Market Highlights
February 9, 2024

January 2024

Over a decade beyond its initial inception, spot Bitcoin exchange-traded funds (ETFs) made their debut in the United States in January 2024. The journey of Bitcoin into the core of the global financial system has seen numerous milestones, encompassing the advent of initial exchanges, derivative products, and loans backed by Bitcoin collateral. Amidst the daily fluctuations in prices and financial flows, the introduction of these new Bitcoin ETFs stands as a pivotal stride in the evolution of the budding crypto asset class.

Spot Bitcoin ETF volumes ranked among large equity and bond products


Net inflows into US-listed spot Bitcoin ETFs, outflows elsewhere

The trading volumes of the ten recently launched products underscore the broad spectrum of investor enthusiasm for engaging with Bitcoin through the ETF framework. Since their introduction on January 11, the collective daily volumes of the spot Bitcoin ETFs have averaged $2.1 billion. To put this into perspective, if we compare these trading volumes to the typical activity of all US-listed ETFs, the turnover for these novel Bitcoin products would rank 8th, aligning with products providing exposure to US equity and bond markets (Exhibit 1). For context, the most significant non-crypto commodity-based ETF ($GLD) recorded an average daily volume of about $1.1 billion since January 11, while the largest Bitcoin futures-based ETF ($BITO) saw daily volumes of $570 million during the same period.[1] Despite various avenues for Bitcoin ownership, including self-custody, the successful launch of spot Bitcoin ETFs indicates a preference among many investors and financial advisors for the convenience and liquidity offered by this product structure.

In the wake of the approval and listing of the 10 new spot Bitcoin ETFs in the US, Bitcoin's 30-day volatility surged to its highest level since April 2023, attracting over $30 billion in cumulative volumes and net inflows surpassing $1.5 billion by month-end. Noteworthy is the observed reduction in bid/ask spread and the premium/discount to Net Asset Value (NAV) of these ETFs, making these products often available at 1 basis point spreads and less than a 30 basis point premium or discount to NAV. Such liquidity serves to validate the utility of ETFs, a development we anticipate will drive down transaction costs and potentially capture market share from centralized exchanges.

Offsetting the influx of US ETF investments, futures activity (Open Interest) on the Chicago Mercantile Exchange (CME) contracted by $2 billion from an early January peak to $4.4 billion at month-end. Concurrently, European bitcoin Exchange-Traded Notes (ETNs) witnessed modest outflows, indicative of investors reacting to the news rather than embracing it. The resultant ebb and flow between futures and spot markets led to a substantial reduction in funding costs for holding futures and other leveraged positions throughout January. For instance, the cost of maintaining a perpetual bitcoin futures position on Binance, which stood at 21% on January 1st, sharply plummeted to 6% by month-end. We posit that this decline in demand for leverage may position the market for another upswing if ETF inflows continue at their current robust pace, surpassing the influx of new Bitcoin supply.

Amidst the lateral movement in Bitcoin prices, large-cap assets (+1%) outperformed their small-cap counterparts (-9%), Ethereum remained relatively stable (flat) compared to Layer 1s (-6%), while Coinbase (-26%) and Bitcoin miners (-28%) lagged.

Tether driving growth of stablecoin adoption

Sui (+105.9%)

Monthly Fees Generated

Source: Artemis XYZ as of 1/31/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Sui emerged as the standout performer among smart contract platforms, witnessing a doubling of its price over the course of a month. Despite a month-to-month decrease in daily active user count (-11%), Sui experienced a substantial uptick of (+66.7%) in Total Value Locked (TVL), reaching $444 million, and an (+88.8%) increase in Decentralized Exchange (DEX) volume. Notably, Sui's DEX volume and TVL in January surpassed the metrics of Coinbase's Base blockchain. Sui, a captivating newcomer in the alternate layer-1 blockchain competition, launched its Mainnet in May 2023. Conceived by former developers of the Facebook blockchain project Diem and anchored in Diem's cutting-edge Move blockchain language, Sui boasts a remarkable array of capabilities. We find Sui intriguing due to:

The blockchain project excels in efficiency, boasting a 1/5th development time compared to Solana. Simplifying coding with half the lines, it prioritizes a user-friendly experience, allowing seamless fund control through familiar sign-ins like Google or Facebook. Safety measures include a bytecode verifier and an object-based coding language to prevent smart contract faults and blockchain attacks. The project's modular architecture facilitates scalability, recording a remarkable 65 million transactions in a day. Transactions can perform up to 2048 functions simultaneously, surpassing competitors, and offer fast confirmation times as quick as 30ms. This success is credited to the talented developer team, strategically leveraging the Move language.

