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Digital ETP update

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Matteo Greco, Research Analyst at Fineqia International, writes that bitcoin (BTC) ended the week at approximately USD66,675, marking a 4.3 per cent decrease from the previous week’s closing price of around USD69,650.

“Throughout the week, stronger selling pressure compared to buying demand was evident, with the BTC price consistently dropping on Tuesday and gradually declining further during the week, eventually stabilising over the weekend in the USD66,000 to USD67,000 range,” Greco says.

BTC Spot ETFs experienced net outflows last week, breaking a streak of four weeks and 19 trading days of consecutive inflows. The cumulative outflow for the week was about USD580 million, reducing the total net inflow since inception to USD15.1 billion.

“The recent price drop was also influenced by high selling volumes from miners. Mining activity has been impacted by the recent Bitcoin halving, which reduced block rewards from 6.25 to 3.125 BTC. This event forces miners to optimise their capital efficiency to maintain profitability, initially causing a significant decrease in profitability as rewards are halved from one block to the next.

“Additionally, the Bitcoin network’s hashrate has sharply increased over the past few years and has only decreased by 4 per cent following the halving. This indicates strong competition in the mining sector, with businesses forced to find various revenue streams to stay profitable and optimise capital efficiency.

“During this market phase, miners tend to sell more heavily due to the halved rewards. High prices encourage this sell-off, allowing miners to bolster their cash reserves and better prepare for potential future bear markets. The 2022 bear market caused significant distress in the mining sector, making current market conditions particularly critical for miners in preparation for periods of market downtrend.”

Meanwhile, BTC Spot ETFs continue to grow in Australia, Greco says. “Following Monochrome’s launch on Cboe Australia, VanEck has obtained approval to list a BTC Spot ETF on the Australian Securities Exchange (ASX), one of the country’s most important exchanges. The product is set to launch on Thursday the 20th, confirming the increasing worldwide adoption of BTC as an asset class among traditional finance investors.

“As for Ethereum (ETH) Spot ETFs, their launch in the US is expected in a few weeks. Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC), has confirmed that he anticipates ETH Spot ETFs to start trading during the summer. Some analysts expect this to happen as soon as the first week of July, with conversations between the SEC and issuers in their final stages.

“The launch of ETH Spot ETFs may pave the way for issuers to file for several other digital asset ETFs. Recently, rumours have been circulating about BlackRock soon filing for a Solana ETF. This suggests that the approval of ETH Spot ETFs could facilitate the filing and approval of other major digital assets that use Proof-of-Stake (PoS) as their consensus mechanism.”

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