March 2024 proved a pivotal month for cryptocurrency. On the surface, Bitcoin achieved new heights, notching its seventh consecutive monthly gain and longest uninterrupted winning streak in history. Yet beneath the celebrations, turbulence was stirring that revealed deeper questions about cryptocurrency's maturation.
Regulation has emerged as a defining issue. With trillions entering the sector since COVID, watchdogs now aim to curb potential risks to investors and financial stability. Their stances will shape the space for years. In March, this manifested through a distinct lack of clarity from regulators regarding Ethereum investment products seeking approval. This in contrast to Bitcoin's smoother process.
Fidelity's novel Ethereum filing intensified this debate. By including staking, it pushed boundaries in uncertain times. Was this forward-thinking or foolhardy? Philosophically, it probed regulators' risk tolerance versus permission for technological progress.
Beyond rules, March also exposed evolving dynamics within cryptocurrency itself. Bitcoin's mid-month tumble tested market psychology. Meanwhile, Ethereum lost dominance against Bitcoin not seen since 2021, raising questions about each's perceived value.
By scrutinizing these diverse yet interlinked March developments, this essay aims to further understanding of cryptocurrency's maturation at a crossroads of growth and evolving governance. Both bring opportunity and challenge in the road ahead.
Serious people being serious about serious crypto things
Bitcoin's Record Month
In March 2024, Bitcoin achieved new heights, closing the month at ~$70,000. This placed it at the highest monthly close in its thirteen-year history, capping seven consecutive months of gains for the dominant cryptocurrency.
The sheer length and consistency of this winning streak is unprecedented. Never before has Bitcoin risen in price for seven months uninterrupted. For investors who had held firm in previous bear markets, this prolonged stretch in the green seemed to validate their resolve. With each passing month, Bitcoin not only increased in dollar value but also in legitimacy as a store of value in the eyes of mainstream financial observers.
This legitimacy came with both benefits and drawbacks. On one hand, the growing adoption of Bitcoin by large institutions signals recognition of its potential as a portfolio diversifier and inflation hedge. Billionaire investors publicly endorsing it as "digital gold" raised its profile while new investment vehicles like ETFs made access simpler.
However, with popularity comes increased volatility. Where Bitcoin has once been the domain of tech-savvy libertarians, its emergence as a mainstream asset class means being pulled into the ebbs and flows of broader market sentiment. A mid-March decline of ~18% serves as a reminder of its infancy and sensitivity to macroeconomic factors.
In the end, Bitcoin's record-setting monthly close in March underscores how far it has come, while volatility hints at the growing pains still to come as it matures from a niche to having influence beyond its community. Both adoption and price swings will continue shaping its evolution.
As always, the grand daddy crypto is a wild ride.
Mid-Month Decline and Recovery
After reaching a high of over $70,000 in mid-March, Bitcoin underwent a precipitous correction, plummeting by 18% over only a few days. This mid-month decline shook the market and tested the resolve of investors who had grown accustomed to steady price increases.
The trigger for the sell-off was unclear, though rising geopolitical tensions and inflation concerns were likely factors. As more mainstream players entered the market, Bitcoin showed increased sensitivity to macroeconomic cues compared to past cycles which have been mostly dominated by ideologically-driven early adopters.
BTC's monthly chart is a face-melter.
Regardless of the cause, the 18% drop exposed lingering doubts among those questioning if the rally could be sustained. It served as an important psychological check for bulls who had become overly optimistic. The dip showed that Bitcoin, despite its gains, remains a highly volatile asset. Its staying power through periods of red ink will determine its legitimacy in the eyes of cautious institutions.
However, unlike previous crashes that took months to recover from, Bitcoin rebounded rapidly. Within only one week, it had regained its losses and surpassed $70,000 once more. This resilience in the face of adversity demonstrated strengthened conviction from long-term holders as well as improved market structure supporting its price floor.
By retesting investor nerves and showcasing its ability to recover lost ground quickly, the mid-March decline and recovery is a valuable insight into Bitcoin's maturation as a store of value and the evolving psychology of its user base. Both bulls and bears took notice.
Bitcoin has been a bit chaotic this month.
Ethereum/Bitcoin Ratio Decline
The Ethereum/Bitcoin ratio has declined significantly this month, on track for its lowest monthly close since April 2021. This shift can be attributed to growing expectations that upcoming applications for spot Ethereum ETFs in the United States may be denied by the Securities and Exchange Commission (SEC) in May.
