Reflexivity Research: November in Review

Before diving in, be sure to check out some of our recently released research content:

• Hedera Q3 2024 Overview
• ZKsync Overview
• Maple Finance Launches SYRUP
• Exploring Gaming on Skale
• Overview of the Stablecoin Landscape

Introduction

November was a significant month for the cryptocurrency market, with Bitcoin reaching new all-time highs of over $99,000. These prices were catalyzed by several large events, ranging from Donald Trump’s presidential election victory to Michael Saylor’s $42 billion corporate Bitcoin strategy, in addition to impressive BTC ETF flows of over $6 billion. This report delves into these core events and highlights some of the most important protocol-specific updates for the month.

Donald Trump Wins 2024 Election

On November 5th, Donald Trump made a remarkable political return by winning the 2024 U.S. presidential election, overcoming Vice President Kamala Harris. He garnered 312 electoral votes to Harris's 226, winning all seven crucial battleground states and signaling a major nationwide shift toward the Republican Party. With 95% of the votes tallied, Republicans lead the popular vote by about four million, and every state experienced a swing in their direction compared to the 2020 election. Additionally, Republicans regained control of the U.S. Senate by flipping seats in West Virginia, Ohio, and Montana, and are on track to control the House of Representatives, though some races are still undecided. At 78 years old, Trump becomes the oldest person to assume the presidency and the first in 132 years to lose an election and then return to office. Kamala Harris conceded the race, encouraging her supporters to "never abandon the struggle for our democracy," while Trump announced his intention to begin forming his cabinet in the upcoming days and weeks.

In addition to his “Make America Great Again” platform, Trump’s campaign strongly supported Bitcoin and the broader cryptocurrency industry, contributing to Bitcoin’s recent record highs. He pledged to create a national strategic Bitcoin reserve by maintaining government-held Bitcoin assets, primarily acquired through legal seizures, to enhance the nation’s financial stability. Trump also committed to boosting domestic Bitcoin mining by increasing electricity production, aiming to reduce reliance on foreign mining operations. To promote a favorable regulatory environment, he proposed establishing a Bitcoin and cryptocurrency advisory council to set clear guidelines within the first 100 days of his administration and promised to replace SEC Chair Gary Gensler with a more crypto-friendly appointee. These initiatives highlight Trump’s strategic focus on integrating Bitcoin into the U.S. financial system and positioning the country as a leader in the global cryptocurrency arena, potentially shifting both domestic and foreign policies and fostering optimism and growth in the crypto market.

MicroStrategy Drives Corporate Bitcoin Investment with $42 Billion Strategy

MicroStrategy has launched an ambitious plan to invest $42 billion in Bitcoin over the next three years, splitting the investment evenly between debt and equity. This initiative, known as the "21/21" plan, aims to leverage Bitcoin's rising value and increasing institutional interest. Recently, the company expanded its Bitcoin holdings by purchasing an additional 27,200 BTC for $2 billion, bringing its total to 279,420 BTC.

Building on this momentum, MicroStrategy completed its largest Bitcoin acquisition to date by buying 51,780 BTC for approximately $4.6 billion between November 11 and 17, 2024, at an average price of $88,627 per Bitcoin. This purchase elevated the company's total Bitcoin reserves to 331,200 BTC, valued around $30 billion. Continuing its aggressive investment strategy, MicroStrategy further acquired 55,500 BTC for about $5.4 billion at an average price of $97,297 per Bitcoin, increasing its total holdings to 386,700 BTC with an estimated value exceeding $35 billion. These acquisitions were financed through the sale of approximately 13.6 million shares, consistent with MicroStrategy’s approach of utilizing both equity and debt to fund its cryptocurrency investments. As a result, MicroStrategy now stands as the largest corporate Bitcoin holder.

In a similar vein, Marathon Digital (MARA) announced a $700 million private offering of convertible senior notes set to mature on March 1, 2030. The funds raised will be directed towards acquiring additional Bitcoin and refinancing existing debt, including the repurchase of $200 million in notes due in 2026. These new convertible notes, which can be exchanged for cash or MARA stock, will offer semi-annual interest payments starting March 1, 2025. This move aligns with Marathon's ongoing strategy to expand its Bitcoin holdings, which currently amount to 26,747 BTC.

Overall, both MicroStrategy and Marathon Digital are significantly increasing their Bitcoin investments, reflecting a broader trend of corporate adoption and confidence in the cryptocurrency market.

