Five Things to Know in Crypto This Week: BTC Impacts ETF Flows and MircoStrategy

BTC-Spot ETF Market Records Net Weekly Outflows

BTC was down 6.54% to $64,018 from Monday (Mar 18) to Saturday (Mar 23). Significantly, BTC fell to a low of $60,805 before steadying.

BTC-spot ETF market flow data impacted buyer demand for BTC, with five consecutive days of net outflows. Monday (Mar 18) to Friday (Mar 22), the BTC-spot ETF market saw total net outflows of $887.7 million. The market saw total net inflows of $2,565.7 million over the previous week.

Based on data from BitMEX Research and Farside Investors,

• The market saw record net outflows (Monday – Friday).
• iShares Bitcoin Trust (IBIT) continued to lead the way but saw net inflows of $828.3 million vs. $2,483.6 million over the previous week.
• Grayscale Bitcoin Trust (GBTC) net outflows surged from $1,246.1 million (week ending Mar 15) to $2,001.3 million (week ending Mar 22).
• Fidelity Wise Origin Bitcoin Fund (FBTC) saw net inflows tumble from $717.9 million to $79.4 million (week ending Mar 22).

Bloomberg Intelligence Senior ETF Analyst Eric Balchunas attributed the jump in GBT net outflows to Genesis. Assessing the overall market trend, Balchunas said,

“Add it up, the ETFs have been net buyers of btc (and none of the new money has left in fact more has come in). As usual, when it comes to selloffs, the call is coming from inside the house.”

Despite the disappointing numbers for the week, Balchunas highlighted that IBIT and FBTC saw 49 consecutive days of net inflows. Putting it not perspective, Balchunas said,

“[…] only 30 other ETFs have ever done (and none of them did it right out of gate). Among active streaks they 4th after $COWZ $CALF (which are over 100 days, damn) and $SDVY.”

MicroStrategy Sees 14.55% Weekly Loss on BTC Sell-Off

MicroStrategy (MSTR) slid by 14.55% in the week ending Mar 22. MSTR saw heavier losses than BTC and bucked the broader market tech stock trend. The Nasdaq Composite Index gained 2.85% in the week. NVIDIA (NVDA) rose by 7.35% to $942.89.

However, a second consecutive weekly loss for BTC did not deter MSTR from acquiring more BTC.

On Tuesday (Mar 19), Chairman and founder Michael Saylor announced the purchase of 9,245 BTC, saying,

“MicroStrategy has acquired an additional 9,245 BTC for ~$623.0M using proceeds from convertible notes & excess cash for ~$67,382 per bitcoin. As of 3/18/24, MSTR hodls 214,246 $BTC acquired for ~$7.53B at average price of $35,160 per bitcoin.”

On Friday, Saylor commented on the recent BTC retreat, saying,

“Volatility is vitality.”

While the Nasdaq outperformed MSTR in the week ending Mar 22, it is a different story for 2024. MSTR was up 141% year-to-date, while the Nasdaq gained 9.44%. BTC was up 50%.

Coinbase: Filing for BCH, DOGE, and LTC Futures Trading

On Thursday (Mar 21), news hit the wires of Coinbase (COIN) submitting self-certifications with the CFTC to offer bitcoin cash (BCH), dogecoin (DOGE), and litecoin (LTC) futures trading. The listings muddy the regulatory waters and could influence the outcome of the SEC v Coinbase case. If the CFTC does not comment, the three cryptos could join BTC in the commodities box.

In June 2023, the SEC charged Coinbase for allegedly operating as an unregistered securities exchange, broker, and clearing agency. Additionally, the SEC charged Coinbase for the unregistered offering and selling of securities in connection with its staking-as-a-service program.

Coinbase filed a Motion to Dismiss (MTD) in August, arguing that the SEC lacks the statutory authority to regulate crypto exchanges.

In January 2024, Judge Katherine Failla heard oral arguments from the SEC and Ripple. Legal experts believed Coinbase offered a better definition of an investment contract, tilting the scales in its favor.

XRP was another beneficiary of the Coinbase filings with the CFTC. The murkier regulatory waters could further impact SEC plans to appeal the Programmatic Sales of XRP ruling.

Coinbase outperformed the crypto market. In the week ending Mar 22, COIN gained 5.43%, closing the week at $255.51.

SEC v Ripple:

XRP outperformed the broader crypto market from Monday (Mar 18) to Saturday (Mar 23), falling by 1.15% to $0.6117. In contrast, the total crypto market cap was down 6.01% to $2,361 billion.

The Coinbase filing with the CFTC fueled a Wednesday-Thursday rally, reversing losses from Tuesday (Mar 19).

XRP faces several headwinds, including SEC plans to appeal the Programmatic Sales of XRP ruling. In July 2023, Judge Analisa Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test.

Moreover, XRP benefitted from increased scrutiny of SEC activity within the US digital asset space.

An ongoing investigation into crypto conflicts of interest within the SEC could also unravel SEC plans to appeal the ruling. In 2022, government watchdog Empower Oversight reported possible financial conflicts of interest within the SEC to the Office of Inspector General (OIG).

The OIG is reportedly nearing the end of its investigation. Adverse findings against the SEC could force the SEC to settle the case against Ripple. A settlement would end SEC plans to appeal against the Programmatic Sales ruling.

The investigation pertains to former SEC director William Hinman. Hinman allegedly received millions of dollars from Simpson Thacher, his former employer, while at the SEC. Simpson Thacher is part of a group that promotes Enterprise Ethereum.

Hinman famously stated that bitcoin (BTC) and ethereum (ETH) are not securities in 2018. BTC and ETH benefitted from the speech, while XRP tumbled over fear of SEC action. Hinman returned to his former employer after leaving the SEC.

In March 2024, Empower Oversight expanded its investigations into financial conflicts of interest. Empower Oversight submitted a letter to the FOIA requesting records relating to ethical violations within the SEC.

In addition to requesting documents relating to Bill Hinman, Empower Oversight targeted former SEC Chair Jay Clayton. Clayton filed the charges against Ripple on his final day as SEC Chair. Clayton joined One River Asset Management after leaving the SEC. One River Asset Management was a hedge fund focused on BTC and ETH.

SEC v Debt Box: Judge Denies SEC Motion to Dismiss

On Monday (Mar 18), Judge Robert Shelby denied the SEC Motion to Dismiss the case against Debt Box. In December, Judge Shelby ordered the SEC to show why the court should not sanction the SEC for making false and misleading representations to the court.

The SEC filed the Motion to Dismiss as a response to the court order and likely in a bid to avoid further scrutiny.