Despite its considerable potential, Sui remains in its infancy, lacking a defined core identity or a highly differentiated application ecosystem. The cultivation of culture and community often stems from the personalities within the broader team. While Sui's team is exceptionally talented, they are yet to establish a robust online presence akin to successful chains like Ethereum or Solana. In the crypto realm, social capital and the creation of an engaging community hold significant value. Although projects like Aftermath Finance have initiated a grassroots movement of culture on Sui, it remains uncertain if this momentum can be sustained. Additionally, Sui's daily active user count is relatively low, placing it in the same usership size cohorts as projects like MultiverseX, Fantom, and the Cosmos Hub, each of which carries lower valuations than Sui. Furthermore, a substantial portion of the activity on Sui is likely attributed to the enticing rewards within Sui DeFi.

Polygon (-17.4%)

Average DAUs vs. Average TVL, Last 30 Days

Source: Artemis XYZ as of 1/31/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Polygon's MATIC token faced another challenging month, with positive usership metrics such as daily active users showing an increase (+39.2%) compared to December. However, crucial fundamental indicators of activity, including DEX Volume and TVL, witnessed a decline of (-21%) and (-1.8%) month to month. From a fee perspective, MATIC experienced a decrease of (-55.3%) in January compared to December. A catalyst for the negative price action revolves around accusations that Polygon intentionally misallocated 400 million tokens earmarked for staking rewards. Some argue that these tokens were sold on Binance to generate funds for Polygon. While adjustments to tokenomics are not uncommon, transparency is typically expected. The shifting of tokens, especially if done almost three years ago, is considered an issue, though not necessarily a fatal blow to the token's price. However, Polygon contends with a somewhat unfavorable reputation for making questionable claims. Overall, market sentiment towards Polygon is weak, fueled by confusion regarding its long-term vision, differentiation from other Layer 2 solutions, and the allocation of tokens to business partnerships that are yet to yield substantial on-chain fees.

Nevertheless, there are compelling reasons to believe that Polygon is undervalued relative to its potential. Polygon boasts the seventh-largest Daily Active User (DAU) base in all of crypto, with approximately 571,000 users over the last 30 days, nearly four times the user base of its closest Layer 2 blockchain competitors. Additionally, several distinctive projects are being developed on Polygon, including ImmutableX, focused on gaming, Dimo, an automotive data project, and GEODNET, a GPS improvement entity. Crucially, Polygon's innovative zk scaling approach positions it to become an aggregation layer for Layer 2 blockchains.

In their strategic vision, Polygon aims to generate revenue by operating proof systems and serving as a settlement layer for zk rollup blockchains built using the Polygon CDK. This would facilitate trustless bridging between these chains, addressing a significant challenge for Layer 2 solutions, and consolidating liquidity while earning fee revenue. Polygon has also recently announced a noteworthy partnership with Fox Corporation to launch Verify, enabling Fox to provide proofs of authenticity for its media content on Polygon's blockchain. As is often the case in crypto, Polygon's MATIC token is likely to benefit from a compelling narrative. For Polygon, this market narrative is likely to revolve around the challenges of bridging funds between Layer 2 solutions and other pain points associated with non-zk rollups L2s. While the emergence of such a positive narrative for Polygon is uncertain, what is definite is the imminent launch of its aggregation layer in February, drawing widespread attention to its performance.


BlackRock's spot bitcoin exchange-traded fund (ETF) has shattered records by reaching $1 billion in assets within the first four days of trading. This achievement not only marks a significant milestone for BlackRock but also sets the pace for a new era in the cryptocurrency market. As we delve into the details, it becomes evident that the U.S. Securities and Exchange Commission's recent approval of a series of ETFs tracking the world's largest cryptocurrency has played a pivotal role in reshaping the landscape.

ARK Invest executed a strategic sell-off of ProShares Bitcoin Trust ETF (BITO), shedding a total of 2,226,191 shares since January 19th. This move, valued at approximately $42.8 million at the closing price of $19.22, is a reflection of ARK's dynamic approach to portfolio management.

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