Cryptocurrency exchange Coinbase opines that the sanction for bankrupt crypto lending firm Genesis to offload its Grayscale Bitcoin Trust (GBTC) shares will not disrupt the crypto market.
It contends that the majority of the funds will re-enter the crypto ecosystem, resulting in a neutral impact on the market.
Genesis received approval from a bankruptcy judge on Feb. 14 to liquidate approximately £1.3 billion worth of GBTC to reimburse creditors.
Nevertheless, since Grayscale Investments obtained approval to convert GBTC into a spot Bitcoin exchange-traded fund (ETF) on Jan. 10, GBTC has witnessed outflows exceeding £5 billion.
There are concerns within the crypto industry that Genesis’ recent approval to sell-off GBTC shares could further depress the price of Bitcoin.
In its weekly report, Coinbase argued that although it remains uncertain whether the additional GBTC outflows will enter other spot Bitcoin ETFs or go directly into Bitcoin for creditor reimbursement, it believes the funds will likely remain within the crypto ecosystem.
“Our view is that much of these funds will likely remain within the crypto ecosystem, contributing to a neutral overall effect in the market,” Coinbase stated.
The bankruptcy plan permits Genesis to either convert GBTC shares into the underlying Bitcoin asset for creditors or sell the shares outright and distribute the cash.
The confirmation hearing is set for Feb. 26.
READ MORE: Bitcoin Hash Rate Expected to Drop by Up to 20% Post Halving, Analysts Predict
Genesis holds 35.9 billion shares of GBTC, 8.7 million shares of the Grayscale Ethereum Trust (ETHE), and 3 million shares of the Grayscale Ethereum Classic Trust (ETCG).
Furthermore, it emphasised that net inflows for Bitcoin ETFs in the initial 30 days surpassed those of State Street’s SPDR Gold Shares ETF in its debut month.
Sam Callaghan, senior analyst at Swan Bitcoin, mentioned in an X post that there will be some “netting” in the crypto market due to Genesis’ GBTC sales.
However, Callaghan expressed uncertainty regarding the number of creditors who will sell their Bitcoin holdings.
Meanwhile, Bitfinex head of derivatives Jag Kooner indicated to Cointelegraph that the significant discount offered to GBTC investors was a primary driver for the high volume of share selling in recent weeks.
Grayscale, the crypto asset manager, has seen a deceleration in outflows from its spot Bitcoin ETF, although analysts suggest there’s more potential for further depletion.
As per data from Bianco Research and Farside, the total outflow from the Grayscale Bitcoin Trust (GBTC) since its transition to a spot Bitcoin ETF reached $7 billion by Feb. 16.
Despite the significantly reduced rate of outflow, observers like ETF Store President Nate Geraci caution that the bleeding may not have ceased entirely.
January marked the peak of the exodus, witnessing $5.64 billion exiting GBTC by month-end, whereas February has recorded only $1.37 billion in outflows thus far.
In a Feb. 18 post on X, Jim Bianco, the founder of Bianco Research and a former Wall Street analyst, attributes much of the outflow to investors rebalancing portfolios and migrating to spot Bitcoin ETFs with lower fees.
He notes that the recent wave of ETF launches has slashed fees to between 0 and 12 basis points, in contrast to Grayscale’s 150 bps charge.
Bianco also highlights another factor contributing to the ongoing outflow from GBTC: the fund traded at a considerable discount to the BTC market price, approximately 44%, when BlackRock applied for its spot ETF in June 2023.
He explains, “A lot of money flows into ‘cheap’ BTC,” suggesting that Grayscale began closing this arbitrage-type trade upon its ETF conversion in January 2024.
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Nate Geraci remains cautious, indicating that it’s premature to assume the asset bleed has concluded.
He speculates that even with a substantial reduction in assets, Grayscale could still surpass other issuers combined.
Moreover, Geraci anticipates the potential launch of a “mini-GBTC,” a new spot Bitcoin ETF by Grayscale, with considerably lower fees.
Further outflows could materialise following a recent court order permitting bankrupt crypto lender Genesis to liquidate a portion of its investments in Grayscale.
Genesis reportedly held approximately $1.6 billion worth of shares in GBTC, the Grayscale Ethereum Trust, and the Grayscale Ethereum Classic Trust.
The National Anti-Corruption Commission (NACC) of Australia has alleged that a federal police officer erased a Trezor hardware wallet containing 81.62 Bitcoin at a crime scene.
