Reflexivity Research: September in Review

Before diving into our monthly crypto market overview for September, be sure to check out some of our free recently released research content:

• ETH L2 Scaling Debate
• Bittensor Overview
• Hyperliquid Primer
• Helium Overview
• Avalanche 9000 Overview
• MultiversX Q2 Update
• Thorchain Q3 Update
• MCQ Markets Brings Luxury Cars On-Chain

Overview

September 2024 saw noteworthy developments that highlight the ongoing evolution and increasing integration with traditional financial systems within the digital asset space. Bitcoin and Ethereum ETFs experienced varied performance, with BlackRock’s IBIT ETF leading in inflows. Coinbase launched cbBTC, a wrapped Bitcoin token aimed at enhancing liquidity within decentralised finance ecosystems, and EigenLayer introduced its coveted EIGEN token.

Institutional adoption continued to gain momentum, exemplified by Ethena Labs' collaboration with BlackRock to release the UStb stablecoin and Franklin Templeton's tokenization of its U.S. Government Money Fund on the Aptos blockchain.

Additionally, Solana made strides with the introduction of the Solana Seeker smartphone and the deployment of the Frankendancer validator client, both designed to bolster network performance and scalability.

The Celestia Foundation secured an additional $100 million in funding to advance its modular blockchain architecture, while the TON Foundation formed key partnerships with Curve Finance and integrated with Telegram to enhance Web3 accessibility.

These advancements collectively demonstrate the dynamic progress and expanding applications within the cryptocurrency and blockchain industries during September 2024.

This comprehensive overview captures the essence of a month filled with strategic developments, technological innovations, and shifting investment patterns.

Bitcoin ETF September Performance

The above table details the daily net flows for various Bitcoin ETFs between 2nd and 30th September 2024, showcasing their performance in millions of USD. Throughout this period, BlackRock's IBIT ETF emerged as the top performer, with cumulative inflows reaching $577.9 million. Significant inflows were recorded on 25th September ($184.4 million), 27th September ($110.8 million), and 24th September ($98.9 million), reflecting strong investor confidence in BlackRock’s ETF.

Fidelity's FBTC ETF also saw substantial inflows, totaling $165.2 million for the month. Major inflows occurred on 10th September ($63.2 million) and 27th September ($123.6 million), signalling a strong performance throughout the month.

Bitwise's BITB ETF had a positive outcome as well, ending with total inflows of $147.6 million, driven by notable contributions on 13th September ($43.1 million) and 26th September ($50.4 million).

ARKB had significant positive inflows, totalling $404.2 million over the month, with large contributions on 27th September ($203.1 million) and 13th September ($99.3 million), reflecting growing investor interest in this ETF.

Conversely, GBTC experienced the largest outflows for the period, with total withdrawals amounting to -$238.6 million, particularly on 6th September (-$52.9 million) and 23rd September (-$40.3 million).

The graph above illustrates the daily net flows of various spot Bitcoin ETFs throughout September 2024, highlighting performance trends across the month.

The chart reveals notable fluctuations, with significant outflows in early September, particularly between the 3rd and 5th, followed by a recovery and a sharp rise in inflows from mid to late September. The peak occurs around 25th September, where total inflows exceed $500 million, indicating strong bullish sentiment during this period.

ETFs like IBIT and FBTC, represented by prominent sections in the graph, show pronounced volatility. Overall, the graph captures the dynamic nature of investor behaviour in Bitcoin ETFs, with large swings in net flows throughout the period.

Overall, since the launch of Bitcoin ETFs, the net flow has reached 335,400 Bitcoin, contributing to a total of 955,000 Bitcoin now held by various Bitcoin ETFs. This represents approximately 4.83% of the current total Bitcoin supply.

These figures underscore the increasing influence and demand for Bitcoin ETFs in the market, as they accumulate a growing share of the total Bitcoin available, reflecting their importance as a key investment vehicle for institutional and retail investors alike.

Coinbase Launched cbBTC

In other Bitcoin related news, Coinbase introduced cbBTC, a wrapped Bitcoin token represented as an ERC20 token, fully backed 1:1 by Bitcoin held by Coinbase. Initially launched on the Base and Ethereum networks, plans are in place to extend support to other chains. This initiative aims to enhance the decentralised finance ecosystem by integrating Bitcoin liquidity into faster, more cost-efficient financial systems on these networks. The launch gained significant traction, with cbBTC reaching a market cap of nearly $100 million in just 24 hours.

