Takeaways:
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Bitcoin ETFs Rebound: After $1.5B in outflows, U.S. Bitcoin ETFs gained $475M in inflows on Dec. 26, led by Fidelity and ARK funds.
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South Korea’s Bitcoin Premium: Bitcoin trades at a 3% premium in South Korea amid political turmoil and the won's 15-year low.
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Institutional Bitcoin Growth: Spot Bitcoin ETFs reach $36B inflows as companies add BTC to treasuries and new ETF filings emerge.
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ETF Options Boost Liquidity: Bitcoin ETF options debut with $1.8B in first-day volumes, offering advanced tools for institutional traders.
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IRS Targets DeFi: New tax rules mandate DeFi brokers to report user trades, raising privacy and compliance concerns.
Bitcoin ETFs Break Out of Four-Day Outflows with $475M Inflows Post-Christmas
U.S. spot Bitcoin ETFs reversed their trend of outflows on Dec. 26, recording a net inflow of $475.2 million after a four-day streak of outflows totaling over $1.5 billion. Fidelity's Wise Origin Bitcoin Fund led the inflows with $254.4 million, followed by ARK 21Shares Bitcoin ETF and BlackRock’s iShares Bitcoin Trust ETF (IBIT), which saw $186.9 million and $56.5 million, respectively. Grayscale’s and VanEck’s Bitcoin ETFs also contributed modest inflows of $7.2 million and $2.7 million.
This turnaround came after a significant decline, with IBIT marking its largest-ever single-day outflow of $188.7 million on Dec. 24. Bitcoin prices mirrored the turbulence, falling 2.2% to just above $96,000 on Dec. 26. Despite this recovery, year-to-date Bitcoin ETF inflows stand at an impressive $35.9 billion, with total assets under management (AUM) at $111.9 billion.
Ether ETFs also continued their positive momentum, recording $117.2 million in net inflows on Dec. 26, bringing their three-day total to $301.6 million. Fidelity’s ETH fund dominated with $83 million, while BlackRock and Grayscale ETFs added $28.2 million and $6 million, respectively. ETH’s price dropped 1.7% to under $3,400, and despite lagging behind Bitcoin in setting new all-time highs, Ether ETFs have achieved $2.63 billion in net inflows this year, with an AUM of around $12 billion.
Bitcoin Kimchi Premium Rises Amid South Korean Political Unrest
Bitcoin is trading at a 3% premium in South Korea, with the largest cryptocurrency priced at 145,000,000 won ($98,600) on Upbit compared to $96,700 on Coinbase. This spike in the "Kimchi Premium" comes as South Koreans flock to Bitcoin to hedge against the declining won, which has hit a 15-year low against the dollar.
The premium surge coincides with escalating political turmoil in South Korea, where the parliament recently impeached Prime Minister Han Duck-soo, following the earlier impeachment of President Yoon Suk Yeol. Allegations of election fraud and foreign interference have eroded trust in the country’s National Election Commission, further destabilizing the nation’s political and economic landscape.
Market analysts view the Bitcoin premium as a reflection of growing uncertainty and a flight to perceived safe-haven assets. Jeff Park, head of alpha strategies at Bitwise, warned that South Korea’s political crisis underscores the broader risks democracies face from disinformation and the politicization of institutions.
Institutional Adoption of Bitcoin Gains Momentum with New ETF Filings
Institutional interest in Bitcoin has defined 2024, marked by the U.S. approval of spot Bitcoin ETFs and a surge in corporate adoption of the cryptocurrency for treasury management. Bitcoin has risen nearly 130% this year, repeatedly breaking record highs and nearing the critical $100,000 threshold. Spot Bitcoin ETFs, approved earlier this year, have attracted $36 billion in net inflows and now hold over 1 million BTC.
Companies are increasingly turning to Bitcoin as a treasury asset. KULR Technology, a Texas-based energy storage firm, recently allocated $21 million to purchase 217.18 BTC and plans to convert up to 90% of its surplus cash into Bitcoin. This corporate trend has prompted Bitwise Asset Management to file for the "Bitcoin Standard Corporations ETF," which will track firms holding at least 1,000 BTC in their treasuries, among other criteria.
Strive Asset Management has also entered the Bitcoin ETF arena, filing for a Bitcoin Bond ETF that invests in instruments like MicroStrategy’s convertible securities. Strive CEO Matt Cole emphasized Bitcoin’s role as a hedge against inflation, geopolitical risks, and fiat currency instability, asserting that the ETF would democratize access to Bitcoin-linked bonds. As these developments unfold, Bitcoin’s institutional adoption narrative continues to strengthen, positioning the asset as a critical component of corporate and investment strategies.
Launch of Bitcoin ETF Options Marks Milestone in Institutional Crypto Trading
The introduction of options on U.S. spot Bitcoin ETFs in November 2024 has emerged as a defining moment for institutional crypto trading. Debuting with the iShares Bitcoin Trust (IBIT) on Nov. 19, followed by five additional ETFs the next day, the options market saw explosive activity, with IBIT options alone reaching $1.86 billion in notional trading volume on their first day. Over 80% of this was driven by call orders, reflecting strong confidence in Bitcoin's upward trajectory.
For institutional investors, ETF options offer a compliant, efficient, and familiar framework for gaining exposure to Bitcoin without directly interacting with the cryptocurrency. They provide directional leverage, streamlined settlement in U.S. dollars, and enhanced reporting mechanisms, appealing to funds, family offices, and large-scale investors. As these products gain traction, they are expected to deepen market liquidity and broaden institutional participation in Bitcoin.
While some analysts believe Bitcoin ETF options may stabilize the cryptocurrency’s volatile price dynamics, initial conditions suggest the opposite. Implied volatility in these options remains elevated, reflecting the nascent nature of the product and ongoing price discovery. However, market participants remain optimistic that the long-term integration of these instruments will foster greater financial stability and pave the way for mainstream adoption.
IRS Finalizes DeFi Tax Reporting Rule Requiring Brokers to Collect User Data
The U.S. Internal Revenue Service (IRS) has finalized regulations mandating "DeFi brokers" to report user trading information for gross proceeds in digital asset sales. These brokers, akin to traditional securities brokers, will be required to issue Form 1099s to users for tax reporting. The rule applies to front-end service providers that facilitate direct interactions with decentralized protocols, and it is set to take effect on or after January 1, 2027.
While the IRS claims the rule aligns crypto tax reporting with traditional assets to ensure fairness and simplify tax filing, critics argue that decentralized finance differs fundamentally from traditional markets. The challenge of determining entities responsible for user data collection in DeFi ecosystems—often lacking centralized service providers—has raised privacy concerns and operational hurdles. Notably, organizations like the Blockchain Association have pledged to challenge the rule through aggressive legal and legislative actions, while others anticipate potential Congressional reviews or lawsuits disputing the regulation’s scope.
The Treasury maintains that technology-focused financial service operators must adhere to the same standards as traditional brokers. However, industry participants argue that DeFi's decentralized nature makes compliance uniquely challenging, questioning the practicality and fairness of the approach. With the rule rooted in the 2021 Infrastructure Investment and Jobs Act, its implementation marks another step in expanding regulatory oversight of digital asset markets, with implications for innovation and privacy yet to unfold.
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