Crypto Weekly: In the name of Bitcoin Crypto Weekly: In the name of Bitcoin Crypto Weekly: In the name of Bitcoin

Crypto Weekly: In the name of Bitcoin

Cryptocurrencies 8 minutes to read
Mads Eberhardt

Cryptocurrency Analyst

Summary:  The first update in four years got activated on Bitcoin yesterday. Some days prior, not surprisingly, SEC denied approval for a Bitcoin ETF based on the spot market. NFTs are still going strong.


Taproot update gets activated on Bitcoin

For the first time in four years, a Bitcoin update was activated on the network. The update named Taproot got activated on Sunday following great anticipation by the community. Taproot strengthens privacy and security along with likely small improvement in the scalability of the Bitcoin network. Not to mention that it allows developers to make protocols implying more complex transactions on the network. The latter is applicable for smart contracts, which are the cornerstone in decentralized applications, for instance, decentralized trading and lending.

Decentralized applications have gained substantial acceptance over the past year particularly on Ethereum since the majority of applications operate on Ethereum. Without question, the thriving decentralized application domain has been a key factor behind the positive market sentiment of Ethereum over the past year. As Taproot makes Bitcoin more workable for decentralized applications, the Bitcoin community, particularly Bitcoin maximalists, has been anticipating Taproot since it may make Bitcoin able to access some of the market for decentralized applications on Ethereum or other blockchains such as Solana and Polkadot.

Even though it appears like a cinch for some that Bitcoin will challenge Ethereum on being the main chain for decentralized activities, there are several challenges for Bitcoin to overcome. First, Bitcoin also lacks scalability similar to the current state of Ethereum, which needs to be solved in a user-friendly manner. Second, perhaps more important long-term, is the network effect. As the majority of decentralized applications are established on Ethereum, most users are using Ethereum and conversely. This is also the reason users are paying sometimes more than $100 to execute a single transaction on the Ethereum network instead of using cheaper chains like Solana with a thriving number of decentralized applications. Frequent readers of Crypto Weekly know that we are eager to point out the network effect which is severely critical to achieving adoption in this regard.

Nevertheless, Bitcoin reached a new all-time high last week of 69,000 (BTCUSD) indicating that the community has positive expectations for Taproot. At around the same time, Ethereum reached a new all-time high of 4,870 (ETHUSD).

Once again, no spot ETF in the US

Roughly a month ago, the first Bitcoin ETF in the US named ProShares Bitcoin Strategy ETF started trading. However, the ETF is based on Bitcoin futures and therefore not holding “physical” Bitcoin. This makes the futures ETF considerably expensive to hold due to the futures needing to be rolled forward with a negative roll yield with the expiry of every contract. Due to this, not as many hold the futures ETF compared to potentially holding a spot ETF, meaning the latter would be significantly more influential on Bitcoin, price - and adoption-wise. As expected, it does not seem the market will be gratified with a US spot ETF this year. On Friday, the US Securities and Exchange Commission (SEC) turned down an application for a Bitcoin ETF based on the spot market from US-based ETF and mutual fund manager VanEck. The ETF was virtually denied approval due to concerns over market manipulation in the Bitcoin spot market, which has also been the case for denial of other Bitcoin spot ETFs in the past. One could argue that the reason is somewhat bizarre. As Bitcoin futures indirectly follow the Bitcoin spot market, they are also exposed to potential market manipulation, so the denied approval is presumably more due to the Bitcoin spot market being widely unregulated, whereas the futures are fully regulated and traded on CME.

Coinbase has high expectations for its NFT platform

Non-fungible tokens, known as NFTs, have achieved traction in the past year. Coming fairly out of the blue, NFTs have arguably been the cryptocurrency trend of 2021. The American TV host Jimmy Fallon joined other prominent people last week such as Stephen Curry, Snoop Dog, and Ellen DeGeneres in either buying or selling an NFT as he bought a Bored Ape, essentially being illustrations of cartoon apes. One of the largest cryptocurrency exchanges, and perhaps the most influential, NASDAQ-listed Coinbase (COIN) announced in October its intention to launch an NFT platform later this year. Following its Q3 financial result last week, Coinbase co-founder and CEO, Brian Armstrong, was quite optimistic about its NFT platform: “We are very excited about NFTs, this is going to be a very large area for crypto in the future, and it already is today”, while going on to say that NFTs could be as big or bigger than their cryptocurrency business in the future. Coinbase reported $1.24bn in revenues and a profit of $406mn in Q3, down nearly 75% from the previous quarter.
Source: Saxo Group
Source: Saxo Group

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.