Ethereum ETF September Performance

Following on from Bitcoin, the above table displays the daily net flows for various Ethereum ETFs throughout September 2024, detailing their performance in millions of USD. Among the ETFs, ETHA recorded the highest total inflows for the month, accumulating $133.5 million. Significant inflows were observed on 24th September ($59.3 million), 26th September ($15.3 million), and 27th September ($11.5 million), reflecting strong investor demand for this particular ETF.

FETH also saw substantial inflows, totaling $85.6 million, with notable days on 26th September ($15.9 million) and 27th September ($42.5 million), contributing significantly to its overall positive performance. In contrast, the ETHE ETF experienced the largest outflows, amounting to -$346.6 million, with its most substantial outflow occurring on 23rd September (-$80.6 million), indicating a significant loss in investor confidence during this period.

The remaining ETFs, such as ETHW and ETHV, showed more modest activity, ending with total inflows of $12.6 million and $2.9 million, respectively. On the whole, the combined total across all Ethereum ETFs for the month resulted in a net outflow of -$46 million, largely driven by the heavy losses from ETHE.

The above graph illustrates the daily net flows of various spot Ethereum ETFs throughout September 2024, highlighting performance trends across the month.

Overall since their inception, Grayscale dominates the Ethereum ETF market through its ETHE fund, holding 1,674,483 Ethereum worth $4 billion, which accounts for 59.7% of the market. Grayscale Mini’s ETH ETF comes in second, holding 402,153 Ethereum valued at $944 million, giving it a 14.3% market share.

BlackRock’s ETHA ETF follows closely with 387,843 Ethereum, worth $910 million, contributing to 13.8% of the market. Fidelity’s FETH ETF, with 160,000 Ethereum and a USD value of $375 million, takes 5.7% of the market.

Other ETFs, such as Bitwise’s ETHW, VanEck’s ETHV, and Franklin Templeton’s EZET, hold smaller shares of the market, with market shares of 4.5%, 0.9%, and 0.5%, respectively. Invesco and 21Shares have the smallest positions, holding less than 10,000 Ethereum each, with market shares of 0.3% and 0.2%.

In summary, Grayscale continues to hold a dominant position in the Ethereum ETF market, with its combined products representing over 74% of the total market share. BlackRock and Fidelity also maintain significant positions, while other players hold more niche portions of the market.

Top Gainers and Losers as of September 29th, 2024

$EIGEN Token transfers went live

One of the major events of September was the launch of the highly coveted EigenLayer  as token transfers became available.

The insights in this breakdown are informed by Kairo Research's analysis of the token’s supply and market dynamics.

Supply Overview:

At launch, EIGEN has a total supply of 1,673,646,668 tokens. The circulating supply at the start is primarily shaped by the first two stakedrops:

• 6.75% from the first stakedrop
• 5.2% from the second stakedrop

This put the initial circulating supply at approximately 200,000,776 EIGEN (11.95%).

However, the actual float was suspected to be quite different.

Why was the float lower?

During the first stakedrop, only 85.4% of tokens were claimed (about 95 million EIGEN). So far, for the second stakedrop, only 21.7% have been claimed (18.6 million EIGEN).

In total, the circulating supply is currently 114 million EIGEN. On top of that, 73 million EIGEN have already been restaked on EigenLayer.

This means the real float was around 40.43 million EIGEN. At the pre-market price of $3.84 (via HyperLiquid), this equaled a market value of approximately $155 million, with an implied fully diluted valuation (FDV) of $6.42 billion.

With only 2.42% of the float in circulation, there was likely to be substantial volatility as the market found its price.

Additional Factors:

Operator claims for the tokens will only be available after October 6th, which could be slowing down the claim process. Additionally, some participants may be delaying their claims for tax reasons, as the claim period ends on March 25th of next year.

Key Claimants:

According to Kairos Research, Analysis of Dune queries for the first two stakedrops reveals some of the largest claimants by wallet. Although the data didn’t perfectly match across both queries, Etherscan was used to verify the legitimacy of these claims.

It’s important to note that entity tags may not be fully accurate, as they are based on a combination of Arkham, Nansen, and wallet fund flow tracking. Due to the low float and the fact that many participants are restaking their tokens, these large wallets could significantly impact market conditions.

Institutional adoption continued to be a trend

We saw a couple of significant updates on the institutional front in September, with the first coming from BlackRock and Ethena. Ethena Labs introduced UStb, a new stablecoin developed in partnership with BlackRock and Securitize, fully backed by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL). UStb is designed to function like a traditional stablecoin, addressing concerns surrounding Ethena’s existing synthetic stablecoin, USDe, especially in negative funding rate environments. By offering a distinct product with a different risk profile, UStb allows for dynamic asset reallocation during challenging market conditions, enhancing resilience and stability for users and exchange partners.