The authorities utilised crypto tracing software to claim that he transferred the Bitcoin into his own possession.
As per a recent report, the Australian police discovered the hardware wallet during a drug raid at a residence but waited approximately three weeks to obtain court permission to access it.
However, upon accessing the wallet, there was no Bitcoin at all, as federal agent William Wheatley allegedly transferred it out shortly after the raid.
The hardware wallet purportedly held 81.62 Bitcoin, valued at $309,000 at the time of the raid in 2019. However, it is currently worth approximately $4.2 million.
Detective Sergeant Deon Achtypis of the cybercrime squad indicated that authorities initially suspected an associate of a crime syndicate for the Bitcoin theft.
“The suspicion arose as the police force also discovered a device containing the seed phrase to the hardware wallet, which is a sequence of 12 to 24 random words that can be used as a recovery method in case the wallet is stolen or lost.”
However, after an extensive investigation into IP addresses used to access the stolen Bitcoin using crypto tracing software, Achtypis allegedly found a link to Wheatley.
“I formed the opinion that a police member may have been involved in the movement of the cryptocurrency.”
Enforcement authorities around the world are adopting crypto-tracing software to tackle illicit activity with digital assets.
In August 2023, Canadian law enforcement announced it had started using Chainalysis Reactor software to help trace illicit crypto transactions.
READ MORE: Coin Metrics Research: Nation-States Unable to Destroy Bitcoin and Ethereum Networks
Moreover, advancements in crypto detective software technology are leading to a higher rate of recovered stolen crypto.
On Jan. 29, Cointelegraph reported that over $674 million was recovered from more than 600 large-scale crypto hacks in 2023.
Meanwhile, Wheatley is pleading innocent against accusations of exploiting his position as a public officer for personal gain, theft, and involvement with proceeds of crime.
He is reportedly prepared to contest the charges regarding the stolen Bitcoin from the Trezor wallet.
This comes amid Trezor’s acknowledgment of a security breach affecting nearly 66,000 users.
On Jan. 20, Cointelegraph reported that Trezor disclosed unauthorised entry into a third-party support portal on Jan. 17.
The company warned that individuals who had engaged with Trezor’s support team since December 2021 might have had their data compromised in the incident.
VanEck has agreed to pay a £1.75 million fine to settle charges brought by the United States Securities and Exchange Commission (SEC) regarding its launch of a social media-focused exchange-traded fund (ETF) in 2021.
The SEC imposed a civil penalty on the investment adviser.
On February 16, the SEC disclosed in a statement that during the launch of the VanEck Social Sentiment ETF in March 2021, VanEck did not fully disclose the involvement of a prominent social media personality in marketing the product.
The ETF aimed to track an index using “positive insights” from social media and other data sources.
However, the SEC found that VanEck attempted to enhance the fund’s success through social media and collaborated with an influential and divisive online personality to increase its appeal.
Although the financial watchdog did not explicitly name the influencer, reports from 2021 had previously linked David Portnoy, founder of Barstool Sports, to the promotion of the VanEck ETF.
The regulator observed an undisclosed detail: the influencer’s fee was tied to the fund’s growth, ensuring higher compensation as the fund expanded.
The SEC criticised the undisclosed agreement, focusing on VanEck’s failure to inform the ETF’s board about the influencer’s intended involvement.
This undisclosed arrangement had significant implications for the management contract and fund operations, breaching the board’s duty to oversee financial aspects during advisory contract discussions.
Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, emphasised the importance of transparency from advisers.
READ MORE: Coin Metrics Research: Nation-States Unable to Destroy Bitcoin and Ethereum Networks
He noted that the failure to provide accurate disclosures hampers the board’s ability to properly assess the advisory contract and understand the economic impact of licensing agreements.
VanEck accepted the SEC’s order acknowledging its violation of the Investment Company Act and Investment Advisers Act.
The company agreed to a cease and desist order, censure, and the required financial penalty without admitting or denying the findings.
The announcement comes after the company’s decision to terminate one of its ETF products, the Bitcoin Strategy ETF, a month ago following a comprehensive performance evaluation.
In an apparent effort to boost the popularity of its dedicated spot Bitcoin ETF with the ticker HODL, VanEck indicated on February 15 that it would reduce its fees from 0.25% to 0.20% starting February 21.
Bitcoin exchange-traded funds (ETFs) have experienced another robust week, with net inflows surpassing £2.2 billion from Feb. 12–16.
