Crypto Markets Decline, ETF Inflows Rise, New Crypto Banking Blueprint Ahead?

• BTC ETFs pulled in $1B, while ETH ETFs saw $0.5B in inflows
• BlackRock to list bitcoin ETP in Europe
• Cboe BZX Exchange proposes options trading on spot ETH ETFs

Crypto stays in the red, ETF inflows hold steady, MSTR evolve from holder to brand

Crypto markets extended their decline for a second straight week, bringing total market capitalization down to $3.2 trillion, while bitcoin dominance climbed above 60%. Among the blue chips, bitcoin fell by 6.8% compared to the previous week while ether posted a weekly decline of 10.4%. In the US spot ETF market, BTC ETFs saw over $1 billion in net inflows over the past 5 trading days, while ETH ETFs added $0.5 billion. US spot bitcoin ETFs took in larger inflows in January than the previous month, coinciding with President Donald Trump's return to the White House. In January, the 12 spot bitcoin ETFs recorded approximately $5.25 billion in net inflows for the month, rising from $4.53 billion in December. BlackRock’s IBIT topped the list, attracting $3.23 billion in inflows.

Despite the price drop, filings for new crypto investment products remain active. Following the success of its US spot bitcoin ETF, BlackRock is reportedly developing a bitcoin-linked exchange-traded product (ETP) for Europe, Bloomberg reports citing anonymous sources. The product is expected to be domiciled in Switzerland. Meanwhile, Cboe BZX Exchange has proposed amending Rule 19.3 to allow the listing and trading of options on spot ether ETFs. This mirrors a pending proposal from NYSE American currently under SEC review. The filing specifically references the Bitwise Ethereum ETF, the Grayscale Ethereum Trust, the Grayscale Ethereum Mini Trust, and any trust holding ether. Under existing rules, options can be traded on fund shares tied to financial instruments, money market assets, precious metals (classified as commodities), and bitcoin (also recognized as a commodity). The filing argues that Ethereum-backed ETFs operate similarly. Options trading on spot bitcoin ETFs launched in November 2024.

MicroStrategy, the largest corporate holder of bitcoin, revealed a rebrand on Wednesday to highlight its crypto-focused business. The company will now operate under the name Strategy. According to the press release, the new logo features a stylized “B” to symbolize the company’s bitcoin strategy and its role as a “bitcoin treasury company”. The company holds a total of 471,107 BTC, valued at approximately $45 billion (at the time of writing), and recently concluded a 12-week streak of BTC acquisition. Strategy posted a fourth-quarter net loss of $3.03 per share, a sharp decline from the $0.50 per share profit recorded a year earlier. The loss stemmed from an impairment charge on its BTC holdings. The company opted not to adopt the new fair value accounting rule for digital assets introduced by the Financial Stability Accounting Board (FASB) last year but plans to implement it starting in the first quarter of 2025. While the rule remains optional through the end of 2024, it will become mandatory in early 2025 for corporations holding digital assets.

CMS Holdings recently posted an insightful thread on X, sharing thoughts on the current cycle. Bitcoin is only about 1.5x its previous peak, ether barely surpassed its prior high, mostly due to staking, and Solana briefly exceeded its last cycle’s top. The rally seems largely driven by Saylor’s BTC advocacy and ETFs helping assets recover 2021 levels, yet broader inflows remain weak, with non-BTC assets struggling to attract new capital. Speculative money has shifted toward memecoins, but their short-lived popularity means their total market cap is smaller than what major alts like AVAX commanded last cycle. Rather than new liquidity driving growth, assets are rotating with no real depth or momentum to push fresh highs. While hype-driven narratives like Trump-related tokens engage crypto natives, it’s unclear if they’re pulling in capital from outside the ecosystem. The market feels stagnant, with gains in one area offset by losses elsewhere, resulting in neutral overall flows. Liquidity is thin, venture funding continues to support alts but lacks exits, and valuations remain weak. Some funds are thriving, but the broader market is lagging. It’s possible that speculative venture capital has shifted to AI, or the overwhelming number of tokens is stretching demand too thin, forcing a recalibration.

‍Disrupting the status quo, a new crypto banking blueprint on the horizon?

