Bitcoin's Illusory Monday, the Shift to Mainstream Accessibility, and Lightning Labs' Multi-Asset Vision

• Bitcoin surged to almost $30,000 on the rumor of the SEC approving BlackRock's spot-bitcoin ETF application
• Lightning Labs introduced 'Taproot Assets,' envisioning a multi-asset Bitcoin network
• BitGo acquired the crypto wealth management platform HeightZero

Bitcoin's illusory Monday and Lightning Labs' multi-asset vision

The cryptocurrency market demonstrated modest growth, with a 3% collective gain, primarily led by bitcoin which increased its dominance to over 51% during the week. Among blue chip names, bitcoin showed a sturdy 5.4% week-on-week increase, while ether experienced a slight 0.2% decline. Notably, bitcoin cash also closely tracked bitcoin's gains, posting a 6.1% increase compared to the previous week.

In the past week, the SEC's decision not to appeal its case against Grayscale has stirred anticipation for a potential transformation of GBTC into a spot ETF. The GBTC discount to the net asset value has dropped to under 15%, a notable shift from being just short of 50% at the beginning of the year. According to data from CryptoQuant, by Wednesday over 33,500 BTC had been moved from exchanges to cold storage since last Friday, resulting in multi-year lows in exchange reserves. This suggests that long-term holders are anticipating a bullish future price movement.

On Monday, bitcoin experienced a brief rally, nearing the $30,000 mark, but it quickly retracted due to a false report about the SEC's approval of BlackRock's spot-bitcoin ETF application. Although the erroneous post was deleted within 30 minutes, it generated enough activity to significantly impact prices, leading to over $100 million in liquidations within an hour. CoinGlass data revealed that approximately $81 million in short positions were liquidated during the move to $30,000, while $31 million in long positions met the same fate during the correction.

In a week rife with deceptive reports, a false claim about bitcoin ETF approval wasn't the only curveball. A Bloomberg post suggested that Hong Kong-based BC Technology might consider selling its crypto exchange OSL at a valuation of 1 billion Hong Kong dollars ($128 million). BC Technology released a statement on Tuesday refuting the reports as "factually inaccurate and highly misleading." The statement also noted an "unusual movement" in the trading volume and share price of BC Technology. However, the firm's board mentioned that it was unaware of any specific reason for this volatility.

Amidst these market fluctuations and developments, another significant event unfolded this week. Lightning Labs introduced its Taproot Assets protocol on the main network, a development that has the potential to transform Bitcoin into a multi-asset network by enabling the issuance of stablecoins and other assets through Bitcoin and Lightning. The key challenge for Taproot Assets will be managing this growing demand effectively while preventing network congestion similar to what was experienced when minting BRC-20 tokens via the Ordinals protocol earlier this year.

From niche to mainstream: Where approvals, tools, and financial giants align

Cryptocurrency custodian BitGo has revealed its acquisition of HeightZero, a company offering software tools for wealth managers looking to incorporate crypto and digital assets into their clients' portfolios. The financial specifics of the deal remain undisclosed. HeightZero specializes in portfolio rebalancing, statement generation, tax loss harvesting, and automated billing for crypto clients. The firm had been utilizing BitGo's custody services before becoming part of the larger organization.

With the rising probability of spot-bitcoin ETF approval, there has been a noticeable surge in interest and activity directed towards mainstream wealth managers and regulated investment advisors (RIAs). Unchained, a bitcoin-native financial services provider, has launched Sound Advisory, an advisory service tailored for high-net-worth individuals (HNWIs) in response to the lack of bitcoin-native registered investment advisors (RIAs). This service connects HNWIs with "bitcoin-competent" financial planners to create distribution and utilization strategies, and address tax and inheritance matters. Separately, according to news reports bitcoin miner Marathon Digital (MARA) is planning to diversify its digital asset storage, adding Fidelity Digital Asset as a second custody partner.

Bitcoin saw another surge on Wednesday as Fidelity joined the list of firms amending their spot-bitcoin ETF filings, indicating active discussions between relevant parties and the U.S. Securities and Exchange Commission. If the actual approval materializes, given the current market positioning, it has the potential to trigger a significant and swift market rally. This convergence of bitcoin ETF approval, the availability of tools for registered investment advisors (RIAs), and traditional financial giants expanding their crypto services marks significant progress in increasing access to the masses. However, the true driver of demand will be mass adoption, which in turn hinges on real-world use cases.

Macro pulse 

Among TradFi assets, US equities dropped 1.4% from the previous week as stocks declined amid earnings and strong economic data fueled concerns of prolonged higher interest rates. 10-year US Treasury yields surged by 35bps, and the US Dollar index rose by 80bps. Escalating Middle East geopolitical tensions and a substantial draw in US crude storage contributed to a 4.5% surge in oil futures. Safe-haven flows drove the Gold & Silver index up by 4% compared to last week.

Note: Weekly (7 calendar day) performance figures are as of 8am SGT on October 19, 2023

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