Bitcoin ETFs Overview

The net inflow of Bitcoin exchange-traded funds in November 2024 amounted to an impressive $6.46 billion. The breakdown of these flows is as follows:

Daily Flow Analysis:

• Negative Flows: November began with a moderate outflow on the 1st, recording -$54.9 million. The most substantial negative flows occurred on November 4th (-$541.1 million) and November 25th (-$435.3 million).
• Positive Flows: Three days in November recorded inflows of over $1 billion.

BTC ETF Flows October vs November

Key Observations:

1. Overall Daily Net Flow Increase:
• The "Daily Net Flow" increased significantly from $5,348.2 million in October to $6,465.3 million in November, marking a growth of approximately 21% month-on-month.
2. Significant Contributors to Growth:
• IBIT: The largest contributor to the flows, IBIT increased by $961.3 million (from $4,640.7 million in October to $5,602 million in November).
• FBTC: Flows nearly doubled, rising from $496.8 million to $962.9 million, an increase of $466.1 million.
• Grayscale’s mini trust BTC: A notable rise from $66.3 million to $211.5 million, reflecting a gain of $145.2 million.
3. ETF Flows That Declined:
• BITB: Shifted from $137.3 million inflow in October to -$40.4 million outflow in November, a net change of -$177.7 million.
• GBTC: Worsened from -$65.9 million outflow to -$363.9 million outflow, a further decline of -$298 million.
• BRRR: Reversed from a $12.7 million inflow to a -$6.8 million outflow.
4. Mixed Performance Among Smaller ETFs:
• ARKB: Improved from a -$77 million outflow in October to a $15.5 million inflow in November.
• BTCO: Fell from $47.4 million inflow to a minimal $0.5 million inflow.
• EZBC: Marginal growth, increasing from $21.4 million to $12.8 million.
• HODL: Rose modestly, from $65.7 million to $71.2 million.
• BTCW: Decreased slightly, from $2.8 million inflow to $0 million.

Conclusion:

November saw a strong net increase in ETF flows compared to October, largely driven by the exceptional performance of IBIT and FBTC. However, this growth was offset slightly by declining performance in BITB, GBTC, and BRRR.

Strategic Bitcoin Reserve Bill Gains Momentum

In the latter half of November, Senator Cynthia Lummis provided an update on the Strategic Bitcoin Reserve bill, expressing optimism about advancing the initiative early in President Trump’s term. Initially proposed by Lummis in July, the Bitcoin Act seeks to establish a decentralized network of secure Bitcoin vaults across the United States.

Key provisions of the proposal include:

• The U.S. Treasury acquiring 200,000 BTC annually over five years, targeting a total reserve of 1 million BTC.
• A mandatory holding period of at least 20 years for the reserves.
• Implementation of a proof-of-reserves system to ensure transparency.
• Consolidation of all Bitcoin currently held by the U.S. government into the new reserve.

This initiative aligns with the previously discussed Trump’s campaign commitment to create a national Bitcoin reserve. While the plan has been met with enthusiasm, skeptics have raised concerns over its financial viability and potential political roadblocks. Nonetheless, the proposal is gaining traction at the state level, with Pennsylvania recently introducing a bill to allocate up to 10% of its state treasury funds to Bitcoin investments.

Ethereum ETFs Overview

The net inflow of Ethereum exchange-traded funds in November 2024 amounted to $1.05 billion. The breakdown of these flows is as follows:

ETH ETF Flows October vs November

Month-on-Month Comparison of Ethereum ETF Flows: October vs November

Key Observations:

1. Overall Net Flow Increase:
• Net flows surged significantly from $43 million in October to $1,057.2 million in November, marking a remarkable growth of over 2,358% month-on-month.
2. Significant Contributors to Growth:
• ETHA: The standout performer, increasing from $197 million in October to $760.3 million in November, a growth of $563.3 million.
• ETHW: A notable turnaround, shifting from an $8.9 million outflow in October to a $73.8 million inflow in November, representing a positive change of $82.7 million.
• ETH: A substantial rise from $8.4 million to $120.4 million, adding $112 million to the overall flows.
3. Steady Performers:
• FETH: Consistent inflows with a modest increase from $35.9 million to $309.7 million, a growth of $273.8 million.
• ETHV: Grew from $10.4 million to $39.1 million, a gain of $28.7 million.
• QETH: Maintained steady flows of $2.5 million across both months.
4. ETFs with Declining Flows:
• CETH: Shifted from an $8.2 million inflow in October to a $2 million outflow in November, a net decline of $10.2 million.
• ETHE: Increased outflows, worsening from $212.3 million in October to $246.6 million in November, a further decline of $34.3 million.
• EZET: Dropped from $1.8 million inflow in October to $0 inflow in November.

