--- title: “That’s Our Two Satoshis” - The Rally No One Is Talking About description: This week, we will discuss AI, DeFi, crypto ETF inflows, and explore what the next iterations of ICOs may look like. image: https://www.ar.ca/hubfs/Copy%20of%20TO2S%20375x175%20%282845%20%C3%97%201600%20px%29%20%2870%29.png --- [![email-sig-logowhite](https://www.ar.ca/hs-fs/hubfs/email-sig-logowhite.png?width=102&height=96&name=email-sig-logowhite.png "email-sig-logowhite")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** [![Arca](https://www.ar.ca/hs-fs/hubfs/arca_square_576x576.png?width=60&height=30&name=arca_square_576x576.png "Arca")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** Search **Menu** ** ** [![Data Room](https://no-cache.hubspot.com/cta/default/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ![](https://www.ar.ca/hubfs/Blog/Thats%20Our%202%20Satoshis/Branding/2-Sats-Header.png) [Market Recap](https://www.ar.ca/blog/tag/market-recap) | # “That’s Our Two Satoshis” - The Rally No One Is Talking About [![Jeff Dorman, CFA](https://www.ar.ca/hubfs/Jeff%20Dorman.png)](https://www.ar.ca/blog/author/jeff-dorman-cfa) Written by [Jeff Dorman, CFA](https://www.ar.ca/blog/author/jeff-dorman-cfa) Dec 16, 2024 ******![Thats Our 2 Satoshis Logo](https://www.ar.ca/hs-fs/hubfs/Thats%20Our%202%20Satoshis%20Logo.png?width=300&name=Thats%20Our%202%20Satoshis%20Logo.png)****** ******![Screenshot 2024-12-16 at 9.36.45 AM](https://www.ar.ca/hs-fs/hubfs/Screenshot%202024-12-16%20at%209.36.45%20AM.png?width=703&height=459&name=Screenshot%202024-12-16%20at%209.36.45%20AM.png)****** *Source: TradingView, CNBC, Bloomberg, Messari*   **AI, DeFi, and HYPE Remain Hot** If you only look at broad crypto indices, it would appear as if the digital assets market has paused the past few weeks after a significant runup post-election.  But most crypto indices do a poor job of accurately representing the entire asset class, as these indices are market-weighted and, therefore, predominantly composed of BTC, ETH, and SOL. Further, it’s almost impossible for any passive strategy or broad-based index to keep up with the innovation and new token launches.    For example, the Hyperliquid (HYPE) token launched two weeks ago over Thanksgiving and is already a Top 30 asset with a nearly $10 billion market cap after rising over 400% from launch (and +80% last week).  Similarly, most of the AI sector (now composed of AI bots and platforms) is less than 2 months old.  None of these will show up in any index, even though they have been the market leaders for the past few weeks (as we [wrote about](https://www.ar.ca/blog/the-hype-token-launch-and-ai-bots) 2 weeks ago), and continued to soar in value last week.     ![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXdFRTWl1WEqQVLesGH1_hqbgBrMGgvPJHW0dl83__lZiIRUj92XeE4lKxcqXy-gZuBV2fHBxujhZXXMZrRejwrvl6TovB3bLxCMaCB_lBcCIpW40ybgalhAOSBZjMhb2od3xGSxPw?key=iKuZ1mL9t39rdwYK2bm1Rqpr) *Source:  Messari*   Similarly, while some of the hot DeFi tokens are old enough and big enough to be included in some indices (like ETH-based AAVE, +36% w-o-w), there are few, if an,y indices that carry Solana DeFi (i.e. RAY, +10% w-o-w), Base DeFi (i.e., AERO, -5% w-o-w) or any of the recent newcomers (i.e. HYPE and ENA, +26% w-o-w).     The overall crypto market cap barely budged last week due to large caps stalling, but make no mistake, there is still a roaring bull market happening in new sectors and themes.    **What’s Driving ETF flows?** Look - I’m tired of writing about the BTC and ETH ETFs, too, but they are just so hard to ignore.  Here’s a fun stat.  Out of nearly 700 ETFs launched this year, over half of the top 30 by fund inflows are crypto-related.    - 9 BTC ETFs - 4 ETH ETFs - 3 MSTR ETFs ![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXdgF4dkYB9tAkO3pvZCi2B4d29-mDisli82aXYKN5l-PJTE8u9xnXQzYvFEbJTYmcsgCjSxuvpydC2d8s6YwN9MOO7xKzfGMCxeJdTmunlAv_5p6H3a9K0BPcPuIh7ukzBqML_O7Q?key=iKuZ1mL9t39rdwYK2bm1Rqpr) *Source:  *[*The ETF Store*](https://x.com/nategeraci/status/1867986566498664456?s=46&t=e_HO6YZP2lhbFDHG5e0fKQ)   Say what you want about the validity or value of digital assets, but it’s pretty undeniably clear that the market was starved for it.     And last week was no different.  Bitcoin spot ETFs posted 9 straight days of inflows above $200 million, with $4.2 billion in total inflows.  In the same 9-day span, Ethereum spot ETFs saw daily inflows >$80 million and a total of $1.7 billion in total inflows.   So why isn't the price going much higher?  