According to Bloomberg analyst Eric Balchunas, the combined volume exceeded the inflows received by any other among the 3,400 ETFs available in the United States.
BlackRock’s iShares Bitcoin Trust (IBIT) attracted the majority of capital, accumulating positive flows of £1.6 billion over the week, as per data from BitMEX Research.
“£IBIT alone has taken in £5.2b YTD, which is 50% of BlackRock’s total net ETF flows, out of 417 ETFs,” noted Balchunas.
Among the spot Bitcoin ETFs holding billions of pounds in assets, Fidelity’s Wise Origin Bitcoin Fund witnessed significant inflows, drawing £648.5 million over the last five trading sessions.
The Ark 21Shares Bitcoin ETF secured £405 million during the same period, while the Bitwise Bitcoin ETF attracted £232.1 million in capital inflows.
However, outflows from the Grayscale Bitcoin Trust are affecting the collective performance of the other recently approved spot Bitcoin ETFs.
READ MORE: Bitcoin Hash Rate Expected to Drop by Up to 20% Post Halving, Analysts Predict
The fund experienced £624 million in withdrawals from Feb. 12–16 as investors continued to divest.
Since its transition from an over-the-counter product to a spot ETF on Jan. 10, Grayscale’s fund has seen over £7 billion in capital outflows.
The new ETFs are believed to be one of the factors propelling Bitcoin’s recent price surges.
The cryptocurrency has surged 91% in the past four months, buoyed by market sentiment surrounding the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) on Jan. 10.
During the week, Bitcoin gained nearly 7% and is trading at £51,434 at the time of writing, marking a 24% increase in February.
Major banks and financial institutions are also taking note of the new ETFs.
In a Feb. 14 letter, a trade group coalition representing Wall Street’s largest firms urged the SEC to consider modifications to the Staff Accounting Bulletin 121, which offers guidance on accounting for crypto asset custody obligations.
The proposed revision would permit banks to serve as custodians of the BTC funds.
Bitcoin mining difficulty, which gauges the level of complexity in solving the intricate cryptographic puzzles integral to the mining process, surpassed 80 trillion on Friday, February 16th.
As per BTC.com, the network’s hash rate, indicating the cumulative computational power utilised by miners, achieved 562.81 exahashes per second (EH/s), with the mining difficulty reaching a peak of 81.73 trillion.
The escalation in Bitcoin (BTC) mining difficulty has been consistent since January 2023, with forecasts anticipating a climb to 100 trillion in the imminent months.
In Bitcoin’s proof-of-work consensus mechanism, heightened difficulty necessitates miners to employ greater computational power and energy to uncover the correct hash.
Over the past year, Bitcoin’s difficulty level has more than doubled.
During its automatic readjustment on February 15th, Bitcoin mining difficulty was slated to surge by an estimated 6%.
If this transpires, data from monitoring resource BTC.com suggests it will propel the difficulty to unprecedented heights above 80 trillion for the first time.
On February 16th, Bitcoin maintained a value of $52,000 at the commencement of Wall Street trading, buoyed by the revelation of surpassing expectations in the latest United States macro data.
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Figures from Cointelegraph Markets Pro and TradingView depicted a stagnant BTC price performance as the week’s final TradFi trading session unfolded.
In April, Bitcoin’s mining rewards are set to halve in what is termed the Bitcoin Halving.
As a hedge against inflation, Bitcoin’s developers integrated this reduction into the token’s structure approximately every four years, with the previous halving transpiring in May 2020.
The forthcoming halving will diminish Bitcoin’s rewards from 6.25 BTC to 3.125 BTC.
This adjustment may lead to a reduced hash rate, with less efficient miners grappling to cover expenses and potentially shutting down their mining rigs.
Consequently, a diminished hash rate is likely to precipitate a decline in Bitcoin mining difficulty as the network endeavours to sustain a consistent block production rate every 10 minutes.
Analysts from Galaxy Digital speculate that as much as 20% of Bitcoin’s existing hash rate could deactivate post the Bitcoin halving, leaving only the most efficient mining rigs operational.
Major banks and financial institutions in the United States are urging the United States Securities and Exchange Commission (SEC) to revise its definition of crypto assets, potentially enabling them to assume a more significant role in the crypto sphere, such as serving as custodians for the recently sanctioned spot Bitcoin exchange-traded funds.