David Sacks, the newly appointed White House AI and crypto czar, is working closely with lawmakers to develop regulatory frameworks for digital assets, with a primary focus on stablecoins. Sacks expressed optimism about moving legislation through both the House and Senate within the next 6 months to establish clear guidelines for stablecoin use. Stablecoins, cryptocurrencies pegged to real-world assets like the US dollar, have become more popular overseas, prompting US lawmakers to promote domestic stablecoin issuance to reinforce the dollar's dominance in digital finance. Supporters like Sacks believe this could drive significant demand for the dollar and lower long-term interest rates.

Sacks was joined by key congressional leaders at a press conference to announce early steps in shaping US crypto policy, including backing a stablecoin bill proposed by Senator Bill Hagerty. This bill aims to create a clear regulatory framework for stablecoins. Sacks also mentioned that his task force will explore the feasibility of establishing a bitcoin reserve, an idea suggested by President Trump during his campaign. Meanwhile, the SEC has shifted its approach to digital asset regulation under new leadership. Commissioner Hester Peirce, now leading the SEC's Crypto Task Force, has outlined priorities to provide transparent and predictable regulations. These include clarifying which crypto assets are subject to securities laws, creating a path for regulatory approval for token issuers, and ensuring compliance without stifling innovation. Peirce emphasized that while the SEC seeks to foster industry growth, it will remain firm against fraud.

US lawmakers are actively addressing the issue of crypto debanking, a growing concern over whether the cryptocurrency industry is being excluded from the banking system. This issue has gained significant traction in recent weeks, with Republican leaders spearheading investigations and calls for hearings to probe the impact of debanking on the industry. One such hearing, held by the Senate Banking Committee, focused on the "real impacts of debanking in America," with Senator Tim Scott expressing alarm over stories of financial institutions cutting off services to digital asset firms, political figures, and businesses with conservative affiliations. Another hearing is scheduled for the House Financial Services Committee to further address the topic.

The crypto debanking issue has become a flashpoint in Washington, as crypto firms have voiced concerns about the difficulties they face in establishing and maintaining accounts with US banks. Senator Elizabeth Warren, who has been a vocal critic of the crypto industry, found some common ground with crypto advocates, condemning the practice of debanking businesses without clear explanations. Warren noted that the Consumer Financial Protection Bureau (CFPB), which she championed, has been working to combat such practices, underscoring the need for regulatory action to prevent banks from unjustly shutting down accounts. Her comments highlighted the necessity of financial inclusion for the crypto industry, provided firms are adhering to the law.

Meanwhile, the Federal Deposit Insurance Corporation (FDIC) has come under scrutiny for its role in crypto debanking. The FDIC released 175 documents detailing how it supervised crypto-related activities, revealing that many banks faced resistance when attempting to engage with crypto firms. FDIC Acting Chairman Travis Hill acknowledged that banks often encountered significant delays or outright refusals when seeking approval to expand their crypto-related services. This has led to legal action, with Coinbase suing the FDIC over its alleged attempts to restrict crypto industry access to banking services. The lawsuit centers around the FDIC’s issuance of "pause letters" between March 2022 and May 2023, instructing financial institutions to halt or limit their engagement with crypto activities.

The ongoing investigations and legal battles underscore the mounting pressure on lawmakers and regulators to clarify and create a more transparent regulatory framework for the crypto industry. As the debate around debanking continues, both the SEC and lawmakers are under scrutiny to ensure that crypto firms can access essential financial services while balancing the need for investor protection and regulatory oversight. The outcome of these proceedings will likely shape the future of crypto’s relationship with traditional banking institutions in the US.

‍Macro pulse ‍

Among TradFi assets, oil futures declined 2.2% on the week, while US equities edged up 0.4%, led by tech stocks. Market sentiment was shaped by concerns over tariffs, with China weighing an Apple probe, and the US and the EU considering investigations into Pinduoduo (PDD) and Shein. The EU is also exploring potential action against US tech giants in response to tariffs. On monetary policy, Fed officials signaled a patient stance — Jefferson echoed Powell’s view that rate cuts are not imminent, and Barkin emphasized a wait-and-see approach while still anticipating cuts this year, and Goolsbee remained cautious citing fiscal policy uncertainty. Elsewhere, the US Dollar index fell by 0.4% and the 10-year US Treasury yields slipped by 11 bps week on week while the Gold and Silver Index rallied by 8%.

‍_{*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on February 06, 2025} 

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