Daily Crypto Signals: Bitcoin ETFs See Strongest Inflows in Month, Solana Struggles Against Rival Chains
Bitcoin spot ETFs recorded their largest single-day inflows since mid-November at $457 million as institutional demand strengthened, while
Quick overview
- Bitcoin spot ETFs experienced their largest single-day inflows since mid-November, totaling $457 million, indicating strong institutional demand.
- Solana's native token has fallen 32% since November, underperforming the altcoin market due to declining network activity and increased competition.
- The Federal Reserve has relaxed its restrictive crypto guidance for banks, allowing for more innovative activities in the cryptocurrency space.
- Despite positive inflation data, Bitcoin struggled to maintain momentum above $90,000, with analysts suggesting it must clear this threshold to show buyer conviction.
Bitcoin BTC/USD spot ETFs recorded their largest single-day inflows since mid-November at $457 million as institutional demand strengthened, while regulatory developments saw the Federal Reserve withdraw restrictive crypto guidance for banks. Meanwhile, Solana’s native token SOL/USD has fallen 32% since November, significantly underperforming the broader altcoin market as network activity and revenues decline amid rising competition from Ethereum layer-2 solutions and BNB Chain.
Crypto Market Developments
This week saw significant changes in the cryptocurrency market due to divergent performance among major digital assets and the emergence of regulatory tailwinds. A formal pathway for both insured and uninsured state member banks to pursue innovative activities, including cryptocurrency services, provided risk-management standards are met, was established in place of the Federal Reserve’s 2023 guidance, which had restricted crypto engagement by Fed-supervised banks. The central bank justified the policy change by pointing to an advanced financial system and a better comprehension of novel products.
However, the Bitcoin advocacy group expressed reservations about the planned tax legislation. De minimis tax relief, which is meant to exempt minor cryptocurrency transactions from capital gains taxation, may only apply to stablecoin transactions, perhaps eliminating regular Bitcoin purchases, according to representatives of the Bitcoin Policy Institute. Noting that tax exemptions for minor transactions would allow Bitcoin to be used as a means of exchange rather than just a store of value, the organization’s head of strategy referred to the decision to exclude Bitcoin as a serious error. Senator Cynthia Lummis had first suggested a $5,000 yearly cap on tax-free sales and an exemption for cryptocurrency transactions of $300 or less.
On the macroeconomic front, the Consumer Price Index report released in November revealed that inflation had cooled to 2.7% year-over-year, which was lower than the 3.1% prediction and closer to the Federal Reserve’s 2% target. The market responded favorably to the weaker inflation report, as Bitcoin momentarily reached $90,000 before declining. Although the move remained liquidity-driven rather than trend-establishing, traders observed that rising open interest accompanied the price movement, suggesting fresh positioning rather than short covering.
Bitcoin Slips to $85,000
Bitcoin spot exchange-traded funds showed renewed institutional appetite on Wednesday, with $457 million in net inflows, the strongest single-day intake since November 11. BlackRock’s iShares Bitcoin Trust contributed about $111 million, while Fidelity’s Wise Origin Bitcoin Fund topped with about $391 million. With overall net assets surpassing $112 billion, or around 6.5% of Bitcoin’s entire market capitalization, the inflows increased cumulative net inflows for US spot Bitcoin ETFs to $57 billion.
Following a turbulent period in November and early December marked by alternating modest inflows and rapid outflows, there was a rise in inflows. The shift was characterized by analysts as “early positioning,” implying that institutional investors are rebuilding exposure following recent market volatility. Following the positive inflation figures, Bitcoin momentarily jumped beyond $90,000 but was unable to maintain momentum above that psychological threshold. With immediate resistance between $90,500 and $92,000, technical analysts suggest that in order to show buyer conviction, Bitcoin must clear $90,000 and regain a position above the monthly volume-weighted average price. Bitcoin might hit swing lows of $83,800 if it is rejected.
With exchange measures showing unrealized losses have ceased growing, CryptoQuant’s onchain data indicates that Bitcoin has entered a repair phase rather than a distribution phase. Coins are likely being sold near cost rather than in a panic, as indicated by the spent-output profit ratio that is hovering close to breakeven. The idea that selling pressure is reactive rather than structural is supported by the fact that deposit activity on major exchanges primarily increases during brief downward movements and decreases when the price stabilizes. If dollar pressure lessens and real rates decline in response to the inflation statistics, this stabilization may give way to a more sustained upward trend.
Solana Sees Stronger Decrease Than Other Altcoins
Since November, the native token of Solana (SOL) has dropped 32%, far less than the 21% decrease of the altcoin market as a whole. Notwithstanding encouraging developments, such as the $636 million in assets amassed by US Solana ETFs and the addition of more than 20 million SOL tokens to the balance sheets of several corporations as reserve strategy, this performance disparity has alarmed investors. Furthermore, nearly 68% of SOL’s circulating supply is still staked on the network’s proof-of-stake mechanism, with staking rewards higher than 6%. This has assisted in limiting the amount of supply that is instantly available.
Rather than more general market conditions, the underperformance seems to be related to deteriorating network fundamentals. Since August, Solana’s onchain activity has been gradually decreasing; two months ago, weekly network fees were $7 million, but now they are $4.5 million. Over the same time period, revenue from decentralized applications on Solana fell by 30%, to $26 million weekly. While Solana saw a mere 4% increase in monthly transaction counts, rival networks saw huge increases: Base saw a 34% spike, Arbitrum saw a 21% increase, and Polygon saw an 89% jump. Even Tron, a direct rival, saw a 13% increase in 30-day transactions.
With similar low costs, the Ethereum layer-2 ecosystem has jointly surpassed Solana’s $8.5 billion in total value locked, splintering the market share that Solana once held. With decentralized apps supported by Binance gaining traction because to greater access to developers, marketing channels, and sizable user bases, competition from BNB Chain has increased. Analysts predict that unless there is a noticeable change in onchain activity indicators, Solana is unlikely to close its performance gap with the larger altcoin market. Bulls are now looking for catalysts to restore long-term upward momentum as hopes for a short-term SOL price recovery have diminished due to the shift in blockchain adoption trends toward rival platforms.
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