What happened last week

November has concluded and Bitcoin has closed higher than it opened for the third consecutive month, returning 8.88% in November. Bitcoin closed at $37’700 in November, the highest close in 19 months. Michael Saylor has announced that his MicroStrategy has added another 16’130 BTC to their holdings, bringing their total holdings to 174’530 BTC which is 0.89% of the circulating Bitcoin supply. MicroStrategy is still the largest known institutional owner of BTC today and given their large holdings and rate of accumulation, they are unlikely to be dethroned anytime soon. According to public information MicroStrategy has started accumulating Bitcoin in November 2020 and has kept accumulating through both bull- and bear-markets. According to Michael Saylor, their average entry price is currently at $30’252 which nets them a tidy unrealized profit of $1.47B. It intends to conduct a sale of $750M of Class A common stock to raise funds.
Other prominent Crypto-focused institutions have made headlines recently; Grayscale has reportedly been in collaboration with the SEC which fueled hopes of a GBTC to Spot-ETF conversion. This can also be gauged by the GBTC discount to NAV which has been shrinking to as little as 8%. The SEC has met with other SEC applicants, such as Hashdex, whose ETF was delayed as a result. Despite the pushback, the SEC’s cooperation is largely seen as a positive development on the ETF topic.

The SEC is seeking public input on a proposed rule change that could enable Fidelity, to offer shares of an Ethereum Spot ETF. Fidelity submitted its request to list an Ethereum ETF on the Cboe BZX Exchange on November 17. The SEC's notice, published on November 30, invites comments from interested individuals regarding this proposal. The filing emphasizes that while other countries offer Ether exposure through exchange-traded products, the U.S. lacks a regulated vehicle for this. ETH is up 3.8% since the news and is currently trading at $2’100.

Moving away from the institutions and looking towards the protocols: Cosmos Hub founder Jae Kwon suggested a potential split of the blockchain into two. This proposal comes after the Cosmos community approved a reduction in ATOM's inflation rate from 14% to 10% despite Kwon's opposition to the reduction. This led him to propose a hard fork called "AtomOne" for the Cosmos Hub. This hard fork could potentially resolve community conflicts and benefit ATOM token holders, leading to a significant airdrop and increased trading volume for both ATOM and ATOM1 tokens. As of now, ATOM is trading at $9.44, down 7.5% from this week’s high. Tokens usually lose value prior to chain-splits or airdrops, in anticipation of a second token which is assumed to hold some part of the combined value.

On November 23, 2023, KyberSwap, a multi-chain decentralized exchange aggregator, suffered a smart contract reentrancy attack, resulting in approximately $47 million in losses across multiple networks and a staggering 90% decrease in Total Value Locked from $84.9 million to $8.28 million in a single day. The exploit initially caused a direct loss of $49 million, and following KyberNetwork's recommendations, an additional $27 million was withdrawn by users. Kyber Network has responded swiftly by issuing an advisory to users, urging them to withdraw their funds as a precaution, and is actively investigating the incident to fully understand its extent and implement necessary security measures. The hack itself is unfortunately only the latest in the series of recent hacks. What sets this one apart from others is that the hacker, who humbly calls himself the “Kyber Director” in a message sent via ETH transaction on Nov. 30th, has stated some bizarre demands. Aside from the control of all on-chain assets and governance mechanisms, he also demands all real-world assets that Kyber holds, how he intends to accomplish this while remaining anonymous is anyone's guess. He offers to buy out executives as well as provide a generous 12-month severance to employees who are not satisfied with the sudden change of management, despite being promised double their current salary, should they elect to remain. Kyber has been around since 2017 and has lost most of the market share it once held already before the attack. The troubling and hopefully temporary losses to the protocol’s users are now a bargaining chip of an anonymous exploiter who promises to revamp one of the oldest DeFi protocols in a radical way.

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Our take

Crypto continued moving on its upward trajectory this week, positive developments on SEC’s ETF desk have held hopes high that in January the first Spot-ETF’s will see the light of day. How GBTC will fare in the process, depends a lot on if it gets its conversion to a true ETF before, at the same time as or after other Spot-ETF applicants get their green light. MicroStrategy, which has transformed itself into a BTC-tracking vehicle, might also lose some appeal should suddenly other means of getting Bitcoin exposure without buying actual Bitcoin, the spot-ETF's, spawn. The Ethereum ETF Train has gained some momentum this week and at least the attention which is currently paid to BTC Spot-ETF's will fully lie on ETH come Q2 2024. Fed chair Powell will speak later today (01.12.2023), and investors are eager to look for dovish rhetoric from the fed chair. The Dollar Index (DXY) has seen a weak November, losing 3%. The first rate cuts are now expected by March 2024 albeit by a slim margin (50.76% vs 49.24%). A week ago, a cut by March was only priced in with 21% vs 79% probability, and the fed funds futures were only pricing in a rate-cut by May 2024.

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The week ahead

Tuesday, 05 December 2023

• U.S. JOLT’s

Thursday, 07 December 2023

• China Balance of Trade

Friday, 08 December 2023

• U.S. Nonfarm Payrolls
• U.S. Unemployment Rate

Saturday, 09 December

• China November Inflation Rate