Crypto market review in September 2024: spot Bitcoin and Ethereum ETFs, Polymarket's success and the Hyperliquid airdrop

Read our August 2024 crypto market review

Stablecoins: A Continued Rise

Let's start our market analysis report with a study of stablecoins. During September 2024, the total amount of dollar-backed stablecoins rose by 2%, from $172.9 billion to $176.6 billion. This growth confirms a trend observed the previous month (almost 8% increase in August 2024) and more generally since October 2023.

Stablecoins, in a way, are the benchmark for buying and selling cryptocurrency transactions on exchanges. Thus, their total capitalization is an interesting indicator of investors' confidence in the market and their willingness—or reluctance—to take positions.

Since the end of 2023, stablecoin capitalization growth has paralleled the bullish surge in Bitcoin (BTC) and cryptocurrency prices in general. However, the recent period of stagnation since the March 2024 all-time high does not reflect the constant inflows observed in stablecoins.

This is particularly significant, as reflected by the on-chain Stablecoin Supply Ratio (SSR) indicator, which measures the ratio between the total amount of Bitcoin in circulation and that of stablecoins, expressed in Bitcoin. In other words, it's the market capitalization ratio of Bitcoin to stablecoins. Currently, the SSR ratio is at a low point, indicating that investors have more liquidity available for investment.

Regarding the stablecoin sector itself, there hasn’t been much movement. Tether’s USDT continues to dominate the stablecoin market, holding over 71.6% of the market share in September, though slightly down from August (72%). Behind it, Circle’s USDC represents about 21.4% of the total market capitalization, a slight increase from the previous month (20.9%). On the other hand, USDe confirms the ongoing trend and continues to lose ground; the valuation of Ethena’s stablecoin fell from $300 million to $253 million in September 2024.

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Spot Bitcoin ETFs: Still Buyers

Inflow and Outflow Summary

As a reminder, August 2024 was a particularly challenging month for spot Bitcoin ETFs, with a monthly outflow of -$92.2 million. However, September 2024 saw a rebound in investor interest, with the 11 spot Bitcoin ETFs accumulating over $1 billion in inflows.

Fidelity's FBTC experienced the largest selling flows, amounting to $438 million, followed by Grayscale’s GBTC (with $271.5 million, bringing the total to over $20 billion since these products launched). It's worth noting that FBTC also saw the highest trading volumes, with more than $553 million in total, and sufficiently strong buy-side inflows to end September 2024 with a net positive flow (+$115 million). The same is true for ARKB from Ark Invest and 21Shares (+$322.8 million net flow) and BITB from Bitwise (+$137.5 million).

Overall, the total assets under management (AUM) of spot Bitcoin ETFs rose from $54.83 billion to $61.12 billion, marking a significant increase of 6.29%. In terms of BTC held in these investment products, nearly 948,000 units are now held in spot Bitcoin ETFs, up 2.4% compared to August 2024.

IC-ETF/BTC Index

For now, U.S. institutional actors and wealth managers appear to be following the general market trend, supporting Bitcoin’s price rise in September (+7.38%). The key indicator to monitor remains when net flows in ETFs will begin to diverge from price movements.

To track this, we’ve developed a simple tool, the IC-ETF/BTC Index, which calculates the ratio between inflows into spot Bitcoin ETFs and the relative changes in Bitcoin’s market capitalization over a one-day period. When this ratio is positive, it indicates that ETF flows are following the market trend for that day. Conversely, when this ratio is negative, it suggests that ETF flows are moving against the market trend.

In this latter case, two scenarios are possible: either ETFs are buyers while Bitcoin prices are falling, or ETFs are sellers while Bitcoin prices are rising. These situations can be visualized with green and red dots, respectively, for the first and second cases.

In September 2024, IC-ETF/BTC data indicated that ETFs positioned themselves as sellers twice during Bitcoin’s price drop at the beginning of the month, when it fell from around $58,000 to just below $54,000. Subsequently, Bitcoin's rebound was continuously supported (in line with the market) and even during correction phases. However, we observed greater indecision in September 2024 compared to correction days in May, July, and August, when ETFs positioned themselves as clear buyers.

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Spot Ethereum ETFs: Not Very Spectacular

More than two months after their official launch in the U.S., spot Ethereum ETFs now have enough history to examine and draw some conclusions. Despite launching during the summer (July 23, 2024), the initial trading volumes were in line with analyst expectations: $4.05 billion in the first week, roughly three times less than spot Bitcoin ETFs. It took about two weeks for volumes to stabilize around $150 to $250 million per day.

