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tl;dr: ETF demand overwhelms, ETH’s strength, crypto x AI test pump, UNI’s fee switch & the growing SEC pressure, BTC ordinals explosion & higher for longer
BTC dominance 52% | ETH dominance 19% | DeFi TVL $82B |
Total Crypto Market Cap $2.08T | Stablecoin Supply $139B |
Whew, it feels good to be so back. Both through writing and the price appreciation of our precious tokens. The obvious underlying reason for the continued momentum has been the speculation and demand for BTC, and to a continually growing extent ETH, ETFs.
The decade+ wait of spot BTC ETFs have now been trading for ~30 days and their debut has been a massive success. While initially throttled by GBTC’s liquidity unlock, net inflows to BTC ETFs have drastically surpassed even the most bullish projections. The “sell the news” crowd was initially correct as BTC traded from an approval high of ~50k to 38.5k in the following two weeks subsequent approval, but steady inflows have since enabled BTC to climb back above 50k.
As the calendar turned from January to February, observing the flows into the ETF products along with declining GBTC outflows provided a clear picture that BTC and the entire crypto market were headed higher.
As BitMEX’s data shows, the net inflows began significantly increasing throughout the second week of February. Between February 8th through the 16th, inflows amounted to $3.22B and net outflows have occurred only once since January 25th. Since the products’ launch on January 11th, the cumulative net inflows now sits at a total of $5.51B despite the forced selling of GBTC and the closing/unwind of market participants that had been positioned long into the approval.
Simply put, every possible metric surrounding the launch of BTC’s long awaited spot ETFs signal that the market is headed higher. This doesn’t mean that the repricing higher occurs in the next hour, day, week or even months but what it does mean is that the market currently has a substantial underlying bid while previously massive amounts of GBTC selling are diminishing. Always remember, higher for longer.
Currently, BTC (50.6k-52.99k) & ETH (2.88k-3.03k) are breaking out of the relatively tight ~5% ranges they were previously consolidating in but the general market sentiment somehow appears almost fearful. I’m not sure how it’s possible but there’s a clear price to sentiment mismatch that I will continue to take advantage of by shoving every possible dollar into the market.
Where that money has been concentrated over recent weeks is AI tokens on both ETH & SOL, ETH & BTC ordinals. Since BTC’s spot approval, ETHBTC is up ~16%+ in a clear sign the market is positioning for what’s next. If you had prior doubts, it’s now absolutely clear market participants are onboard with running back the BTC ETF trade with ETH.
I have some slight hesitancy in the ETH ETF will undoubtedly be approved takes I’m not going to ever fight the trends and narratives the market creates. If you’re tradfi, one of these ETF issuers, or any market observer what is your core takeaway from the month+ of BTC ETFs? The obvious answer is that you start accumulating ETH and doing everything in your power to ensure that spot Ethereum ETFs are approved on May 23rd.
The insane volume traded and initial inflows translates to massive fees collected which creates an incredibly enticing carrot for Larry, Fidelity and financial institutions throughout the entire tradfi ecosystem to rally behind. We’re now 3 short months away from the white hot market having the additions of the BTC halving and an ETH ETF approval. Stop fighting the trends, embrace the new structure and realize that the long-term outlook for the space has never been better.
In a market-shocking move, a governance proposal from the Uniswap Foundation appeared Friday morning titled, “Activate Uniswap Protocol Governance”. More specifically, the proposal which will open for UNI holder votes on March 1st, proposes to “upgrade the protocol such that its fee mechanism rewards UNI token holders that have delegated and staked their tokens.”
While there has been endless speculation and governance initiatives along this same line the past, this proposal, to share fee revenue with UNI delegators and stakers, comes directly from the Uniswap Foundation. The UF’s weight was clearly felt through the market reaction as UNI quickly repriced from $7.16 to $12+ while UNI’s market cap expanded from $5.4B to $9.2B in a brief hour. As a result, UNI is now the 16th most valuable token by market cap and adding, but most importantly (so far) keeping, ~$3B worth of market cap appreciation signals a likely governance approval.
As mentioned, UNI fee switch proposals are not a new thing (discussed & proposed since at least 2022) but the market’s reaction & the UF’s influence in creating the proposal are clearly being bought in a classic “this time’s different” scenario. Uniswap Labs, the entity behind Uniswap, has previously blacklisted tokens & addresses, created decentralized alternatives to their front end, said they may share wallet addresses and user information with third parties if litigated or subpoenaed and have shot down any comment, discussion or potential proposal on the “fee switch” for holders as it’s been considered a nonstarter mostly due to antiquated US regulations.
While UNI could’ve hypothetically adopted this model years ago, they simply haven’t entertained that option until now. Protocols sharing revenue with token holders, particularly US based entities, is a potentially massive step forward for the entire crypto ecosystem and UNI, as a market leader, sets the example for countless other protocols.
