Spot Bitcoin ETFs dampen demand for futures as Ethereum upgrades advance and FTX creditors see refund prospects

DATA from CryptoCompare shows that the price of Bitcoin moved sideways throughout the week after initially jumping from $42,000 to around $43,500. The original cryptocurrency has since been trading within this range and is now changing hands for $43,000.

Ethereum’s Ether, the second-largest cryptocurrency by market capitalization, moved in a similar way, starting the week with a rise from $2,250 to $2,350 but failing to stay above that level. ETH is now trading at $2,325.

Headlines in the cryptocurrency space this week focused on the impact of the launch of spot Bitcoin exchange-traded funds (ETFs) in the United States, with data showing that after their launch, there has been reduced demand for Bitcoin futures.

As of January 30, the CME Group’s Bitcoin futures contracts have seen a decrease in open interest by approximately 23%, following the introduction of spot Bitcoin ETFs. This significant decrease occurred after open interest reached an all-time high, driven by Bitcoin’s 160% surge last year.

These derivatives were used by investors to take advantage of the discount Grayscale’s $21 billion trust GBTC had, but after the trust’s conversion into a spot Bitcoin ETF that trade has faded.

Spot Bitcoin ETFs issuers have meanwhile started exploring strategies to increase their profitability, with Valkyrie Investments adding BitGo as a second custodian to safeguard the BTC of its BRRR spot Bitcoin ETF, which has over $100 million in assets.

The move not only mitigates counterparty risk, but it also enables the ETF issuer to negotiate more favorable fee arrangements with custodians in the future, aiming to enhance their profitability.

Adam Sporn, the chief of BitGo’s prime brokerage unit, revealed that the company is negotiating with several Bitcoin ETF while, representatives from other custody services, such as Gemini, Anchorage Digital, and Kraken, stated that they are also in talks with ETF firms to serve as backup custodians.

Meanwhile, the Hong Kong Securities and Futures Commission (SFC) received its first spot Bitcoin ETF application from Harvest Hong Kong, one of China’s largest fund managers. The SFC is reportedly moving to process ETF applications as it aims to unveil Hong Kong’s first spot Bitcoin ETF shortly after the Chinese New Year.

Collapsed crypto exchange FTX creditors may get fully refunded

Over the week, collapsed cryptocurrency exchange FTX informed the judge handling its insolvency case that its creditors who prove their losses are expected to receive all of their money back.

The firm’s lawyer, Andrew Dietderich, stressed this isn’t a guarantee but “an objective” as there’s “still a great amount of work, and risk, between us and that result.” The firm has also abandoned plans to relaunch over the expected excessive costs and risk involved.

The estate of the exchange has been actively selling off its assets and accumulating cash as it works to reimburse its creditors. The company's key subsidiaries, notably FTX Trading Ltd. and Alameda Research LLC, have markedly increased their cash reserves, escalating from around $2.3 billion in late October to an impressive $4.4 billion by the year's end in 2023.

To enhance its financial position, FTX reported in a recent legal document that it had raised $1.8 billion by December 8 through disposing of various digital assets, while participating in Bitcoin derivatives trading as a strategy to mitigate its Bitcoin-related risks and to earn income from its assets.

This past week also saw bankrupt crypto lending firm Celsius announce it will distribute over $3 billion to its creditors as it concludes its bankruptcy proceedings, with creditors set to also receive shares in Ionic Digital Inc., a new mining firm.

Meanwhile, leading stablecoin issuer Tether reported a “record-breaking net profit” in the final quarter of 2023 as its returns from holding Treasury Bills backing USDT have kept growing and other assets it holds performed well.

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The company earned a net profit of $2.85 billion in the fourth quarter of 2023, with the figure including an interest income of up to $1 billion from U.S. Treasury securities, as well as positive returns from Bitcoin and gold investments.

READ MORE: FTX caretakers ditch plans to resurrect collapsed exchange

Ethereum’s Dencun upgrade deployed on Sepolia testnet

Etherem’s Dencun upgrade, meant to significantly lower transaction fees on the network, has successfully been deployed on the Sepolia testnet, marking a step forward towards the introduction of the long awaited "proto-danksharding" functionality.

Its activation on Sepolia was completed without any unexpected events, according to Parithosh Jayanthi, a DevOps engineer with the Ethereum Foundation. The implementation follows an earlier implementation on the Goerli testnet.

This sets the stage for the rollout of a final test on the Holesky testnet, scheduled for February 7. If that upgrade is successful as well, Ethereum’s Dencun upgrade is set to be on the network’s mainnet by March.

Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.