Conclusion: Ethereum ETF flows experienced explosive growth in November, primarily driven by ETHA, ETH, and ETHW.

Ethereum Foundation’s 2024 Report

Beyond ETH ETF flows, the Ethereum Foundation (EF) released their 2024 report during the start of November. The core findings of this report highlight the EF’s dedication to Ethereum’s long-term growth and resilience:

1. Foundation Structure and Values: The EF prioritizes decentralized support, focusing on empowering independent teams and new institutions within the Ethereum ecosystem rather than centralizing control. Its core values: long-term thinking, "subtraction" (reducing centralized control), and stewardship of Ethereum’s values, guide its mission.
2. Financial Health and Treasury Management: The Foundation’s treasury during the time of the report was at $970.2 million, with 81.3% held in ETH. EF follows a conservative treasury approach, using strategic ETH sales to secure funds for future ecosystem support, especially during market downturns.
3. Ecosystem Growth and Institutional Support: EF has actively fostered new institutions (e.g., Argot Collective, Geodework) to decentralize ecosystem support and share responsibility for Ethereum’s health. This helps to ensure diverse, sustainable growth across the Ethereum landscape.
4. Spending and Community Investment: EF invested over $240 million in the past two years across a range of activities, including R&D, security, grants, developer tools, and global community-building. This spending supports protocol upgrades, enhances developer experience, and funds local and regional Ethereum initiatives.
5. Conflict of Interest Policy: A new conflict of interest policy has been introduced, requiring EF members to disclose large crypto holdings, angel investments, and other ecosystem-related activities to preserve the foundation’s integrity and transparency.

These findings affirm EF’s commitment to decentralization, financial prudence, and integrity, with an emphasis on supporting Ethereum’s long-term development and resilience in a rapidly evolving ecosystem.

Progress in Solana ETF Development

November was a big month for continual progress on the Solana ETF front.

Updates from the Solana Ecosystem

• Strengthening the role of the JTO token as a governance and utility token.
• Enabling JTO holders to participate in protocol decision-making and development.

As a liquid staking platform, Jito allows users to stake SOL tokens to receive JitoSOL tokens, which offer both liquidity and MEV reward distribution. This mechanism bolsters Solana’s staking ecosystem by incentivizing participation and governance.

A summary of the proposal is outlined in the below table:

Overall, efforts to launch Solana ETFs are gaining traction, led by Bitwise, VanEck, and 21Shares, while developments like Jito’s JIP-10 proposal are expanding staking innovation within the Solana ecosystem. Both trends underscore Solana's growing prominence within the space.

Hyperliquid Launches HYPE Token, Empowering Decentralized Trading

On November 29, 2024, Hyperliquid, a decentralized perpetual exchange, unveiled its native token, HYPE, during a highly anticipated genesis event. The token plays a pivotal role in staking and securing the HyperBFT consensus mechanism, driving the platform’s shift toward full decentralization.

In a standout decision, 31% of HYPE’s total supply was distributed via a community airdrop to early users. Notably, no allocations were made to private investors or market makers, emphasizing Hyperliquid's focus on community-first principles.

HYPE’s market debut was impressive, with the token trading at $4.80 and achieving a market capitalization of $4.8 billion alongside a $165 million trading volume in the first hour.

This launch cements Hyperliquid’s position as a leader in decentralized trading, offering enhanced liquidity and cutting-edge features to its users.

Monad Advances with Testnet Rollout

Another interesting development came from Monad which has initiated the phased rollout of its testnet following the successful performance of its devnet, which reached 10,000 transactions per second during testing. As an Ethereum-compatible Layer 1 blockchain, Monad aims to enhance throughput and scalability by designing a new Ethereum Virtual Machine from the ground up using a pipelined architecture. This innovative design enables more efficient processing and instant block finality while maintaining full compatibility with existing Ethereum smart contracts. The mainnet launch is anticipated later in 2024.

