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Bitcoin Corrects Ahead of Spot Bitcoin ETF Decision, Grayscale Wins ETF Lawsuit

August 31, 2023

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Stay up to date with our monthly market commentary:

  • Grayscale wins ETF lawsuit against the SEC.
  • Large Bitcoin holders accumulate Bitcoin faster than ever before.
  • Bitcoin (BTC) is down 6%, while Ether (ETH) is down 7% versus last month.*

Market Overview - August

The price of Bitcoin (BTC) dropped in August by 6% amid low trading volumes, while investors eagerly anticipate the first set of spot Bitcoin ETF decisions coming up in September to gain further insight into the likelihood of a spot Bitcoin ETF coming to U.S. exchanges. 

In mid-August, we saw the largest Bitcoin liquidation since December 2021 - $497.4 million in a single day - which contributed to Bitcoin’s price falling to approximately $25,000. 

Additionally, SpaceX announced the sale of its $373 million in BTC last month, accumulated over 2021 and 2022. Although this was not the primary reason for the selloff, it certainly didn’t help in giving investors a reason to sell. 

Just before the month’s end, however, news broke that Grayscale won its lawsuit against the SEC, which had prevented the company from turning its flagship Bitcoin Trust into a Bitcoin ETF. The news prompted the price of Bitcoin to shoot up to a weekly high of $27,975 before trading around the $27,000 mark to close out the month. 

The Grayscale news was exciting for retail and large institutional investors, indicating a positive sentiment for a potential spot Bitcoin ETF in the near future. The SEC has a 45-day grace period where they can appeal the decision, request a rehearing, or work closely with Grayscale to determine the next steps. 

The SEC’s deadlines for potential next steps or delays of spot Bitcoin ETF approvals are approaching, and we should expect more updates in the coming weeks. Meanwhile, Bitcoin ETF applicants could use this period to accumulate more Bitcoin in anticipation of potential approval of their ETFs in the coming months.

Crypto Asset Market Performance Review 

The crypto asset markets closed the month a leg lower, with some of the most popular altcoins dropping by more than 15%, while Bitcoin (BTC) dropped 6% month-on-month.

Falling 1.9% month-on-month, Shiba Inu (SHIB) was the only cryptocurrency that experienced less than a 5% price drop this month. This is attributed to the launch of the ecosystem’s scaling solution, Shibarium, an Ethereum layer-2 network that uses the SHIB token as a backing mechanism. 

Shibarium aims to work on top of existing blockchain networks, allowing faster, cheaper, and more private transactions to be processed off-chain while still relying on the security of the underlying blockchain. While the community was timid at first, the amount of new wallets tripled overnight in addition to having a positive impact on the token’s price.

Bitcoin Tech Update

While we saw minor updates to the Bitcoin Core protocol and various Lightning implementations, this month’s major news was the merger of Bitcoin and AI through the L402 standard on the Lightning Network. 

So far, we’ve mainly seen the Lightning network’s capability as a payments and remittances layer. To do so, developers must build an entire tech stack dedicated to the network and engage in channels. 

The potential for Lightning to scale is possible in an Application Programming Interface (API) environment. However, the implementation of modern web technology is complicated. This is where the Lightning HTTP 402 Protocol, L402 in short, comes in. It’s a way to charge for particular services and authenticate users in distributed networks. 

The brilliance of this standard is the ability to charge per API command in a single action. Meaning developers don’t have to run a separate infrastructure anymore to authenticate and pay; they can all do it in one go. 

This is particularly interesting for the AI ecosystem, as it would allow them to charge micropayments per command and monetize their products differently than they do now. 

The great advantage of L402 is that neither party has to use Bitcoin directly. Thanks to additional updates on the Lightning Network, it would be possible to use regular fiat currencies, such as the Euro, for these prompts and utilize Lightning’s speed as a gateway between all the technologies. 

With the future potential of AI and the continuous innovation in the Bitcoin ecosystem, it wouldn’t be surprising to see more use cases combining Bitcoin payments with AI coming out in the following months.

Institutional Interest in Bitcoin

For most of August, an unknown Bitcoin wallet bought $3 billion worth of Bitcoin. While some speculated it might be a wallet owned by BlackRock, towards the end of the month, it was revealed that online broker Robinhood was the owner of that wallet. The popular retail investing and trading platform has accumulated 118,300 BTC and has become the third largest public holder of Bitcoin. 

So far, Robinhood has not said if they accumulated so much because of their users’ demand or if they’re preparing potential Bitcoin ETF steps.

Bitcoin on Balance Sheets

MicroStrategy Buy More Bitcoin

Earlier this month, MicroStrategy’s chairman Michael Saylor announced an additional purchase of 467 BTC, which brings the Bitcoin on their balance sheet to a total of 152,800 BTC. MicroStrategy has become one of the largest holders of Bitcoin, accumulating around 0.7% of all BTC.

*Closing price data is from August 31, 2023