ON–202: Bitcoin 🅑

Coverage on the Halving, ETFs, Lightning Network

Feb 2, 2024

ON–202: Bitcoin 🅑

About the Editor: Spencer Noon is an independent angel investor. Looking to get in touch? DM him on Telegram or reply to this email and say hi 👋

📝 Editor’s Note:
2024 is going to be a year of growth for the OurNetwork community and platform. In an effort to scale our coverage for subscribers we’ll be adding a 2nd weekly issue each Tuesday beginning next week, February 6th.

In order to put more editorial rails on our publishing process, we’ll be posting a Community Editorial Calendar at the beginning of each month. Contributors are welcome to reach out to the our Editorial Contributor, Owen (@ofernau), on Telegram if they would like to participate in a specific issue.

We look forward to continuing to provide the premier bottom-up, community led onchain analytics coverage in the space. Our North Star is reporting on the evolving health of decentralized networks with an eye towards onboarding the next generation of power users into the market.

— Spencer 🕛

This Issue Is Powered By Polygon 💜. Check out the new hyper-scalable DeFi hub emerging on Polygon zkEVM.

Bitcoin 🅑

① Bitcoin Overview ⛓️

📈 First two weeks since Bitcoin ETF approvals saw $29B traded

  • After the SEC approved 11 Bitcoin ETFs on Jan. 10 the iShares and Fidelity offerings captured $1.2B and $1B inflows, respectively (68%), while Grayscale faced $2.2B outflows. The first two weeks saw $29B traded, with Ark 21Shares ranked third, capturing 11% of the total market turnover (ex. Grayscale).
Source: Bloomberg
  • With the approval of the long-awaited Bitcoin spot ETFs, the next key milestone for the digital asset is its fourth halving. This will cut the reward from 6.25 to 3.125 BTC per block. Based on the 90-day moving average block time, the forecasted date for the halving is Apr. 16.
Source: Dune Analytics - @21co
  • The U.S. Government has seized at least 215k BTC since 2020 from Silk Road, the Bitfinex hack, and James Zhong. The U.S. is a major holder of BTC and controls roughly 1% of the total supply. On March 9 2023, 49k BTC associated with law enforcement seizures were on the move, with ~9.86k sent to Coinbase.
Source: Dune Analytics - @21co

② Lightning Network ⚡

📈 OKX cracks the liquidity leaderboard, becoming a top 10 Lightning node

  • Bitcoin’s Lightning Network is a layer-2 protocol leveraging bi-directional payment channels to enable near-instant, low-fee transactions. As Lightning grows in popularity, centralized exchanges continue to build out channel infrastructure. Joining peers like Binance, Kraken, and Bitfinex, OKX has grown capacity 19% year-to-date, with 43 BTC added to a collection of 330+ channels. As a result, OKX recently claimed spot #10 on the global liquidity ranking, just below Wallet of Satoshi and LNBIG.
Source: amboss.space
  • Among the centralized exchange cohort, OKX boasts an impressive average channel capacity, topping Bitfinex and Kraken with ~0.68 BTC per channel. Averaging 3.58 BTC across 78 high-capacity channels however, Binance still clears its peers by miles.
Source: amboss.space
  • Zooming out, Lightning capacity has fallen from 2023’s record high. At 5K BTC, TVL is down 9% from its peak. Still, "capacity is presented in Bitcoin terms, while the Bitcoin price has grown tremendously,” notes Amboss CEO Jesse Sharder. USD-denominated TVL remains near 2023 highs above $210M.
source: amboss.space
  • 💦🔬 Tx-Level Alpha: One of OKX’s most quickly-growing peers is mainnet.nostrassets.com, a marketplace offering support for Lightning’s new “Taproot Assets'' protocol. Over the past few weeks, the node has opened several high-capacity channels with OKX, presumably preparing to onboard exchange users to the Bitcoin-based token issuance protocol (with the added benefit of free advertising on OKX’s public channel map).

③ ETFs 👔

📈 Flows for Bitcoin ETFs hit $1.4B

  • In a watershed moment for the crypto space, the SEC approved 11 BTC ETFs on Jan. 10. Since then inflows and outflows from the financial products have reached $1.4B among the ten ETFs that Hildobby, an on-chain analyst, has tracked. Those ETFs represent $28B in BTC, which is 3.31% of the current supply of the digital asset. The largest outflows have come from Grayscale's ETF, GBTC, which was one of the primary ways to gain exposure to the digital asset since its launch in 2013.
Source: Dune Analytics - @hildobby
  • Despite the outflows, GBTC still dominates in terms of market share. The offering has over 70% market share, totaling over $20B, among the tracked Bitcoin ETFs. Blackrock and Fidelity's ETFs both have nearly 10% market share with $2.7B assets under management (AUM) a piece.
Source: Dune Analytics - @hildobby
  • The BTC in Grayscale's GBTC has dropped over 20% since the product converted to an ETF. In absolute terms that's a loss of roughly 129,000 BTC.
Source: Dune Analytics - @hildobby
  • 💦🔬 Tx-Level Alpha: This is the address of Bitwise's ETF. It contains nearly ‎14,956 in Bitcoin, worth over $646M. The company was the first among those offering Bitcoin ETFs to publicly release the address of the stored digital assets. Bitwise ETF ranks fourth among the tracked products by AUM.

④ Atomic Finance 🔐

📈 Atomic Finance crosses 117 BTC in TVL, 1500+ app downloads

  • Atomic Finance, a Bitcoin-Native DeFi app, showed notable growth with an average investment size of 0.29 BTC per user, pushing its total value locked (TVL) to 117 BTC. The platform offers a simple and automated way to earn BTC-denominated returns, through options-based, passive strategies (e.g. covered calls, long options). Strategy returns start at 7% APY. Atomic's primary mission is to “make Bitcoin useful again” by enabling access to BTC-native DeFi tools.
Source: atomic.finance
  • A Discreet Log Contract (DLC) is a native smart contract on BTC mainnet that allows for financial contracts to be constructed, such as futures, or options contracts. There has been a notable uptick in the number of DLCs generated through Atomic Finance with a record of 3227 DLCs created to date.
Source: Atomic Finance (internal)
  • The Atomic Finance mobile app has now passed 1528 app downloads. The app champions the principles of self-sovereignty, transparency, and verifiability.
Source: Atomic Finance (internal)
  • 💦🔬 Tx-Level Alpha: This transaction might seem like a standard dual-funded Lightning Network channel. However, it's actually a funding transaction to create a Discreet Log Contract (DLC). The transaction includes contributions from a user and a market maker. The initial output is dedicated to the DLC, and subsequent outputs allocated to the market maker and the user's change. This shows that DeFi on BTC L1 is already a reality.