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⚡Spot Bitcoin ETFs See 27% Uptick🆙

Croxroad

22 Aug 2024 — 4 min read

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The Daily Newsletter for Intellectually Curious Readers

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🆕 Record Institutional Adoption

The institutional adoption of spot Bitcoin exchange-traded funds (ETFs) has surged during the second quarter of 2024, marking a notable 27% increase despite Bitcoin's recent price correction. According to Vetle Lunde, a senior analyst at K33 Research, the number of professional firms investing in U.S. spot Bitcoin ETFs rose by 262, reaching a total of 1,199 as of June 30. This growing institutional involvement suggests a strong belief in Bitcoin’s future potential, as large capital flows from institutional investors can significantly influence the cryptocurrency market.

Despite this uptick in institutional ETF adoption, retail investors still hold the majority of Bitcoin ETFs. Institutions increased their share of assets under management (AUM) by 2.41 percentage points, now controlling 21.15% of the total. This is a slight rise from 18.7% in the first quarter of 2024. However, the increase in institutional investment has yet to push Bitcoin's price above the critical $60,000 mark, with the cryptocurrency recently trading at $58,370.

The price struggles come amid stagnating ETF inflows, which turned positive on August 15 with $11 million in inflows, according to Farside Investors. This is significantly lower than the $81.4 million outflow recorded the previous day. Although ETF inflows can drive up Bitcoin prices by adding substantial new investments, the recent fluctuations suggest that while institutional interest is growing, it has not yet translated into sustained price gains for Bitcoin.

🍭 Coinbase to Launch cbBTC

Coinbase, the world’s second-largest cryptocurrency exchange, is making waves with its development of a new Wrapped Bitcoin (BTC) token, Coinbase BTC (cbBTC). This initiative has generated significant excitement within the crypto community, as it promises to enhance the adoption of Bitcoin-native decentralised finance (DeFi). The introduction of cbBTC could play a pivotal role in expanding Bitcoin DeFi, or BTCFi, by providing a new layer of utility and integration for Bitcoin within the DeFi ecosystem.

Rena Shah, Chief Operating Officer of Trust Machines, emphasised the potential impact of cbBTC, suggesting that it represents a major onboarding opportunity for Bitcoin DeFi. This follows a broader trend of growing interest in BTCFi, particularly after the launch of Runes, a protocol for issuing fungible tokens on Bitcoin, and the first Bitcoin-backed synthetic dollar, USDh. Coinbase’s move is seen as a critical development for Bitcoin DeFi, building on the momentum created by previous innovations in the space.

The success of cbBTC will largely depend on its adoption by decentralised applications (DApps) and the overall demand for Bitcoin-based financial solutions. Shah noted that while the new token benefits from Coinbase’s mainstream credibility, its real value will emerge from how well it integrates with decentralised and non-custodial solutions. This aligns with the broader goal of increasing Bitcoin liquidity in DeFi, a concept initially advanced by Wrapped Bitcoin (wBTC), which has significantly contributed to the DeFi space by bridging Bitcoin with the Ethereum network.

🚕 How Is a Crypto IRA Taxed?

Crypto IRAs are taxed similarly to traditional IRAs, depending on the type of account you hold. In a Traditional IRA, withdrawals are taxed as ordinary income when you take them out. On the other hand, in a Roth IRA, your contributions are taxed as ordinary income when deposited, but withdrawals are tax-free. The tax treatment remains the same whether your assets are in cryptocurrency or traditional assets—what changes is how and when the taxes apply, based on the IRA type and when you decide to withdraw your funds.

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