Bitstamp Monthly Briefing – October 2023

Welcome to Bitstamp’s October Digest! Each month, we curate and present the most impactful crypto milestones, granting you a comprehensive understanding and a preview of what's ahead. This edition focuses on the growing anticipation surrounding Bitcoin ETFs in the US and the recent fluctuations in the AI token sector, influenced in part by ChatGPT. Our goal? To keep you updated and primed for the crypto movements about to unfold.

Let's dive right in!

Monthly recap: October 2023

The total crypto market cap increased by 19.1% MoM, reaching $1.26tn at the end of October. Trading volume on the leading crypto spot exchanges we monitor grew by 37%* during the same period, amounting to $286bn.

BTC dominance increased by 4.0 pp MoM to 53.8%.

Total crypto market cap (grey) and BTC dominance (green)

Source: Total crypto market cap,  Bitcoin dominance

*Calculated from $208bn, a corrected value from what we reported in our previous newsletter

Best performing CMC 100 assets in October

• + 84.7% Injective (INJ) - Injective announced integration with Google Cloud’s CloudHub
• + 79.7% Solana (SOL) - Received a positive outlook from VanEck
• + 55.3% Render (RNDR) - Price increase driven by anticipation of Render migration to Solana (completed on 3rd November)

Worst performing CMC 100 assets in October

• - 10.8% Maker (MKR) - Selling pressure rose during the month, along with high MKR supply on exchanges
• - 7.7% Curve DAO Token (CRV) - CRV experienced higher selling pressures combined with decreased volumes on DEXs
• - 6.9% Uniswap (UNI) - Price failed to breach crucial resistance around $4.6

Key macro & crypto events in November 2023

• November 6: OpenAI DevDay
• November 7: US Trade Deficit and Consumer Credit
• November 10: GB’s GDP Growth Rate
• November 14: US CPI Report
• November 15: North American Blockchain Summit 2023
• November 21: World Tokenization Summit
• November 28: ECB Monetary Developments in the Euro Area
• November 30: DEV3 CON

Bitcoin ETF market sizing

October witnessed significant signs that a spot BTC ETF might be nearing approval in the United States. This prospect rejuvenated the previously stagnant crypto market. A spot Bitcoin ETF is a more ideal solution than current investment vehicles, such as closed-end funds, futures-based ETFs, and other ETPs. These types of investment products come with notable downsides for investors such as high fees and low liquidity, complexity due to underlying derivative instruments, and in some cases inaccessibility to retail investors. By September's end, Bitcoin investment products held 842k BTC, roughly valued at $21.7 billion

The key reasons supporting the role of a US Bitcoin spot ETF, as described by Galaxy Research, are the broadened accessibility to various wealth segments and the increased legitimacy brought about by formal recognition from regulators and reputable financial service providers. A spot ETF allows investors to gain direct exposure to Bitcoin without the responsibility of self-custody, and, compared to existing Bitcoin investment products and options, a spot ETF offers improved cost efficiency, liquidity, and price tracking, as well as enhanced convenience and regulatory compliance.

The US wealth management industry will likely experience the most substantial increase in accessibility with the approval of a Bitcoin ETF. As of October 2023, the total assets managed by broker-dealers, banks, and RIAs amounted to a substantial $48.3 trillion. With a spot ETF making Bitcoin price exposure more accessible, demand from these various segments may experience growth in the coming years. Galaxy further assumes that if 25% of broker-dealer assets, 25% of bank assets, and 50% of RIA assets have access to a Bitcoin ETF after one year, this leads to an addressable market of approximately $14 trillion.

According to these market size projections, anticipating a 10% adoption rate across all available assets within each wealth channel, with an average portfolio allocation of 1%, the estimates suggest an initial inflow of $14 billion into a Bitcoin ETF during the first year after its launch. Additionally, it's important to consider the reach a Bitcoin ETF has beyond the US wealth management sector. This includes international markets, retail investors, a variety of other investment products, and numerous distribution channels, all of which have the potential to attract additional inflows.

Current submissions of spot BTC ETFs with the SEC, October 2023

Source: Bloomberg

A spot ETF could be suited for any investor who wants direct exposure to bitcoin without having to own and manage the bitcoin through self-custody, offering numerous benefits over current bitcoin investment products and options. The accessibility of BTC ETFs suggests these products could see significant inflows, primarily driven by the wealth management channels that cannot currently access safe and efficient bitcoin exposure through traditional instruments. If multiple spot bitcoin ETFs can come to market all at once, factors such as brand, liquidity, and institutional volume are likely to be crucial in determining which ETFs gain the most adoption.

AI tokens

Artificial Intelligence tokens experienced their peak in Q1 this year, thanks to ChatGPT's prominent role in showcasing the technology. There are currently more than 80 tokens related to AI in some way or another, whether using the technology or actively building it, with a combined market cap of approximately $3.1 billion.

However, from Q2 onwards, not only has enthusiasm waned but demand has also dwindled, leading to a decline in the value of AI-related cryptocurrencies. The situation might change if overall market conditions continue to recover and if the DevDay developer conference manage to rekindle the AI enthusiasm.

OpenAI, known for creating ChatGPT, will host its inaugural developer conference on November 6. OpenAI DevDay is set to bring together hundreds of developers worldwide for an exclusive look at new tools and an opportunity to exchange innovative ideas. OpenAI DevDay, while not the first developer conference in November, stands out as the only one hosted by an AI-focused company. Consequently, its impact on AI-centered cryptocurrencies is poised to be significant.

We've already witnessed some early indicators of this impact in the price movements of AI tokens towards the end of October. Tokens including Injective (INJ), SingularityNET (AGIX), and Ocean Protocol (OCEAN) have experienced notable rallies, while Render (RNDR) saw a boost both from Bitcoin's upswing and the anticipation surrounding the upcoming conference. Notably, AGIX demonstrated an impressive rally of over 30%.

Source: Bitstamp

With high expectations for the event, the OpenAI conference may shape the near-term direction for AI enthusiasm and the outlook for AI-related assets.

Recommended reads

Why Investors Need to Consider Bitcoin Separately From Other Digital Assets by Fidelity

In this paper, the authors argue why Bitcoin is fundamentally different from other digital assets and why it can serve as an entry point for traditional allocators looking to gain exposure to digital assets.

Crypto & Blockchain Venture Capital Landscape in Q3-2023 by Galaxy

A systematic deep dive into Q3-23 VC activity shows that crypto VC still hasn’t bottomed out, with Q3 seeing the least amount of activity since Q4-20, both in terms of both deals done, and total capital invested.

Crypto Venture Funding Events in Web3 by Decentralised.co

Drilling down further from the recommended read above, here’s a comprehensive list of more than 5000 VC deals in the Web3 space since 2021, all in one place and conveniently browsable.

Insights into Digital Asset Markets by Coin Metrics’

This research piece examines trends in trading volume and market data for a better insight into the market conditions by specific digital asset sectors, while also focusing on both centralized exchanges and decentralized exchanges (DEXs).

Vampire Attacking in Web2 and Web3 by TPan

The concept of vampire attacks is explained in detail.

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