Chaining Links and Uniswap Winks Amidst ETF Launch Analysis Veil

• Bitcoin ETF sees nearly $1B in net inflows in three days
• Chainlink CCIP integrates Circle's CCTP for cross-chain USDC transfers
• Uniswap allocates $300,000 for V4 front-end development

BTC ETF debut, walking the tightrope of hit or miss

The majority of crypto assets traded in red this week. The total market cap of the crypto universe posted a weekly decline of 5.1% and the bitcoin dominance dropped below 50%. Among the blue chips, bitcoin fell 8.3% compared to last week. In contrast, ether outperformed BTC for the second consecutive week posting a weekly decline of 2.1%. Notably, newly approved spot bitcoin exchange-traded funds (ETFs) recorded approximately 21,000 BTC in net inflows (equivalent to $894 million at the prevailing price of $42,600) over the first three full trading days ending Tuesday.

BlackRock's iShares Bitcoin Trust (IBIT) attracted the most inflows with 16,362 bitcoin, followed by Fidelity's Wise Origin Bitcoin Fund (FBTC) with 12,112 bitcoin. However, Grayscale's Bitcoin Trust (GBTC) saw significant outflows, losing about 25,000 bitcoin, impacting the industry's overall inflow. Until the recent approval of spot bitcoin ETFs by the US Securities and Exchange Commission, GBTC operated as a closed-end fund, later converting to an ETF alongside new products from companies like BlackRock. Initially charging a 2% management fee and holding about 630,000 bitcoin, the ETF version of GBTC now charges a reduced 1.5% management fee. Despite the reduction, this fee is still at least 100 basis points higher than its new competitors. Furthermore, the conversion to an ETF eliminated the fund's trading discount to net asset value (NAV), providing GBTC holders with an opportunity to either fully divest or reallocate to other recently introduced ETFs with lower management fees.

There has been ongoing debate since the debut of bitcoin ETFs regarding whether it has been a success or failure. One faction perceives it as a flop citing the subdued price action in bitcoin, while the other faction attributes success to a robust liquidity profile. According to a post, the total trading volume in the recently listed bitcoin ETFs significantly surpassed the combined daily trading volumes of the 500 ETFs launched in 2023. A healthy liquidity profile, net inflows, and subdued price action often indicate the accumulation phase of a cycle. Anyone familiar with the pace of market developments recognizes that it is premature to declare the launch a success or failure. An insightful assessment may be more meaningful after at least a quarter or two, if not by the end of the year.

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Linking chains, Uniswap's $300K pledge and Dookey Dash

Amidst a general sell-off in most major cryptocurrencies, Chainlink stood out with a 4.6% rally this week. The uptick came in conjunction with the announcement of Chainlink's integration of Circle’s CCTP protocol into its own CCIP system. This integration introduces fresh use cases for USDC, enabling seamless and secure cross-chain transfers, payments, and other DeFi interactions within protocols built on Chainlink CCIP. Chainlink’s CCIP serves as a versatile cross-chain messaging framework, empowering developers to transfer data and assets across chains through a smart contract-based mechanism, facilitated by Chainlink oracles. Circle's CCTP represents a standardized bridge protocol, facilitating native USDC transfers by employing a burn-and-mint process for the stablecoin across supported chains. Currently, CCTP is accessible on seven networks, including Arbitrum, Avalanche, Base, Ethereum, Noble, OP Mainnet, and Polygon PoS.

The increased activity in Uniswap is attributed to traders positioning themselves ahead of the anticipated UniswapV4, which introduces significant enhancements to the decentralized exchange protocol. Notable features include "hooks" for customizing liquidity pools, a singleton design for more efficient cross-pool liquidity, and the reintroduction of native ETH trading pairs. In an ongoing effort, Uniswap has earmarked $300,000 to assemble an engineering team tasked with developing the V4 front-end for new pool launchers and liquidity providers. The forthcoming version aims to introduce innovative features like on-chain limit orders, automatic deposits to lending protocols, and auto-compounded liquidity provider fees, with the overarching goal of enhancing the overall user experience.

Apecoin, the digital currency linked to Yuga Labs's Bored Ape Yacht Club (BAYC) ecosystem, experienced a 9% surge week on week. The bulk of these gains occurred on Wednesday following the announcement of a new free-to-play edition of the BAYC-themed game, Dookey Dash. Previously exclusive to holders of the Bored Ape Yacht Club’s Sewer Pass NFTs, the game's accessibility has expanded. A promotional trailer for this edition prominently featured ApeCoin logos, although Yuga Labs has yet to confirm whether in-game rewards will be distributed via ApeCoin. Per a twitter post from Yuga Labs, the NFT collection owners, including Bored Apes and Mutant Apes, will receive special "token benefits" in the upcoming edition of Dookey Dash. The game, scheduled to launch in February, will be available on iOS, Android, Mac desktop, and Windows desktop platforms.

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Macro pulse 

Among the traditional financial assets, the US equities faced downward pressure, experiencing a 0.9% decline compared to the previous week. The market responded to robust retail sales data, which heightened concerns that the Federal Reserve is in no hurry to reduce interest rates. Concurrently, the US Dollar index exhibited strength with a 1.1% rally and 10-year US Treasury yields rose by 8 bps, while the Gold and Silver saw a significant drop of 4.9% week on week. Elsewhere, Oil futures witnessed a 1.6% rise from the previous week supported by OPEC's announcement on Wednesday predicting robust growth in oil demand for 2025.

*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on January 18, 2024 

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