Ethena Implements Fee-Sharing Proposal for ENA Token

On 6 November, Wintermute, a cryptocurrency market maker, suggested allocating part of Ethena’s fee revenue to stakers of its native token, ENA. This proposal was confirmed on 15 November by the Ethena Foundation’s Risk Committee, which plans to finalize the parameters for the fee-sharing mechanism by 30 November, with detailed implementation steps to follow.

Key Developments:

• Fee Sharing: ENA token stakers will now benefit from a portion of Ethena’s revenues, creating a value accrual mechanism for sENA (staked ENA). This addresses the prior disconnect between ENA token holders and the protocol’s revenue growth.
• USDe Stablecoin: Ethena Labs’ USDe, an interest-earning stablecoin launched in February, has gained traction with a circulating supply nearing $3.2 billion. The stablecoin can be minted against assets like Bitcoin, Ether, liquid staking derivatives, and other stablecoins. Ethena hedges against volatility in its portfolio using off-chain financial derivatives.
• Wintermute Integration: On 25 October, Wintermute began accepting USDe as collateral for spot and derivatives trading. This expands the utility of USDe alongside other accepted collaterals like BTC, ETH, Solana, and USDC.

According to Wintermute, Ethena Protocol generates significant real revenue, demonstrating strong product-market fit for USDe. This fee-sharing initiative aligns ENA tokenholders with the protocol’s growth and strengthens its overall ecosystem.

XRP Becomes 3rd Largest Crypto Asset by Market Cap

For the last update of the month, XRP has surpassed Tether’s USDT in market capitalization, reaching over $135 billion and securing the third spot among cryptocurrencies.

Several asset management firms have recently filed for spot XRP exchange-traded funds with the U.S. SEC, aiming to provide investors with regulated exposure to XRP. 21Shares Filed a Form S-1 on November 1st for its Core XRP Trust, proposing to list shares on the Cboe BZX Exchange.

Conclusion

November 2024 was a significant month for the cryptocurrency market, marked by notable political, corporate, and technological developments that influenced market dynamics and investor behavior. Donald Trump’s victory in the U.S. presidential election has introduced new policies aimed at integrating Bitcoin into the national financial framework. Key initiatives include the establishment of a national strategic Bitcoin reserve, increased support for domestic Bitcoin mining, and the formation of a Bitcoin and cryptocurrency advisory council. These measures have contributed to Bitcoin reaching new all-time highs, reflecting the potential impact of governmental policies on cryptocurrency valuations.

Corporate investment in Bitcoin saw substantial growth, with MicroStrategy and Marathon Digital leading the charge. MicroStrategy announced a $42 billion investment strategy, significantly increasing its Bitcoin holdings through multiple large acquisitions. Similarly, Marathon Digital launched a $700 million offering of convertible senior notes to fund additional Bitcoin purchases and refinance existing debt. These actions indicate a trend of increased institutional investment and confidence in Bitcoin’s long-term prospects.

ETFs for Bitcoin and Ethereum experienced substantial inflows in November. Bitcoin ETFs saw net inflows of $6.46 billion, driven by major contributors such as IBIT and FBTC, despite some ETFs experiencing outflows. Ethereum ETFs also saw a significant increase, with net inflows of $1.05 billion and a notable month-on-month growth of over 2,358%. This growth underscores the rising demand for regulated cryptocurrency investment products.

Advancements within blockchain ecosystems were also prominent. The Ethereum Foundation released its 2024 report, highlighting efforts to support decentralized growth and financial prudence. Solana saw progress in ETF development, with firms like Bitwise, VanEck, and 21Shares submitting applications to the SEC. Additionally, innovations such as Jito’s JIP-10 proposal for Solana and the launch of Hyperliquid’s HYPE token demonstrate ongoing developments in staking mechanisms and decentralized trading platforms.

Other notable developments included Monad’s testnet rollout, achieving a high transaction throughput, and Ethena’s implementation of a fee-sharing proposal for ENA token stakers. XRP reached the third position in cryptocurrency market capitalization, surpassing Tether, influenced by its use in remittances and cross-border payments as well as regulatory developments.

Overall, the events of November 2024 reflect a period of robust activity and growth in the cryptocurrency market. Political outcomes, significant corporate investments, increased ETF inflows, and technological advancements have collectively contributed to progression of digital assets.

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.