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Bitget Hot Takes (May 27 - Jun 02, 2024)

Bitget Hot Takes is the exclusive weekly newsletter series by Bitget Academy, which sums up BGB performance, what's new at Bitget, and the latest market movements. The latest Bitget Hot Takes can be found here: Market Updates Central Themes • Cautious optimism as Bitcoin climbed back above US$70K again, but stringent regulatory oversight of cryptocurrencies contributes to market volatility and operational challenges for financial institutions and exchanges. • Key macro data in June: Interest rate decision for the Eurozone on June 05, U.S. Non-Farm Payrolls on June 07 and U.S. CPI data and FOMC on June 12. Week 22: Mixed Sentiment The cryptocurrency market saw significant fluctuations in W22. The global market capitalisation stood at $2.7 trillion, reflecting a 1.4% decrease despite a sentiment of 'Greed' at 72/100 by the end of the week. Bitcoin (BTC) experienced a high of US$70,598 and a low of US$66,633, ending the week with a 2.3% decrease, while Ethereum (ETH) showed resilience with a 1.7% weekly gain and highs and lows of US$3,974 and US$3,702, respectively. Other top cryptocurrencies like BNB, SOL, and XRP showed mixed performances: BNB slightly down by 0.2%, SOL decreased by 1.4%, and XRP fell by 4.3%. The week saw notable trading activities, particularly for ETH and BNB, with 7-day volume changes of 86.1% and 89.7%, respectively. In a significant regulatory event, President Joe Biden vetoed H.J.Res. 109, a resolution that would have overturned the SEC’s Staff Accounting Bulletin 121. This bulletin requires banks to treat customers’ crypto assets as liabilities, a stance criticised by banking groups for making crypto handling prohibitively expensive. Biden emphasised the need for these guidelines to protect investors, particularly after high-profile collapses such as FTX. The veto underscores ongoing regulatory scrutiny and reinforces the perception of a stringent regulatory environment, which likely contributes to the overall market performance. The security breach at DMM Bitcoin, where 4,502.9 BTC worth approximately $305.1 million were stolen, added another layer of uncertainty. Here are our guides on how to safeguard your assets from any potential threats: Navigating Security: How To Choose A Trustworthy Exchange For Your Prosperous Digital Future: Key Factors To Consider Bitget’s Commitment to Educating Users About Crypto Risks and Best Security Practices Bitget Wallet - Your Ultimate Gateway Into the Future These should be key events leading to significant net outflows from BTC and ETH. Bitcoin and Ethereum experienced a reduction of 46,608 coins valued at approximately $3.18 billion, and ETH a decrease of 832,193 coins worth around $3.14 billion in the last seven days. These outflows suggest possible profit-taking or repositioning by large holders that reflects broader market caution. Net flows in futures Bitcoin ETFs were negative at -US$16.61 million, marking the second consecutive week of outflows. In contrast, spot Bitcoin ETFs showed positive inflows of $373.02 million and indicated a preference for direct Bitcoin exposure over more volatile futures contracts. Among the spot Bitcoin ETFs, IBIT saw the highest inflows with US$310.76 million, whereas GBTC and ARKB experienced significant outflows of US$136.23 million and US$87.65 million, respectively. Other notable fund flows included BITB with US$45.59 million, FBTC with US$214.79 million, and smaller inflows into BTCW and BRRR. In comparison, futures ETFs like BITO and BITI saw outflows of US$28.61 million and US$1.22 million, respectively. The leveraged ETF BITX still had a positive inflow of US$13.22 million. The relative stability and inflows into spot Bitcoin ETFs suggest that investors view these products as more attractive or stable compared to traditional stocks (such as NASDAQ Composite and SP 500, who both experienced declines of 1.5% and 0.7% last week) amid the current market uncertainties, highlighting the growing acceptance and reliance on cryptocurrency-based investment products as a viable alternative to traditional stock market investments - especially when spot Bitcoin ETFs seemed to be more resistant to unfavourable news than the broader tech market. Setting The Tone: Monday Performance The global MCap increased by 2.2% to US$2.8 trillion, with the Fear Greed Index rising slightly to 73/100, maintaining a sentiment of 'Greed'. Bitcoin traded within a range of US$70,231 to US$67,590, while Ethereum fluctuated between US$3,849 and US$3,759. Ethereum's open interest (OI) reached numbers second only to its all-time high (ATH) at the closing on Monday, indicating strong trading activity and investor interest. In the futures markets, BTC and ETH showed funding rates of 0.0127% and 0.0118%, respectively. The long/short ratios were relatively balanced, with BTC at 50.41% long and 49.59% short, and ETH slightly favouring shorts at 49.79% long to 50.21% short. The OI change was positive for both, with BTC up by 2.2% and ETH by 2.8%, further suggesting growing interest in leveraged positions. These futures market dynamics highlight continued investor engagement and speculative activities as well as confidence in short-term price movements. The Federal Reserve's cautious stance on interest rate cuts and the ongoing monitoring of inflation data, particularly the Personal Consumption Expenditures (PCE) price index, played a significant role in shaping market expectations on the first day of the week. With the PCE price index showing a 0.3% monthly increase and a 2.7% YoY rise, the Fed's target of 2% inflation remained elusive regardless of the cooling in consumer spending. This influenced market sentiments and investor behaviour, as evidenced by the cautious trading and varied performances of crypto stocks and ETFs. Crypto stocks showed mixed results, with BITO decreasing by 1.1% while MSTR saw a positive return of 1.6%, but with a substantial overall volume that indicates active trading nevertheless. Spot Bitcoin ETFs showed some declines on Monday, together with the benchmark indices, ahead of the CPI data release on June 12, 2024. Trade BTC and ETH on Bitget today: Bitget Spot Trading | Bitget USDT-M Futures | Bitget Coin-M Futures | Bitget Copy Trade New Events Buy BGB using credit/debit card with zero fees 100% Guaranteed: Win rewards instantly and Bitget Card whitelisting！ Buy/deposit: Share $1M in trading bonuses and BTC! 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Bitget Beginner's Guide — Introduction to Take Profit and Stop Loss (TP/SL) in Futures Trading Bitget's Futures Quest: A Fun and Rewarding Game for Futures Traders Common Cryptocurrency Scams: Bitget's Safety Guide First Of Its Kind: Bitget Copy Trade Telegram Signal Bot Simply create an account, and start exploring the incredible Bitget-Verse today!

Can Blockchain-based Gaming Reshape the Industry?

When do adults stop playing and start taking themselves seriously? Typically, when they need to earn a living. But what if you could play for a living? A path that isn't just for the top 0.1% of esports athletes? This mythical land does exist, and it began to reach its full potential in 2021. It's known as GameFi. GameFi extends games into the financial realm. Stronger property rights mean players can take their beloved characters outside their native world for fun and profit. Blockchain technology provides the economic building blocks that used to take game developers so long to create that it prevented them from even starting. Economic activity on GameFi has recently exploded, and entire economies have stemmed from this activity. This report looks at the history of planned-economy games like World of Warcraft against their modern crypto counterparts that create maximum value for their players. What is GameFi? The blockchain-based game Axie Infinity launched its Ronin sidechain to Ethereum in February 2021. Within weeks, transaction volume and deposited balance smashed through all reasonable and even the most outlandish expectations. The gaming world was perplexed. What just happened? In one word: economics. Games in the past had minimal trading functionality, but not due to game developers’ lack of wanting. It was simply too difficult and remote from the game’s main objectives to implement a functional in-game currency and a marketplace that facilitated trades with the lowest possible transaction costs. Enter blockchain technology. A junior Solidity developer can create an ERC20 token for a game currency in less than an hour. When game developers use the ERC721 standard for non-fungible tokens, in-game materials like swords and wands automatically become tradable on popular third-party marketplaces like OpenSea. Axie Infinity and Defi Kingdoms demonstrated that they could reach more than $400 million in transaction volume on some days. These games are the poster children of a new category called GameFi. MixMarvel’s founders first mentioned the term “GameFi” in November 2019. Andre Cronje then used it in a September 2020 tweet, and the word became standard vernacular after that. GameFi is a concatenation of gaming and finance and broadly stands for blockchain games with a financial element, yet distinct from gambling activity. These games require skill and determination, with a smaller component of luck. Players earn currencies and materials by completing tasks or grooming their characters. What sets them apart from the past is what players can then do with their loot. Essential features of GameFi Play-to-earn Players can sell rare items earned in the game to other players on marketplaces in and outside the game, thanks to open standards. The connection between the “real world” and the virtual world becomes stronger when game materials retain utility outside their native surroundings. Some games have spawned a whole complementary industry where players make a decent living growing and training characters or finding powerful in-game Items. In-game currencies often have clever incentives to attract investors regardless of their involvement in the game itself. While this was a boon for early adopters, escalating prices created steep entry fees for newer participants because characters required to play are priced in the game’s native currency. Tokenomics A word combination of tokens and economics, it describes these incentive schemes. “Only 21 million Bitcoin will ever exist!” is Bitcoin tokenomics in a nutshell. There’s a limited supply, and the issuance keeps decreasing. Let’s look at Axie Infinity’s AXS token. Breeding characters sends tokens to the community treasury and removes them from circulation. Users can stake their AXS to secure the network and receive rewards from the treasury. At the same time, AXS tokens have a maximum supply of 270 million, with tokens for the team released gradually over five years so team members cannot dump their shares and ruin the price. The maximum supply, slow-release, and staking rewards work harmonically to make holding AXS more attractive to investors and fuel its price growth. Play-to-earn before blockchain Second Life was the first game that sparked a veritable in-game currency — called Linden dollar — and transactions of virtual items outside the game world. Real estate agent Ailin Graef made more than 1 million British pounds selling in-game plots in 2006. Second Life is still operational, and creator Philip Rosedale recently returned to tackle the metaverse. Perfect timing, since Second Life, pioneered much of what the metaverse is made out