On 14th February, a coalition of trade groups including the Bank Policy Institute, American Bankers Association, Financial Services Forum, and Securities Industry and Financial Markets Association presented their argument in a letter to SEC Chair Gary Gensler.
The coalition highlighted the recent endorsement of spot Bitcoin (BTC) exchange-traded products in the U.S., observing the absence of American banks as custodians for the approved products.
“The Commission recently approved 11 Spot Bitcoin ETPs, allowing investors access to this asset class through a regulated product.
However, notably absent from those approved products are banking organizations serving as the asset custodian, a role they regularly play for most other ETPs.”
The letter called for the SEC to consider adjustments to Staff Accounting Bulletin 121 (SAB 121), issued in March 2022, which offers guidance on accounting for crypto asset custody obligations.
They noted that it has been two years since the issuance of the guidance, and there have been “several relevant developments” during this period, including the approval of spot Bitcoin ETFs.
The existing guidance mandates banks to include crypto assets on their balance sheet, resulting in increased costs and hindrances to offering crypto custody services on a large scale.
READ MORE: Genesis Granted Approval to Liquidate £1.3 Billion in Grayscale Bitcoin Trust Shares
The coalition has now urged the SEC to refine the definition of crypto assets in SAB 121 to exclude traditional assets recorded on the blockchain.
This would prevent assets like tokenized deposits from falling under the stringent crypto guidelines.
They also seek exemptions for banks from the on-balance sheet requirements while retaining the disclosure obligations, enabling them to engage in certain crypto activities while maintaining transparency for investors.
In a post on X, Bitwise chief investment officer Matt Hougan stated that the letter indicates a change in the “tone around crypto regulation in Washington,” with others suggesting that banks are expressing interest in joining the “digital finance wave.”
“US banks, left off key bitcoin ETF roles, are pushing SEC to tweak guidance around holding digital assets,” summarised Bloomberg ETF analyst Eric Balchunas.
Meanwhile, TheBitcoin Therapist, author of a weekly Bitcoin newsletter, echoed the sentiment:
“Bankers are getting annoyed they can’t hold spot Bitcoin ETFs for their customers. The Q1 FOMO is already driving them mad.”
According to preliminary data from Farside, total aggregate inflows to the recently launched spot Bitcoin ETFs have just surpassed $4 billion despite an acceleration in outflows from Grayscale.
Up to 20% of Bitcoin’s present hash rate may cease operation following the Bitcoin halving, as block rewards diminish and only the most efficient mining rigs persist.
Towards the conclusion of 2023, approximately 70% of the Bitcoin hash rate stemmed from eight ASIC miner models, as indicated by Galaxy’s mining analysts in a report dated February 14, citing Coin Metrics data.
“Given how sensitive the breakevens are for the various ASIC models to Bitcoin price and transaction fees as a percent of rewards, we estimate that between 15 – 20% of network hash rate coming from the ASIC models […] could come offline,” the analysts articulated.
Galaxy’s forecast considered potential future power costs.
It computed the breakeven threshold for mining rig models based on “post-halving economics,” with each mined Bitcoin block slated to halve rewards from 6.25 BTC to 3.125 BTC, “transaction fees constituting 15% of rewards and a Bitcoin price of $45,000.”
According to Galaxy’s more conservative projections, nearly all outdated mining rigs — particularly Bitmain’s S9, Canaan’s A1066, and MicroBT’s M32 models — would be decommissioned, while about half of MicroBT M20S and Bitmain S17 models would persist online.
These five models collectively accounted for roughly 15% of Bitcoin’s hash rate by the end of 2023.
READ MORE: BONK Memecoin Surges 7% Amidst Revolut Partnership Rumors
Enduring predominantly would be the Antminer S19 and S19J Pro, newer and more prevalent models that comprised over half of Bitcoin’s hash rate in 2023, alongside Canaan’s A1246, albeit a minor fraction of each might still deactivate in locales with elevated operational expenses.
Nevertheless, a bleaker scenario would witness almost all older models nearing complete deactivation, although Galaxy once more anticipates that Canaan’s A1246 and both S19 models might endure.
Galaxy’s analysts acknowledged that their estimates could be influenced by certain business choices.
Miners utilising “older and more inefficient machines” are likely to implement bespoke firmware to enhance their rig’s efficiency and yield, whilst certain miner models may transition to miners with more economical power costs instead of shutting down.
The analysts also speculated that miners employing the newer S19 models might struggle to maintain profitability, and those employing older mining rigs might purchase them as an upgrade.
