Week of Feb 8, 2022

SEC Delays GBTC ETF Decision

Another look at U.S. inflation data this week. Tether Dominance Among Stablecoins Drops Below 50% For The First Time Ever

💬 Market Commentary


Bitcoin finished last week +11.80%, closing at $42,420. It has now had 2 consecutive weeks of gains - which had not happened since mid November 2021. 

While price action has been positive, spot trading volume has been relatively low. 

The biggest news out of last week was the fact that the SEC delayed the ETF applications for both GBTC and Bitwise.

As you know, there have been several applications submitted to create spot bitcoin ETFs.  After denying 6 applications since November, the SEC recently issued 2 notices requesting further information about 2 particular spot bitcoin ETF applications: Bitwise and Grayscale.

In both cases the SEC asked for additional information and requested commentary from the public and/or interested parties. 

The news was received favourably by the markets as it signals that the SEC is not closing the door entirely to the possibility of an approval. 

While the news of the delays were encouraging, price action suggests that investors have not necessarily adjusted their expectations. Analysts also agree that the probabilities of an approval this time around are still low. 

The other big news dropped yesterday when Tesla announced that it held $1.99 Billion worth of Bitcoin at the end of 2021.

This means that Tesla kept a sizable chunk of its bitcoin. Despite having posted a $101 Million accounting loss, it has also posted $128 Million in realized profits. Theoretically, it also could have an implicit gain of $500 million on the bitcoin that it has kept. 

Looking at the Bitcoin futures markets, we are starting to see some backwardation building on the curves. This simply means that the future month’s contracts are trading at prices below the current spot price. 

Normally, these curves slope smoothly upwards and to the right. As you can see from the above graph, the “dips” in the charts reflect the lower prices later in February (and some curves out to March). 

Additionally, the funding rates for perpetual futures have remained negative even as the market rallies.

This is typically not the case, as funding rates reflect which side of the trade has more leveraged investors. If more contracts are long, the funding rate will be positive, if more contracts are short, the funding rate will be negative. 

Lastly, short interest on Bitfinex remains elevated and has risen during the current rally. 

The 3 factors above (the slope of the futures curve, the negative funding rate, and the level of short interest on Bitfinex), suggest that investors are hedging for some downside, even in the face of the current rally. 

There are some interesting implications to the current positioning. For one, since leverage seems to be building to the downside, this creates a setup where the drops would theoretically not be as deep, and a potential rally could liquidate short investors with leverage, resulting in the price “melting upwards”.

While that concept sounds exciting, let’s not forget that the Biden administration has a looming potential order to task federal regulators with regulating the digital assets. 

While it is still a rumour, the news could introduce volatility if and when it happens. This could be what some investors are trying to protect against.

S&P 500

It’s been a volatile past few weeks in equity markets as central banks across the world look to elevate interest rates to cool down their economies.

In the U.S. the yield on the 10-year bond reached 1.9% - levels not seen since before the pandemic. 

While this looks like a fast increase, the yield on the 5-year bond and the 2-year bonds have risen even more since the start of the year.

What this means is that the market is pricing in higher interest rates in the short term (2-5 years), and much lower yields further out (10-30 years). 

The “yield curve” is a fancy way of saying “the sequence of bond interest rates at different bond maturities”. For example, overnight rate is 0.25%, 1 year rate is 0.5%, 2-year rate is 1%, and so on. The natural state of the yield curve is upwards and to the right. Investors typically demand a higher rate of return for committing their funds for a longer time, as there can be more uncertainty over a longer period of time.

When short-term rates are as high, or higher than the long-term rates. The curve can become “flat” or even inverted. 

Since the start of the year we have been witnessing the yield curve flattening before our eyes.

What happens next?

The above graph can provide clues. It shows a very simple relationship - the difference in yields between the 10-year note and the 2-year note. 

The shaded areas in the graph signal previous periods of economic recessions. As you can see, every time the difference between the 2 yields becomes negative - an economic recession has followed. 

As we have shown, bond yields are trending in that direction and it is getting close to that critical level. - and we will monitor the relationship going forward. 

This issue is not just isolated to the U.S. - we are seeing short-term bond yields soar in Europe as well.

Equity markets have withstood the soaring yields for now, largely on the back of strong earnings. 

However, with oil prices soaring, and interest rates rising, there is a chance we see markets come under pressure - particularly if inflation numbers remain high. We get a read of January’s Consumer Price Index this week - details in our What’s Aheads section.