to be, like virtual professions, virtual land, or an entire virtual economy. The next game to smash the confines of its virtuality was World of Warcraft (WoW). This fantasy adventure saw players bid tens of thousands for blue Murloc eggs on eBay. Inside the game, characters used virtual gold for trades, but only specific items could be exchanged, often at set prices. Developer Activision Blizzard recently released its own digital currency, albeit one that is only available from the developer and only tradeable in the game itself. Economics of gameplay Blockchain gaming is turning the traditional gaming model on its head. Before GameFi, siloed game worlds didn’t let players genuinely own their in-game assets. GameFi stores in-game material as unique tokens, or NFTs, and lets owners sell them on free markets for a price of their choice. In 2019, the introduction of an in-game currency called Smooth Love Potion (SLP) boosted Axie Infinity’s popularity. It paved the way for other decentralized finance (Defi) components to penetrate blockchain gaming. Such parallels that GameFi has with Defi include staking, liquidity mining, NFT trading, and NFT fractionalization. Crypto gaming has grown in popularity as more players collect and trade digital assets, generating a dependable income for game developers and creating value for players. In 2020, Axie Infinity gamers in the Philippines earned their regular monthly salary by just playing the game at a time when measures against the COVID-19 pandemic brought economic hardship to the country. And here we have it: The mythical lands were playing and making a living converging. No wonder this attracted a copious amount of users. According to Bloomberg: “Nearly 50% of active cryptocurrency wallets connected to decentralized applications in November (2021) were for playing games. The percentage of wallets linked to decentralized finance, or Defi, dApps fell to 45% during the same period, after months of being the leading dApp use case.” How players make money Axie Infinity was the first smash hit in GameFi. With a sophisticated ecosystem, it dwarfed its competition at the top of DappRadar’s NFT sales rankings for much of 2021 and into Q1 of 2022, with $563.6 million in sales in Axie Infinity is an NFT game inspired by Pokémon and Tamagotchi. Players earn by breeding, racing, battling, and trading cute Axie creatures. All in-game materials are NFTs using Ethereum’s ERC-721 standard. This is the same standard that all NFT marketplaces use. Axie’s developers met while playing CryptoKitties, where they could witness the power of giving players economic liberties. All assets and all data on Axie are open sources, and using it does not require permission from Sky Mavis. Developers in the community can just build what they want and let the players decide whether they like it or not. In other words, a free and open market is baked into the game design. Axies can be bred by using Smooth Love Potion (SLP), a utility coin, and AXS, the game’s governance token. SLP is rewarded for completing quests in the game. Like in Ready Player One, players can shape a part of the game’s universe. But there’s more. One of the most significant digital land sales in the NFT and metaverse sector to date also comes from Axie Infinity: One of its 75 genesis land plots sold for $2.3 million. The collection has already clocked nearly $4 billion in total sales. Staking, or locking up, AXS over a more extended period of time reaps a substantial annual percentage yield (APY). Even though this reduced from over 200% to about 88%, investors have over $1.56 billion worth of AXS staked. Regulatory woes Since the emergence of Bitcoin (BTC) in 2009, on the heels of the subprime crisis, lawmakers have been slowly trying to find ways to regulate and tax cryptocurrencies. With the runaway success of digital assets since 2020, these efforts have intensified. United States President Joe Biden recently labeled crypto as a “national security threat” and announced an executive order to be sent to a plethora of government agencies asking them to develop regulatory policies. Democrats proposed another piece of legislation, worrying the crypto industry in the U.S. House of Representatives in January, the COMPETES Act. Jerry Brito, executive director for Washington D.C.- based think tank Coin Center, noted that one provision in the proposed bill would allow the Treasury Secretary to ban crypto exchanges from operating without any prior notice. Brito stated that he believes the bill will very likely pass “in some form”. In November 2021, a report published by the President’s Working Group on Financial Markets suggested that stablecoin issuers in the U.S. should be subject to “appropriate federal oversight” akin to that of banks. The report did not specify which federal agency would lead these efforts but said the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) had “broad enforcement, rulemaking, and oversight authorities” to address crypto transactions and companies. Governments across the world are moving toward some form of a regulatory framework. India has recently announced the introduction of a 30% crypto tax that targets all transfers of digital assets, along with plans to introduce its own central bank digital currency (CBDC) by 2023. Thailand also announced its plans to introduce a CBDC but recently backtracked on plans to introduce a 15% capital gains tax on all cryptocurrencies after a public backlash against the proposal. Disclaimer: All products and projects listed in this article are not endorsements and are provided for informational purposes only. This article is for educational purposes only and is not intended as investment advice. Qualified professionals should be consulted prior to making financial decisions.