Historically, the Ethereum network has seen strong usage growth in applications like decentralized finance (DeFi) which has supported higher prices relative to Bitcoin. However, many analysts believe that classifying Ethereum as a security would stunt this growth by limiting the network's accessibility. This perception has driven capital away from Ethereum and into other assets like Bitcoin over the past month.
If spot Ethereum ETFs are denied, it could signal that the SEC views Ethereum more like a security than Bitcoin, which received approval for its own spot ETF last year. Being classified as a security would mean Ethereum is subject to a much more stringent regulatory framework in the US. This could hamper innovation and discourage investments from larger institutional players that want regulatory clarity.
For Bitcoin, a denial of spot Ethereum ETFs would further solidify its position as the dominant cryptocurrency protocol and store of value. It shows that Bitcoin has overcome regulatory hurdles that Ethereum has not, making it a less risky investment. However, both projects still have long-term potential and a decision either way may not change their fundamental value propositions in the rapidly evolving crypto sector.
The knights of Ethereum are fighting the evil forces of government regulation.
Fidelity's Ethereum ETF Filing
Fidelity recently filed an application for the first ever Ethereum ETF that includes staking rewards. This innovative product structure has raised some red flags with the SEC.
https://cointelegraph.com/news/fidelity-files-s-1-application-us-sec-spot-eth-eft-staking
Staking allows ETH holders to earn yields by locking up funds to validate transactions on the Ethereum network. However, it also means fund investors are actively participating in network security rather than just holding the underlying asset. This level of involvement could lead the SEC to view the fund more as an investment contract security than a commodity ETF.
By including staking, Fidelity may be pre-emptively addressing concerns around Ethereum's decentralization. But it also significantly increases the regulatory risk profile compared to spot-only ETF applications. Some analysts see this as a "bet the company" type of move, wagering that staking will be a required component for any future approved Ethereum product if applications are denied.
There is a balance to strike between fostering innovation and ensuring adequate investor protections. The SEC's mandate is to apply securities law based on economic realities rather than technological specifics. However, transparency into their evaluation criteria could help build workable solutions that further both goals. Overall, increased communication will be important to develop shared understanding between regulators and industry.
Ethereum is filing TPS reports.
BlackRock CEO's Perspective
BlackRock CEO Larry Fink expressed a relatively optimistic view of Ethereum's potential despite expectations that the SEC may classify it as a security. As the head of the world's largest asset manager, Fink has a long-term perspective on emerging technologies and their ability to attract mainstream institutional investment.
While acknowledging the regulatory hurdles, Fink noted that even if Ethereum is deemed a security, the network still holds promise as a platform for financial applications. He pointed to the success of BlackRock's recent Ethereum-focused BUIDL fund which saw strong inflows, showing growing demand from large investors. Fink believes the underlying blockchain technology will continue to mature and find use cases regardless of the regulatory framework.
https://decrypt.co/222694/blackrock-ethereum-fund-buidl
Fink's comments signal he is taking a patient view of cryptocurrency adoption rather than reacting to short-term price fluctuations or regulatory uncertainties. As institutions allocate increasing portions of their portfolios to digital assets, the institutionalization of the crypto sector will drive longer investment horizons focused on fundamental use cases and technical roadmaps. Major players like BlackRock also have the resources to navigate complex regulations as the landscape evolves over time.
Overall, Fink's perspective underscores how mainstream Wall Street views cryptocurrency as an emerging asset class with staying power despite bumps along the way. Institutional interest in blockchain technology's long-term potential will be resilient to interim regulatory decisions and help further crypto's integration into traditional finance.
March proved to be a record breaking month for Bitcoin as it achieved its highest ever monthly close. However, the Ethereum/Bitcoin ratio declined significantly on expectations that upcoming Ethereum ETF applications may be denied. There was a notable lack of communication from regulators compared to the Bitcoin ETF process, adding uncertainty.
Meanwhile, Fidelity's Ethereum ETF filing with a staking component raised eyebrows. Still, BlackRock CEO Larry Fink remained optimistic about Ethereum's long-term potential despite any regulatory barriers.
Please share this essay with others who may find its analysis interesting. You can also subscribe for updates and more discussions at the cutting edge of finance's digital transformation.