Admittedly, I’m potentially reading too far between the lines but the significance of UNI’s proposal is clearly being bought with billions of real dollars (sort top performing coins by 7d & 24h and you’ll see DeFi tokens, led by UNI, flooding the list). The UF’s proposal could also fail while meaning absolutely nothing but the market reaction and broader implications are worth considering (and no, it’s not a new paradigm for DeFi tokens pls don’t go buy them after they’ve all gained ~20%+ in the past 24h). This proposal, imo (not a lawyer & NFA), puts further burden on the SEC and slightly improves the likelihood of an ETH ETF approval in May as the regulatory body is increasingly pressured.
UNI’s, and subsequently all applicable tokens, potential fee switch adds subtle pressure to a SEC that is dealing with scrutiny from all angles. This week, Legit Exchange and the Crypto Freedom Alliance of Texas filed the first proactive lawsuit against the SEC by a crypto market participant as they are, “seeking a declaration that secondary market sales of digital assets are not the sales of securities.”
In addition to that lawsuit and UNI’s proposal, optimism continues to grow around Coinbase’s odds of the SEC’s allegations being dismissed and Kraken joined the fight alongside Coinbase and Binance filing a lawsuit of their own.
More importantly, it’s not just the crypto sector that is increasing pressure. Larry Fink is saying we should tokenize everything, the largest bank lobbying groups are joining forces to urge the SEC to repeal the erroneous SAB 121 rule that currently prevents US banks from engaging in the custody of digital assets (“As Bitcoin Rallies, Banks are Pushing US Regulators to Change Crypto Guidance”) & Morgan Stanley is highlighting stablecoins’ ability to strengthen the US dollar’s global dominance by saying,
“Dollar backed stablecoins are set to have a profound impact on the financial sector, potentially reshaping how money is moved across borders. Rather than challenge the dollar’s dominance, their continued evolution and growing acceptance by mainstream financial entities underscore their potential to significantly alter the landscape of global finance and in fact reinforce the dollar as the dominant global currency.”
We’re seeing growing signs of what we’ve been screaming about to what were perceived as deaf ears but it would appear as if they were always listening. This is going to shock you, but as soon as there’s a semblance of regulatory clarity (thankfully enforced by the rule of law of the US courts), financial service companies, banks, and the entire tradfi behemoth want their slice of the crypto pie (aka fees collected on custody & trading products).
Elsewhere, Ethena, the protocol behind the synthetic, decentralized dollar USDe, launched on mainnet this week to a flurry of conversation around its yield projections. Ethena takes stablecoin deposits and returns USDe at the target value of a dollar along with a juicy yield of 24% APY. That APY fluctuates weekly based on the protocols core function of generating yield through the previously large fund dominated trade of cash and carry arbitrage executed through using yield generating staked ETH as collateral to short ETH perpetual futures while collecting the funding rate + stETH yield.
The enticing APY combined with an impressive cohort of backers & the current markets infatuation with points (shards in Ethena’s case) has led to substantial demand. Ethena’s liquidity pools have reached their initial caps, the market cap of USDe has grown to ~$421M in 6 days and Ethena now makes up 5.61% of global ETH open interest. The shard (points) campaign launch is planned to run for 3 months or until USDe reaches $1B of supply (42.1% of the way there after 6 days).
Since Luna’s collapse, people are rightfully dismissing anything that promises high yield attached to a dollar deposit but comparisons between Luna and Ethena are incredibly misguided. While there remain risks to USDe, which are generally applicable to virtually everything in crypto, the team has, imo, properly highlighted them and provided backtested data that should quell the loudest skeptics. FWIW, I’ve personally deposited capital into the protocol and the trend of Ethena’s arbitrage strategy yielding “synthetic dollars” along with other yield bearing stablecoins will only grow moving forward. Ethena and its rapid growth should be the signal to gain a grasp of this sector now more than ever.
Looking ahead to this week, we have ETH Denver taking place and Blast’s highly anticipated L2 launch taking place. Some other things I’m constantly monitoring include:
BTC Ordinals — It was an impressive week for the BTC ordinal ecosystem as the volume transacted approaches $100M over the last 7d. I’ve previously written about ordinals eventual revival and feel more convicted than ever around that thesis. Fading ordinals in their still infant state will haunt people for years to come. NodeMonkes, the first original 10k pfp project inscribed on BTC, led the way as floor prices reached 0.4 BTC (~$20k) while the other top collections including Bitcoin Puppets, Quantum Cats & RSIC also repriced higher.
LINK, ONDO & RWAs — Larry’s leading the way with his “tokenize everything” comments. The takeaway from this should be identifying protocols that benefit from the growth of real world assets coming onchain. RWAs, DEPIN & AI are the categories that should see some of the largest growth over the next few years.
Solana Token Programs — Solana Labs announces new token extensions that “unlock rich native functionality designed for complex behaviors, without compromising on security or scalability”. Potential use cases include new base layer programmability for gaming, DAOs, DeFi, stablecoins, private transactions, optional KYC enforcement, payments & more.
