.
Bitcoin Adopted as a Unit of Account for the First Time
The Bitcoin-positive special economic zone Prospera in Honduras Central America recognized Bitcoin as a unit of account for the first time in the world in January. The unit of account is one of the three generally recognized characteristics of money, in addition to being a medium of exchange and a store of value. As a result of the decision, businesses operating in Prospera can begin to measure the value of products and services in Bitcoin instead of the local currency or the U.S. dollar. The decision was justified, among other reasons, by people's economic freedom.
Tether Purchases €350 Million Worth of Bitcoin
Tether International Limited (Tether), which manages reserves for the stablecoin Tether (USDT) pegged to the U.S. dollar, announced in January that it had purchased 8,888 bitcoins for approximately €350 million. With the purchase, Tether's bitcoin holdings increased to 66,465 bitcoins. In May 2023, Tether announced its strategy to allocate 15 percent of its profits to bitcoin. After the latest purchase, Tether is the world's 11th-largest holder of bitcoin.
Bitcoin Hashrate Reaches New Record Highs
The hashrate of the Bitcoin network, which is the total computational power used for mining, reached new record highs in January. According to blockchain analytics firm Glassnode, the hashrate reached nearly 640 exahashes per second (EH/s) in January. For comparison, the hashrate was around 270 EH/s a year ago. Historically, Bitcoin price has positively correlated with hashrate, so the rise in hashrate to new record highs bodes well for Bitcoin price performance.
Summary
Undoubtedly, the most significant news in January was the approval of 11 Bitcoin spot ETF applications in the United States. ETFs, which gained great interest in the first few weeks, make Bitcoin an even more viable investment option from the perspective of traditional investment markets. Bitcoin receives more media coverage with ETFs, and positive comments about Bitcoin from BlackRock's CEO in U.S. television broadcasts positively influence the number of people interested in Bitcoin. The resolution of the situation with FTX, a cryptocurrency exchange that faced severe problems in 2022, has been ongoing for over a year, and the news of future repayments of customer funds is relieving for many who lost funds during FTX's collapse. In addition to news related to Bitcoin spot ETFs, Bitcoin was positively featured in Prospera, Tether's bitcoin purchases, and the record-high hashrate. Both Tether's bitcoin purchases and the rise in hashrate to new record highs were positive, albeit somewhat expected, news. Although Prospera's decision to make Bitcoin a unit of account is a relatively small step in itself, many cryptocurrency experts believe that similar decisions will be seen in other regions and countries in the future.

Ville Viitaharju
Cryptocurrency specialist
            

Last updated: 06.02.2024 15:00