After its worst-performing week since November of last year, gold managed to close last week at ˜$1807, up almost by 1%.

Interestingly, according to data released last week by the IMF, Central Banks added a net 14.2 tonnes of gold to their reserves in December. 

Elsewhere, Mitsui & Co., a very prominent Japanese Trading House, announced they're planning to issue a digital currency pegged to gold called ZipangCoin (ZPG). 

This would mark the introduction of Japan's first gold-linked cryptocurrency. The firm also disclosed that the digital asset would be sold, first, through Mitsui's exchange, and afterwards on other exchanges. 


It was a wild week in DeFi space. Price-wise both the DeFi index and Ethereum ended last week higher by more than 15%.

There were several significant events throughout last week. 

First up, an update on the stablecoin landscape. Last week Tether’s dominance dropped to below 50% of all stablecoin supply. 

For context, a year ago - all other stablecoins combined only amounted to ~30% of Tether’s market capitalization. Today, they amount to more than 100% of Tether’s market capitalization. Making Tether’s market share effectively less than half.

Elsewhere in the DeFi world, a prominent DeFi platform suffered an exploit and was hacked for $325 Million.

Wormhole is a “decentralized bridge” between Solana and Ethereum. Meaning, it allows assets from one protocol to be exchanged for assets from the other. 

Within 24 hours of the hack, Jump Trading, a Chicago-based trading firm with over 20 years of experience, stepped up to provide the $325 Million needed to make protocol users whole. 

The hack was reportedly the 4th largest in crypto history - larger than the QuadrigaCX hack. 

For full context, Jump Trading has a vested interest in the success of Wormhole. 

The company bought Certus One, the software development firm that was one of the main contributors behind the development of Wormhole. 

The hack once again highlights the risks of DeFi at a time when regulators have their focus on the industry. 


Bitcoin's network difficulty reached a new all-time high last week, moving to 26.69 THs.

The mempool remains clear with transaction costs and processing times at optimal levels.

What's Ahead

Bitcoin seems to be riding a high after the Tesla announcement. The next big test for markets may be January’s inflation reading in the U.S. 

The data comes out at 8.30 AM EST on Thursday. Analysts expect year-over-year inflation to come in at 7.2% from the previous 7% in December. Month-over-month inflation is expected to come in at 0.4% - from the previous 0.5% in December. 

The expectations are for a large reduction in the month-over-month inflation relative to December. 

Any surprises to the upside could cause headwinds for markets. Conversely, lower than expected numbers could be celebrated by the markets.

We hope you enjoyed reading and as always, we wrap up with a summary of the upcoming economic data and earnings reports for the week:


Alibaba reports earnings. 


KKR and Lyft report earnings. 


Uber, Motorola report earnings.

10:30 AM EST - Fed. Governor Michelle Bowman speaks

12:00 PM EST - Cleveland Fed President Loretta Mester speaks


Twitter, Western Union, Eventbrite report earnings. 

8:30 AM EST - Consumer price index (month-to-month)

8:30 AM EST - Consumer price index (year-to-year)

2:00 AM EST - U.S. Federal budget

7:00 PM EST - Richmond Fed President Tom Barkin speaksIt's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.


This article is intended for general information and discussion purposes only, it is not an offer, inducement or solicitation of any kind, and is not to be relied upon as constituting legal, financial, investment, tax or other professional advice. This article is not directed to, and the information contained herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to law or regulation or prohibited by any reason whatsoever or that would subject Ledn and/or its affiliates to any registration or licensing requirement. This article is expressly not for distribution or dissemination in, and no services are being marketed or offered to residents of, the European Union, the United Kingdom or the United States of America. A professional advisor should be consulted regarding your specific situation. Digital assets are highly volatile and risky, are not legal tender, and are not backed by the government. The information contained in this publication has been obtained from sources that we believe to be reliable, however we do not represent or warrant that such information is accurate or complete. Past performance and forecasts are not a reliable indicator of future performance. Any opinions or estimates expressed herein are subject to change without notice. We expressly disclaim all liability and all warranties of accuracy, completeness, merchantability or fitness for a particular purpose with respect to this article/communication. For full legal terms and conditions visit https://ledn.io/legal

About the author

Mauricio Di Bartolomeo

Mauricio is the co-founder and Chief Strategy Officer of Ledn.io. He grew up in Venezuela where he and his family learned about Bitcoin. Now based in Canada, Mauricio holds HBA and MBA degrees from the Richard Ivey School of Business in London, Ontario in Canada.