Crypto x AI — OpenAI trying to raise $7 trillion dollars & Sora’s launch sent Worldcoin and the crypto x AI narrative into hyperdrive. The initial frenzy has since calmed but AI as a general trend & mindshare capture will continue to be up only. The entire AI crypto sector market cap sits at only $17.4B making up sub 1% of the total crypto market cap of $2.1T. There will be endless vaporware to avoid but if I could only long the marketshare of one specific crypto through 2025 the AI sector would be a close second to BTC ordinals.
Farcaster — I’ll save any ramblings as essentially every newsletter and/or podcast has covered it in recent weeks & simply say that if you have yet to join, change that. Frames sparked the frenzy and while hype endlessly front runs utility in crypto, Farcaster genuinely feels like the first, non-financialized crypto product that could go mainstream. My esteemed colleague terv has started a /replyguys channel that has grown to 8k+ people, read more on that here.
As a reminder, I’m always reachable @_tolks or at tolks@pageone.gg. If you want to sponsor the newsletter & reach an audience of 12.5k+ active market participants, pitch a guest post, tell us about your protocol or to collaborate on anything in general, you can always reach us at @PageOneGG.
funding:
Hack VC raises $150M for new venture fund focused on crypto & AI
a16z invests $100M in ETH restaking protocol EigenLayer
RW3 Ventures raises $60M for early-stage crypto fund
Analog, blockchain interoperability protocol, raises $16M @ $120M valuation
DePHY, DePIN infrastructure company, raises undisclosed amount @ $40M val
Lava Network, infrastructure for modular chain data access, raises $15M Seed
Architect, crypto trading infrastructure for institutions, raises $12M Seed
Fordefi, self-custodial MPC wallet company, raises $10M
Helius, SOL-based developer platform & infra provider, raises $9.5M Series A
Helika, AI-powered data/analytics for crypto gaming, raises $8M Series A
Blueprint Finance, native onchain credit protocol, raises $7.5M
Superform, cross-chain yield marketplace, raises $6.5M Seed
Flood, order flow management protocol, raises $5.2M Seed
Superfluid, ETH-based token streaming protocol, raises $5.1M
Inco, modular, privacy-focused L1, launches testnet, raises $4.5M Seed
Ultiverse, AI-powered gaming platform, raises $4M through private token sale
NodeShift, decentralized idle compute platform, raises $3.2M Seed
INIT Capital, liquidity hooks DeFi money market protocol, raises $3.1M
Fuzzland, AI-powered smart contract analysis, raises $3M Seed
Citrea, zero-knowledge BTC rollup, raises $2.7M Seed
news:
Circle, USDC stablecoin issuer, confidentially files for IPO; Circle also announced they stopped minting USDC on TRON’s TRX blockchain
USDT issuer Tether acquires $380M of BTC, now owns ~$3.4B worth of BTC; Tether’s reports $2.9B of Q4 profit, $5.4B of excess reserves in attestation report
PayPal’s stablecoin PYUSD market cap reaches $250M+, sees ~70% growth over the past month
Visa announces crypto loyalty rewards partnership with SmartMedia Technologies
CoinShares exercises option to acquire Valkyrie Funds after ETF approval
Coinbase continues global compliance expansion, partners with African stablecoin exchange Yellow Card
Block explorer Etherscan acquires Solscan
Brevan Howard partners with Libre Capital to tokenize their funds
Bankrupt lender Celsius has distributed $2B worth of crypto to creditors
MetaMask integrated into Robinhood’s trading platform allowing ease of crypto transfer & direct purchase
Reddit now holds '“immaterial” amounts of BTC & ETH on its balance sheet
Ripple plans to acquire Standard Custody & Trust Co. (along with their New York charter) to boost Ripple/XRP’s regulatory qualifications
Judge approves FTX Estate’s motion to sell 8% Anthropic stake, valued at $1B+
BTC miner Riot Platforms generated record $281M total revenue in 2023
Judge approves FTX Estate’s motion to sell 8% Anthropic stake valued at $1.4B+, estate anticipates paying all claims back in full
tokens & protocols:
ARB — Arbitrum’s Orbit (build L2/L3 chains using ARB) adds support for chains to use custom, or their native token, as the chain gas token; ARB DAO always approves between 25-45M ARB for protocols in Long Term Incentives Program
MATIC — introduces AggLayer focused on unifying liquidity through ZK proofs
HNT — partners w/ Telefónica to launch Helium Mobile Hotspots in Mexico
SNX — deploys v3 of its perps protocol on Coinbase’s Base L2
STRK — community approves vote to use STRK as native gas token
FXS — announces FXTL airdrop snapshot will be taken on March 6th
INJ — releases omnichain domain name service for INJ & SOL wallets
SOL/FIL — SOL integrates FIL as decentralized storage provider for block history
Tensorplex Labs — introduces liquid staking token stTAO
RBN — Aevo, platform for derivs & options plans to open its OP-L2 to protocols
ONDO — RWA/tokenization platform announces partnership with Aptos (APT)
ACX — bridging protocol announces intent-based V3
DUSK — L1 launches incentivized testnet ahead of eventual mainnet
Berachain — officially launches long awaited public testnet
Asteroid — Delphi & Astroport launch inscriptions protocol on ATOM
tweets:
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.
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