The Bitcoin halving will be enacted at block number 840,000, anticipated to be mined around April 20, according to data from Blockchair.
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Bitcoin remained steady at $52,000 during the Wall Street opening on February 16, with the latest United States macro data surpassing expectations.
Data from Cointelegraph Markets Pro and TradingView indicated a lack of movement in BTC price leading into the final TradFi trading session of the week.
Following closely after the Consumer Price Index (CPI) release two days earlier, the Producer Price Index (PPI) figures for January added to concerns about inflation in the U.S.§§§
Year-on-year, PPI stood at 0.9%, slightly lower than the previous month but still 0.3% higher than market forecasts.
In combination with the high CPI, these results made markets more cautious about the possibility of the Federal Reserve adjusting fiscal policy this year.
According to data from CME Group’s FedWatch Tool, the likelihood of the Fed reducing interest rates at its March meeting was 8.5% at the time of reporting — less than half the 17.5% probability at the beginning of the week.
“A March interest rate cut is likely completely ruled out after this data,” trading resource The Kobeissi Letter commented on X (formerly Twitter), echoing its response to CPI.
“Furthermore, a May rate cut has become questionable as well.”
Bitcoin reached $52,884 on Bitstamp the previous day, marking its highest level since late November 2021, but encountered resistance from sellers.
Analysing four-hour timeframes, popular trader Skew highlighted the importance of the 21-period exponential moving average (EMA), currently at approximately $51,000.
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“There’s been choppy price action here with a lot of inside bar closes essentially within the same intraday balance,” he observed.
U.S. spot-Bitcoin exchange-traded funds (ETFs) experienced net inflows of nearly half a billion dollars on February 15.
This contributed to an impressive week where the ETF products gained renewed interest more than a month after their initial launch.
However, despite removing more BTC from circulation than adding to it daily, the ETFs have caused some concern among market observers.
In his latest analysis, Venturefounder, a contributor at on-chain analytics platform CryptoQuant, suggested that a slowdown in ETF interest could expose Bitcoin to a significant retracement.
“Bitcoin ETF net inflow flatline/normalize is where the next 20-30% correction will start,” part of X’s commentary stated alongside a summary of current flows.
A previous post outlined potential BTC price floor levels, with estimates extending down to $34,000.
According to the latest research from crypto intelligence firm Coin Metrics, it is no longer feasible for nation-states to dismantle the Bitcoin and Ethereum networks via 51% attacks due to the exorbitant costs involved.
A 51% attack occurs when a malicious actor possesses over 51% of the mining hash rate in a proof-of-work system or 51% of staked crypto in a proof-of-stake network.
This power could be abused to manipulate the blockchain, compromising trust.
In a report released on February 15, Coin Metrics researchers Lucas Nuzzi, Kyle Waters, and Matias Andrade contended that nation-state attackers can no longer sustain such assaults due to the prevailing cost of capital and operational expenses needed to attain 51% control.
The researchers introduced a metric named “Total Cost to Attack” (TCA) to precisely gauge the expense of launching an attack on a blockchain network.
Utilising TCA, the report concluded that there are no financially rewarding avenues to attack either the Bitcoin or Ethereum networks, negating the financial incentive for malicious actors.
“In none of the hypothesized attacks presented here [would the attacker] be able to profit by attacking Bitcoin or Ethereum,” read the report.
READ MORE: Bitcoin Price Prediction 2024 and 2025
“Consider that even in the most profitable double spend scenario presented, where the attacker could potentially make $1B after spending $40B, that would account for a 2.5% rate of return.”
Analysing secondary market data and real-time hash rate output, the report revealed that a 51% attack on Bitcoin would necessitate an actor to procure a staggering 7 million ASIC mining rigs, costing approximately $20 billion.
Acknowledging the scarcity of available ASIC rigs, the report explored an alternative attack vector, which might be pursued by a particularly “relentless” actor.
Assuming a nation-state attacker could fabricate their own mining rigs—identifying the Bitmain AntMiner S9 as the only “plausible” device for reverse-engineering—it would still exceed a $20 billion investment.
Furthermore, the report debunked concerns over a potential 34% staking attack from Lido validators on Ethereum, suggesting it would be both time-consuming and financially prohibitive.
Castle Island Ventures partner Nic Carter commended Coin Metric’s research as “enormously important,” highlighting its rigorous empirical analysis as a significant contribution to the literature.