GOMARKET WEEKLY #32

Welcome to another edition of GoMarket Weekly, where our expert guest Mike Ermolaev breaks down the latest developments in crypto. 

This week, we’ll look into Bitcoin's impressive surge. We will also explore the latest in stablecoin adoption and upcoming U.S. presidential elections that play a role in crypto, regulatory shifts, and much more. Let’s GoMarket! 

Bitcoin's Rising Market Dominance and Supply-Demand Imbalance

Bitcoin (BTC) has enjoyed a remarkable 12.3% gain over the past seven days, boosting its dominance in the cryptocurrency market to 58.96%, the highest since March 2021. 

Source: TradingView 

Meanwhile, according to Glassnode analysts, the risks of heightened volatility are increasingly tied to a significant divergence between Bitcoin’s supply and demand. Since the all-time high (ATH) in March 2024, demand has been steadily waning. The daily capital inflow into the Bitcoin network has dropped from a peak of $2.97 billion in March to around $730 million, indicating a sharp decline in new investment. On the other hand, the supply side is also constricting, with several measures of 'active supply' showing notable compression. The active supply has effectively halved since the ATH, as long-term holders (HODLers) increasingly dominate the market.

Source: Glassnode 

Historically, such tightness in available supply has been a precursor to significant market movements. On-chain data also reveals low levels of coin-day destruction (CDD), meaning long-term investors are holding onto their BTC rather than transacting. This HODLing behavior, combined with reduced on-chain activity and futures trading, suggests that BTC prices could remain range-bound for the near term unless a significant catalyst emerges to break the current equilibrium.

Glassnode's analysis highlights that Bitcoin is currently in a delicate balance between two extremes: a bear market-like constriction of supply and moderate, yet declining, new demand. This period of equilibrium, as noted in the report, often doesn’t last long, meaning crypto market participants should prepare for potential sharp price movements ahead.

Tether Hits 330M Onchain Users 

Stablecoins continue their steady rise in adoption, with Tether (USDT) leading the charge. Tether recently announced that its user base has expanded to an incredible 330 million on-chain wallets and accounts by the end of Q3 2024, a figure equivalent to the population of the United States. This number only includes on-chain users, meaning the total number of USDT users could be much higher when factoring in off-chain accounts on centralized platforms, which are estimated to include tens of millions more. The impressive growth in USDT adoption has been accelerating, with Q3 2024 seeing the largest quarterly increase yet, welcoming 36.25 million new users, a 9% rise over the previous quarters.

Source: Tether.io 

A significant driver behind this rapid growth is the expansion of USDT across various blockchains, with the most notable usage on Tron (TRX), Binance Smart Chain (BSC), and Ethereum (ETH). However, much of the recent adoption surge has been fueled by Layer 2 chains like Optimism, Arbitrum, and Polygon, as well as networks like Avalanche and Solana. The Telegram Open Network (TON) has also played a major role in this, adding 3.3 million users in just six months.

A16z Reports 617M Global Crypto Users

In its latest State of Crypto report, a16z Crypto revealed there are now 617 million cryptocurrency users globally. However, despite this large number, only 5-10% of these users are actively engaging with crypto applications, which translates to approximately 30-60 million active users. The report advises crafting user-friendly apps to foster greater engagement among passive users.

According to the report, crypto activity hit an all-time high in 2024, with 220 million blockchain addresses interacting with a network at least once in September alone. Approximately 100 million of the active addresses are attributed to Solana. Bitcoin, NEAR, Base, and Tron were other notable contributors to this surge in activity. 

Source: a16zcrypto

The number of mobile crypto wallet users also hit record highs in 2024, thanks to countries like Nigeria, India, and Argentina seeing significant growth.

Source: a16zcrypto

Looking ahead, a16z points out that infrastructure improvements, particularly on Layer 2 networks, have drastically reduced transaction costs, making it more feasible to execute on-chain applications at scale. 

Trump’s $7.5M Crypto Campaign Boost

Donald Trump's team has raised an impressive $7.5 million in crypto donations for the 2024 presidential race. Trump’s fundraising committee, Trump 47, reported a total of $145 million in overall receipts, with $7.5 million contributed in cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and stablecoins like USDT and USDC between July and September 2024.  Of the total crypto donations, Bitcoin alone accounted for $5.5 million, contributed by 18 donors, while Ethereum brought in $1.5 million from seven donors. 

With the 2024 election approaching, Trump is favored by 60.9% of Polymarket users. His pro-crypto stance is further supported by his recent launch of World Liberty Financial, a decentralized bank project aimed at fostering crypto-based financial services. 

On the other hand, Kamala Harris, currently polling at 38.9% on Polymarket, has also garnered support from crypto donors, including Ripple's Chris Larsen, who donated $1 million worth of XRP tokens to Future Forward, a super PAC supporting Vice President Harris’ campaign for the White House. 

Source: PolyMarket 

In addition, Harris has committed to creating financial opportunities for Black men, which includes “supporting a regulatory framework for cryptocurrency and other digital assets”.

Bitcoin Laundering and SEC Hack: Key Cybercrime Sentences Loom

U.S. prosecutors have recommended a 60-month prison sentence for Ilya Lichtenstein, the hacker involved in laundering 119,754 BTC stolen from Bitfinex in 2016. The stolen Bitcoins were valued at $71 million at the time of the theft but are now worth approximately $8 billion. Lichtenstein’s cooperation with law enforcement has led prosecutors to seek a reduced sentence.

While Lichtenstein played a central role, his wife, Heather Morgan, who had a smaller part in the laundering scheme, faces 18 months behind bars. The couple’s substantial Bitcoin stash—94,643 BTC—along with accrued coins from Bitcoin Cash (BCH) and Bitcoin Gold (BTG) hard forks, will be returned to Bitfinex as part of the restitution process.

In another cybersecurity case, a 25-year-old Alabama resident, Eric Council Jr., was arrested by the FBI for hacking into the U.S. Securities and Exchange Commission’s (SEC) official social media page. In January 2024, Council allegedly used a SIM-swap attack to gain access to the SEC’s X (formerly Twitter) account, falsely announcing the approval of a spot Bitcoin ETF, causing Bitcoin prices to spike by $1,000. In the aftermath of the hack, Council scoured the internet for advice on tips on “what are some signs that the FBI is after you,” unwittingly tying himself to the crime scene. He is being charged with plotting to steal someone's identity and committing fraud by illegally accessing devices.

Italy Hikes Bitcoin Tax and Tightens Payment Rules

Italy’s government is planning a significant hike in capital gains tax on Bitcoin earnings. Starting in 2025, gains exceeding €2,000 will be taxed at 42%, up from the current 26%. As part of a comprehensive effort to bring order to the Wild West of cryptocurrencies, Deputy Minister of Economy Maurizio Leo unveiled a major increase in regulation and taxation during the 2025 budget presentation. Starting next year, payments for services like taxis will require credit card transactions connected to POS systems for tax deduction eligibility.