Good morning Here’s what happens:
Prices: Bitcoin remained below $27,000, but one analyst says the cryptocurrency with the largest market value is in an “accumulation phase.”
Insights: BRC-20 tokens hit $500 million market cap and Glassnode data shows they continue to be a lucrative source of fees for miners.
Bitcoin enters an “accumulation phase”
Crypto prices remained lethargic as Asian markets opened on Friday.
According to CoinDesk Indexes, bitcoin was recently trading at around $26,835, which has remained about the same over the past four hours but is down 1.2% from Wednesday at the same time. The largest cryptocurrency seemed almost untouched by the vote in the U.S. House of Representatives late Wednesday night to pass a debt ceiling hike that would ensure the government can pay its bills, at least in the short term. The Senate is expected to vote on the bill late Thursday evening (ET).
But in an email to CoinDesk, Bob Baxley, the CTO of DeFi infrastructure platform Maverick Protocol, wrote that crypto markets may now face a U.S. Treasury Department having to replenish its general account, which has shrunk in recent months. This could weaken the liquidity otherwise available for investing in digital assets.
“The risk here is that the trillions of dollars flowing back into the general account could pull a tremendous amount of liquidity out of the market,” Baxley wrote. “Something like this happened in 2019, and market stress forced the Federal Reserve to step in and provide emergency liquidity to prevent a full-blown crisis. In short, just because an agreement has been reached doesn’t mean we’re out of the woods.”
Ether, the second-largest cryptocurrency in market value, recently traded around $1,860, up 0.6% over the past 24 hours. ETH spent part of Thursday in the green, on a day when most assets fluctuated in negative territory. GRT, the token of indexing protocol The Graph, and popular memecoin SHIB fell more than 7% and 4%, respectively. But Litecoin continued on its recent run of success, up more than 3%. LTC is up 7.5% over the past 30 days as investors await the halving in two months and trading activity picks up.
In its opening hour on Friday, the Nikkei index rose about 0.6%. US equities ended the year largely in positive territory despite ongoing inflation concerns and the possibility of more tightening rate hikes.
Maverick’s Baxley wrote optimistically that crypto investors “appear to be in a general accumulation phase.”
“The moving averages are suggesting neutral or perhaps slightly more bullish, suggesting that we are about to lay another foundation for further uptrend,” he wrote, noting that markets are already discounting potential Federal Reserve rate hikes priced in have caused prices to falter in the past.
He added: “What matters most these days is liquidity. And much of what will unfold in the coming weeks will likely depend on how carefully the Treasury can manage its recovery process. Most investors are proceeding cautiously at the moment.” A result, I suspect.”
BRC-20 tokens are targeting a $500 million market cap, and new data from Glassnode shows they continue to be a lucrative source of fees for miners.
According to on-chain data, inscriptions now account for 25% of all transaction fees and about 40% of all transactions on the Bitcoin blockchain.
While inscriptions remain controversial within the broader bitcoin community, they have been a boon to miners.
A miner’s revenue consists of two elements: block rewards, currently 6.25 BTC ($167,709), and transaction fees, which fluctuate based on network demand, with fees traditionally being lower than rewards since 2017.
Data from CryptoQuant shows that the fee-to-reward ratio for bitcoin miners has shifted in favor of miners thanks to inscriptions and ordinal numbers.
The fee-to-compensation ratio is up 7.22%, compared to an average of around 2-3% earlier this year.
An example of how this is affecting miners’ bottom line: Bitcoin is up 16% over the past three months, while Valkeryie’s mining ETF WGMI is up a whopping 42%.
This may not last forever, however, as the unexpected surge in miners’ earnings may be short-lived as high transaction fees prompt users to turn to alternatives like the Lightning Network and stablecoins.
Bitcoin (BTC) and the broader cryptocurrency market staged a sell-off for the second straight day on Thursday, amid renewed fears of inflation and further rate hikes. Todd Groth, CFA and head of index research at CoinDesk Indices, shared his analysis of the crypto markets. Additionally, King Leung, Head of Financial Services and Fintech at InvestHK, discussed the state of cryptocurrencies in Hong Kong as the country’s securities regulator begins accepting applications for crypto trading platform licenses. And Nestcoin co-founder Yele Bademosi shared his reaction to cryptocurrency adoption and innovation in Nigeria.
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