At least part of the reason is the basis trade, meaning a lot of these inflows will be offset by shorts in the futures market. The 3-month basis (if you short futures and go long spot) is offering 15%+ annualized returns currently, which would entice every credit fund manager on the planet, not to mention market neutral strategies, market makers, and even probably some long/short equity funds.     | ![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXdaWCPldhsEBCoqgt0NAQuaQhgk_WK4aX9Y6iWy2J154odUQi1PD-eCYzlsxEwz_p4an8ztRgsjNnarjPpybskAmHFGcAsy0nRLt6Yvc3f_gpWu3xYlfgdHrV0pQNZzWjYP4JCKpQ?key=iKuZ1mL9t39rdwYK2bm1Rqpr) | ![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXdcuPN_DJSP6u0VLCwH6FpqKQUClr1BkKukxpD7csN8NyNc-Gr5CNQSI3g-qpIvLq8PhSnJaRdKOXjG0Pe3XYx_OySxBIzwHKIdO0G8SWNiHoRCKnS7J4WgLdGPnODalD7nwdTc?key=iKuZ1mL9t39rdwYK2bm1Rqpr) | | --- | --- | *Source:  Velo.xyz*   While it’s impossible to accurately quantify how much of the inflows are being offset by futures shorts, it is evident that this is a big part of it.  ETH futures on the CME are showing record shorts.     ![](https://lh7-rt.googleusercontent.com/docsz/AD_4nXeJDuS9jTQ8afXGqW08KSZrHKoSmCkU4YkXYOARbFLPcLAUdrwbXMxo3UcwBGyKnCZnEKGObFTiuVAHkPC9F2ogu-UpFEWIPyfwVCqxCBXFM1eKAOuA284GOAgDe-x93CqLrUxdPg?key=iKuZ1mL9t39rdwYK2bm1Rqpr) *Source: *[*Zerohedge*](https://x.com/zerohedge/status/1867672001151975903)   That said, this doesn’t account for all of the inflows. It’s clear that financial advisors and RIAs are just wetting their feet with regard to exposure to the asset class.  Jay Jacobs, U.S. Head of Thematic and Active ETFs at BlackRock, [recently stated](https://x.com/EricBalchunas/status/1867315163566629059), *“We’re really just at the tip of the iceberg with Bitcoin and especially Ethereum. Just a tiny fraction of our clients own ($IBIT and $ETHA) so that’s what we’re focused on (vs launching new altcoin ETFs)”. *   **Are ICOs Back?** Over the last few weeks, we’ve discussed two prominent themes:   1. Companies and projects are returning to innovation mode after the U.S. election, as they are no longer forced to be afraid of their own shadow when it comes to the hostility and ambiguity of U.S. regulators. 2. The Hyperliquid (HYPE) fair launch was yet another example of how to launch tokens the right way by allowing early users to profit, which was a stark difference compared to the many failed VC-owned token launches that came at egregious valuations on Coinbase and Binance only to go straight down. While not perfect, ICOs in 2017 were definitely closer to perfect than we had seen over the last few years.  I wouldn’t be surprised to see some version of ICOs return under the new U.S. political and regulatory regime.  And we’re already starting to see some further experimentation with token launches.     For example, the Echo platform has helped raise $32M across 86 deals, with participation from over 4,000 investors. Last week, [MegaLabs raised $10 million on the platform](https://www.theblock.co/post/330804/megaeth-funding-cobie-echo?utm_source=twitter&utm_medium=social) in just 3 minutes from over 98 participating countries. It’s clear that the market wants some form of ICOs to return, where community-driven projects with zero venture capital involvement can bring crypto back to its roots.  As one [member of MegaLabs stated](https://x.com/NamikMuduroglu/status/1867616488460374220):    > *“The days of being a discord farmer for metrics that the insiders use to dump on your head is over. Skin in the game for everyone who wants it. Just like Ethereum.”* ![unnamed (3)](https://www.ar.ca/hs-fs/hubfs/unnamed%20(3).png?width=498&height=512&name=unnamed%20(3).png) *Source: Dune Analytics*     ***And That’s Our Two Satoshis! ****Thanks for reading everyone! Questions or comments, just let us know.*   **The Arca Portfolio Management Team** *Jeff Dorman, CFA - Chief Investment Officer* *Katie Talati - Director of Research* *Sasha Fleyshman - Portfolio Manager* *David Nage - Portfolio Manager* *Wes Hansen - Director of Trading and Operations* *Michal Benedykcinski - Senior Vice President, Research* *Alex Woodard - Associate, Research* *Christopher Macpherson - Research Analyst* *Andrew Masotti - Associate, Trading and Operations* *Joey Reinberg, Associate, Trading and Operations*     **To learn more or talk to us about investing in digital assets and cryptocurrency** **call us now at [(424) 289-8068](tel:+14242898068).** ### Subscribe For the Latest Blockchain News & Analysis     Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional. Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services. 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