In terms of assets under management (AUM), we’ve seen a decline from $10.3 billion to around $9.7 billion, a drop of $630 million since launch. Grayscale’s Ethereum Trust (ETHE), which was already an existing product (as a trust), was converted into an ETF during the launch, which is why spot Ethereum ETFs already had a positive AUM before launch.

Regarding Grayscale’s ETHE, it saw almost $3 billion in outflows, similar to what happened with GBTC for Bitcoin. This naturally benefited its less expensive sibling, the Grayscale Mini Trust (ETH), which saw significant inflows (totaling $294 million). However, it wasn’t enough to place it on the podium of the most attractive Ethereum ETFs, which includes BlackRock’s ETHA ($1.208 billion), Fidelity’s FETH ($454 million), and Bitwise’s ETHW ($318 million).

In September 2024, trading volumes remained around usual levels. However, most of this activity was due to outflows from Grayscale’s ETHE, despite a small uptick in interest at the end of the month—correlated with Ether’s price rebound—from BlackRock’s ETHA. Some days were particularly challenging, with exactly zero inflows or outflows on the 8 ETFs (aside from Grayscale).

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Polymarket: The Winning Bet

With the U.S. elections approaching, the race between the two candidates, Donald Trump and Kamala Harris, remains extremely close. While the outcome is as uncertain as it is crucial for the future of financial markets, one clear winner has emerged: Polymarket. In short, Polymarket is a decentralized prediction market platform that allows users to bet on the outcomes of real-world events, such as political elections, sports results, scientific events, or economic trends.

Launched in 2024, Polymarket took until 2024 to experience massive adoption and be recognized as one of the most reliable sources for estimating probabilities of event outcomes, especially in the U.S. presidential race. In just a few months, the platform saw its user base explode, reaching an average of 33,000 active addresses per month, with a monthly transaction volume of around $275 million. On July 22, 2024, Polymarket set a record for active traders, with nearly 6,900 users trading shares in various markets in a single day.

In September 2024, the success didn’t wane, as Polymarket saw over 90,000 active traders, generating more than $533 million in transaction volume. This represents a 41% growth in active traders and a 12% increase in volume compared to August 2024.

As for other notable metrics, Polymarket’s open interest exceeded $150 million, while the number of new prediction markets opened surpassed 2,000 in September 2024, a 25% increase from the previous month. Although interest in the platform may decline after the U.S. election, it is undeniable that Polymarket has made its mark as one of the few decentralized applications that have broken through the cryptocurrency bubble to reach the general public.

For more in-depth insights, we offer an analysis of Polymarket's rise

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Hyperliquid: The Growing Enigma

October 2, 2024, marked the end of Hyperliquid’s second season of point distribution. Since the launch of this activity incentive campaign at the end of 2023, the decentralized perpetual contract trading platform has evolved significantly, notably opening up to spot markets.

While observers expected Hyperliquid’s participation to decrease and TVL (Total Value Locked) to drop after this incentive campaign ended, the opposite occurred. Total inflows (liquidity flowing into the platform) continued to climb, exceeding $600 million (as of this writing). Other important metrics are also on the rise: total volume surpassed $335 billion, and TVL continues to grow, approaching $750 million.

In a way, Hyperliquid is an interesting anomaly to observe in the cryptocurrency ecosystem. Typically, point distribution campaigns meet with some success, allowing the protocol to gain in volume, users, or TVL. However, once they end, a dramatic drop in activity is expected, reflecting the real interest users have in the protocol.

Several factors explain user behavior regarding Hyperliquid. First, some are waiting for a potential third season, believing that if they remain active during the transition period, they might be rewarded. However, their numbers are few, as estimates lean towards a final end to the incentive campaign and the imminent launch of their own token—likely through an airdrop, of course.

Second, Hyperliquid doesn’t have a large number of users, but the platform’s revenues are significant. As such, investors expect the accumulated points to reach a fairly high value. As of this report, points are trading for just over $6 in pre-market on Whales Pro.

Finally, Hyperliquid’s developments are particularly surprising for a team that has received no funding. The integration of spot and pre-launch markets, vaults to enable exposure to platform yields, and the launch of their own Layer 1 blockchain all reassure users and make them believe that Hyperliquid is a project with a future.

Regardless of the date and outcome of this airdrop, Hyperliquid is a striking example that protocols still have interesting marketing strategies up their sleeves, that the end of a point distribution campaign does not necessarily mean the end of a protocol’s activity, and that projects can develop without massive VC funding, without having to prioritize private investors at the community’s expense.