Bitcoin corrects, but how deep?

We reflect on a tumultuous crypto week. After a period of growth, the market corrects. The price of a large number of crypto assets declined along with the decreasing bitcoin price. The burning question on everyone's mind: is this a healthy correction? More on this in this Weekly!

This weekly in brief: 

• Market: The price of bitcoin has dropped by 18% from $73,800 on Thursday, March 14, to $60,700 on Wednesday, March 20. So far, a mild correction.
• News: Speculators flocked to memecoins on Solana this week. In the same week, a British judge delivered a firm verdict: Craig Wright is not the man who invented bitcoin.
• Behind the scenes: We have recently partnered with Company Golf Club. A great partnership in which we bring together golf and crypto.

Market update

Last Wednesday, we described the impressively rapid rise in the bitcoin price to well above the November 2021 all-time high. At that time, the highest point was $69,000, now we were a step above at $73,000. The next day, the price rose a bit further to $73,800. That turned out to be the highest point of the rally that began on January 23 and brought the price 90% higher.

From Thursday, the market weakened. The price of many coins fell, in some cases by tens of percentages in a day. For bitcoin, the lowest point is now at $60,700, a drop of 18% from the top. So far, this is a mild correction.

The four previous corrections in this market cycle were all roughly the same depth, with declines between 20% and 22%. If this correction also ends up there, the price will further decrease to $58,000. However, it would not be surprising if we saw a more severe correction for once. In previous bull markets, a drop of 30% was quite normal.

That 30% drop would bring us back to the price range of the second half of February, around $51,000. Four weeks ago, the mood was excellent with prices above $50,000; now, for many, everything below $60,000 feels like a huge step back.

And that's exactly what is needed: a sentiment reset. A correction allows all market participants to take a sober look at their portfolio again and, if necessary, take profits or buy more. A common and healthy phenomenon in any financial market.

An outstanding performer was Solana. While most other coins had already begun their correction, the coin from the blockchain of the same name continued to grow cheerfully. We only saw the peak on Monday, March 18, at $210, a gain of over 50% in just one week.

The likely cause of this exceptional strength is the surge of memecoins in the Solana ecosystem. New coins sprouted like mushrooms, and gamblers jumped on them faster and faster. However, this dynamic is rarely sustainable in the long term. Solana has now also begun a correction and is 20% lower than the peak.

A question that preoccupied many was how investors in the US spot ETFs would behave during a correction. Would they hold on and even buy more? Or would they be frightened by the rapid price declines typical in the crypto market and sell massively?

We only have two days of data on the ETFs for this week, with Tuesday's figures partly based on estimates. However, the emerging picture is that ETF investors are also reducing their positions. For the first time since March 1st, we see outflows from the collective of ETFs.

On Monday, March 18, the outflow was $154 million, and on Tuesday, March 19, the outflow was $326 million. Together, the ETFs now have about 7,300 fewer bitcoins in their vaults than they did last Friday.

These are significant numbers, but compared to the inflow of recent weeks, they are still relatively minor. The chart below illustrates the ratio nicely. Only when the outflow accelerates further and lasts long will a meaningful portion of the inflow be undone.

And that's good news. This British judge draws a thick line under what has been clear to many people for years. Nevertheless, scammer Wright repeatedly made life difficult for people, from podcast hosts to bitcoin developers. Now that his financier seems to have fled to a warmer climate, we hope not to encounter the names of these people again.

In London, the market's turbulence gives way to the structure of a conference. We are present at the Digital Asset Summit by Blockworks, a congress where particularly large financial institutions and venture capitalists are present. Sandy Kaul, senior vice president at Franklin Templeton, kicked off the day with a resolute "the institutions are here!"

Another attendee here in London is BlackRock, the world's largest asset manager and, in the context of the US bitcoin ETFs, by far the market leader. For BlackRock's Larry Fink, this is just the beginning. He sees the ETFs as the first step towards a renewed financial system, where tokens are used as carriers of wealth.

For Wall Street, all of this converges into the terms tokenization and real-world assets. The strategic consulting firm Roland Berger also foresees tokens disrupting the existing system and calls it a " $10 trillion future": "Our conservative estimate is that the total market value of tokenized assets in 2030 will be significantly higher than $10 trillion."

To realize this future, Wall Street needs new infrastructure. A major difference from the previous cycle is that this infrastructure is now available. In addition to bitcoin, other platforms have proven themselves. Financial institutions now only need to connect to them. And there, too, we see and hear the market slowly but surely shifting: they dare to use public permissionless crypto networks, talk about them, and defend them outwardly.

Crypto is an independent, global infrastructure for recording digital assets.

Other news:

• The London Stock Exchange will soon open a desk for applications for bitcoin and ether products. These are financial products that, like US exchange-traded funds, track the price of their underlying crypto assets. In total, over $3 trillion is invested via the London Stock Exchange.
• MicroStrategy has purchased an additional 12,000 BTC. This time, the company invested $821 million in bitcoin. "We buy it to hold it for 100 years," CEO Michael Saylor said in an interview with CNBC. The software company now owns 205,000 BTC, worth $15 billion. The next purchase is already on the agenda.
• The Ethereum upgrade Dencun has been successfully implemented. The use of rollups has become much cheaper as a result. Coinbase CEO Brian Armstrong calls the upgrade "huge" and says it opens the door to a wide range of new applications. The realized scalability gains become clearer as more rollups use the new features.