The second significant update came from Franklin Templeton in which it launched its tokenized U.S. Government Money Fund (FOBXX) on the Aptos blockchain, represented by the BENJI token. This enables institutional investors to access the fund via digital wallets, bridging traditional finance with decentralised finance. The BENJI token allows for fast and flexible management of U.S. Treasury-backed assets, with over $20 million raised at its launch. Aptos, known for its speed and security, supports Franklin Templeton's asset management objectives, making it a fitting platform for the fund.

Solana made several announcements

September was a big month for Solana also in which they announced several significant updates. The first came from Solana Mobile, which launched its next-generation web3 smartphone, the Solana Seeker, at the TOKEN2049 event in Singapore. Building on the success of the Solana Saga, the Seeker enhances mobile blockchain capabilities with features like the Seed Vault Wallet for secure crypto transactions, an updated Solana dApp Store, and the Seeker Genesis Token for exclusive rewards. Priced at $450, it offers upgraded hardware, including a brighter display and improved camera, with over 140,000 units sold in presales. The official release is slated for 2025.

In other developments, Frankendancer, a validator client developed by Jump Crypto, has successfully launched on the Solana mainnet. This client improves network performance, redundancy, and scalability by introducing a second independent validator client alongside the existing Agave client. Frankendancer optimises each layer for efficiency, allowing validator clients to run at full capacity and significantly enhancing Solana's bandwidth and hardware capabilities. In testnet environments, it demonstrated the ability to process over 1 million transactions per second, showcasing substantial improvements in transaction speed and network resilience. It also acts as a prototype for Firedancer, which aims to further enhance Solana's infrastructure upon its full release.

Additionally, Franklin Templeton announced plans to launch an on-chain mutual fund on the Solana blockchain, leveraging the platform's low costs, high speed, and advanced infrastructure. The fund will operate natively on Solana with a custom-built digital wallet and on-chain transfer agent. This move reflects growing institutional adoption of blockchain technology, with Citibank also considering Solana for payment transfers and smart contract applications.

Celestia Foundation raised an Additional $100m

The Celestia Foundation announced a $100 million funding round led by Bain Capital Crypto, bringing its total raised capital to $155 million. The funds will be used to advance Celestia's modular blockchain architecture, which separates the data consensus and execution layers to improve scalability and flexibility. This investment will accelerate Celestia's development, particularly in scaling data availability to 1-gigabyte blocks, potentially surpassing Visa's transaction throughput. Following the announcement, Celestia's native token, TIA, saw a 14% price surge.

Ton announced key partnerships

The final major piece of news for September is in relation to the Ton Foundation who announced key partnerships that will expand its ecosystem. In collaboration with Curve Finance, TON launched a stable swap project on its blockchain aimed at enhancing stablecoin trading with low-slippage and low-fee transactions. By utilising Curve’s automated market-making expertise, this initiative is set to significantly strengthen decentralised finance services within the TON ecosystem. Michael Egorov, founder of Curve Finance, will serve as an advisor to the project, which will be developed by an independent team with community participation. The project addresses the rising demand for stablecoins on TON, particularly USDT, which has seen a substantial increase in circulation.

Also in September, BNB Chain integrated with Telegram to improve Web3 accessibility. This partnership introduced Telegram Mini Apps, allowing users to manage BNB assets via Telegram bot wallets, and enabling developers to streamline onboarding using Privy’s SDK for seamless Telegram login. By leveraging Telegram's vast user base, this integration lowers barriers to blockchain adoption, making Web3 technology more accessible to the next generation of users.

Conclusion

In conclusion, September 2024 was marked by diverse developments. Bitcoin ETFs exhibited mixed performance, with BlackRock's IBIT ETF attracting substantial inflows, whilst others experienced notable outflows, reflecting varying investor sentiments. The launch of Coinbase's cbBTC and EigenLayer's EIGEN token demonstrated ongoing efforts to enhance liquidity and expand decentralised finance solutions. Institutional participation remained robust, highlighted by strategic partnerships and the introduction of tokenized financial products from leaders such as BlackRock and Franklin Templeton. Additionally, advancements in blockchain technology from platforms like Solana and Celestia emphasised a continued focus on improving scalability and network performance. Collectively, these events illustrate a dynamic and evolving landscape, underscoring the sector's growth and the increasing integration of traditional financial mechanisms with emerging blockchain technologies.

Disclaimer: This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.