What is Nakamoto Coefficient?

A measure of the decentralization of blockchain

Decentralization refers to the distribution of control and decision-making within a network, rather than the concentration of power in the hands of a single central authority. Unlike centralized systems, where one organization or individual manages everything, decentralized blockchain networks distribute data among numerous participants (nodes). Each node has a copy of the transaction ledger, ensuring transparency and reducing the risk of manipulation or system failure.

In the world of blockchain, a decentralized network brings a number of key benefits:

Security: By removing the central point of attack, the network becomes more resilient to malicious compromise attempts.
Transparency: All transactions are recorded on a public ledger accessible to all participants, thus strengthening trust in the system.
Fault tolerance: Even if some nodes fail, the network remains functional thanks to a distributed structure.

However, decentralization is not a static state – it is a continuous spectrum that changes with the growth of the network, changes in the governance structure, and the development of consensus mechanisms. And yes, there is a way to measure the level of decentralization. It’s called the Nakamoto coefficient.

Source: cointelegraph

What is Nakamoto Coefficient?

The Nakamoto coefficient is a measure that quantifies the level of decentralization of a blockchain network. It represents the smallest number of independent entities — such as validators, miners, or node operators — that would need to work together to be able to interfere with or compromise the normal functioning of the network.

This concept was introduced in 2017 by the former technical director of Coinbase, Balaji Srinivasan, and was named after the creator of Bitcoin – Satoshi Nakamoto.

The higher the Nakamoto coefficient, the more decentralized and secure the network is. In such systems, control is more evenly distributed among a larger number of participants, making it difficult for any small group to manipulate or attack the network. On the other hand, a lower Nakamoto coefficient means that fewer entities have more influence, which increases the risk of centralization and network vulnerability.

For example, a blockchain with a Nakamoto coefficient of 1 would be highly centralized – one organization would be enough to take control of the network. In contrast, a network with a coefficient of 10 would require the association of at least ten independent entities in order to be able to compromise its security, indicating a higher degree of decentralization.

Source: cointelegraph

How is the Nakamoto coefficient calculated?

Calculating the Nakamoto coefficient involves several key steps:

Identify key entities: First, you need to identify the main actors in the network – these can be mining pools, validators, node operators, or shareholders. These are entities that play an important role in the functioning and security of the network.
Assess the level of control: The next step is to analyze how much control each of these entities has over the network. For example, in proof-of-work (PoW) blockchains like Bitcoin, this involves examining the distribution of computing power (hashrate) among mining pools. In Proof-of-Stake (PoS) systems, the distribution of stake among validators is analyzed.
Summing up to a threshold of 51%: Once the impact of individual entities is evaluated, they are ranked from most influential to less influential. Then, their percentages are added together cumulatively until the total amount exceeds 51%. The number of entities required to pass this threshold is represented by the Nakamoto coefficient.

For example, let’s imagine a PoW blockchain with the following hashrate distribution among mining pools:

Pool A: 25%
Pool B: 20%
Pool C: 15%
Pool D: 10%
Other: 30%

Let’s start in order: Pool A has 25%, we add Pool B (45% total), then Pool C (60% total). Since these three pools together exceed 51%, Nakamoto’s odds are 3. This means that the network could be compromised if only these three entities were to come together.

Fun fact: Although Bitcoin is often considered a symbol of decentralization, its mining infrastructure is quite centralized. Currently, Nakamoto’s odds for Bitcoin are just 2 – meaning that only two mining pools control most of the computing power in the network. However, it is important to note that it is extremely unlikely that these two or any other two mining abysses will merge.

Source: cointelegraph

Limitations of the Nakamoto coefficient

While the Nakamoto coefficient represents a valuable tool for assessing the level of decentralization of blockchain networks, it is important to keep in mind its limitations.

Static image
The Nakamoto coefficient only gives a current cross-section of the state – it shows the minimum number of entities needed to compromise the network at a given time. But blockchain networks are dynamic: participants switch roles, there is a shift in computing power or shares, and nodes come and go. Because of this, the coefficient can quickly become obsolete and do not reflect the real circumstances.

Focus on subsets
This metric most often focuses on specific subsystems, such as mining pools or validators, ignoring other important aspects of decentralization. For example, the diversity of software clients, the geographical distribution of nodes, and the concentration of token ownership also have a significant impact on the security and decentralization of the network.

Variations in consensus mechanisms
Different blockchain networks use different consensus mechanisms, which shape decentralization in different ways. The Nakamoto coefficient is not universally applicable to all of these systems and often requires adjustment in the measurement mode.

External influences
Regulatory changes, technological advancements, and market trends can also affect the decentralization of the network. For example, laws in certain countries may restrict the operation of nodes or mining operations, thus changing the structure of the network – and these factors are not necessarily included in the coefficient.

In conclusion, while the Nakamoto coefficient offers useful insight into certain aspects of decentralization, it should not be viewed in isolation. For a complete picture, it is necessary to combine this metric with other quantitative indicators and qualitative analyses to truly understand the decentralization and security of a blockchain network.

We hope you enjoyed reading today’s blog, and that you learned something new and useful. If you have any questions or suggestions, you can always contact us on our social networks (Twitter, Instagram).

BlackRock’s BUIDL Fund

What is BlackRock's BUIDL Fund?

The BlackRock USD Institutional Digital Fund (BUIDL) is the first tokenized money fund launched by BlackRock, the world’s largest asset manager. This fund allows traditional financial products to be traded as crypto tokens through blockchain networks. Money market funds are investment funds that invest in short-term, highly liquid debt instruments such as cash, its equivalents, and government bonds with a high credit rating, such as US Treasury bills. They aim to provide investors with a place to temporarily invest capital with a stable return, without large fluctuations in value. BlackRock now offers such products through blockchains such as Ethereum and Solana, combining the security and structure of traditional finance with the transparency and speed of decentralized technologies. The fund has seen explosive growth – from $667 million to $1.8 billion in assets under management in just three weeks. Until March 31, 2025, it continued to attract capital, especially from crypto investors, and now operates on seven blockchain networks: Ethereum, Solana, Aptos, Arbitrum, Avalanche, Optimism, and Polygon. The launch of the BUIDL fund marks one of the most important institutional integrations of traditional finance and blockchain technology, while also confirming BlackRock’s strategy of getting closer to the crypto market and its ever-expanding financial acceptance. This institutional presence further legitimizes the digital asset space and can spur a new wave of investment from the traditional financial sector.

Source: cointelegraph

How does the BUIDL fund work?

BUIDL is a tokenized fund that invests in assets denominated in U.S. dollars, such as U.S. Treasury bills, cash, and repurchase agreements. Investors buy and sell BUIDL tokens, which are pegged to the value of the dollar and pay dividends daily, which are delivered directly to the investor’s wallet each month in the form of new tokens.

This model allows investors to generate returns while maintaining the safety and reliability of traditional finance instruments. It is a form of real-world asset tokenization (RWA), where physical or traditional assets are digitally represented through tokens on the blockchain.

These digital tokens, similar to cryptocurrencies, can be traded on relevant decentralized networks. Unlike traditional asset transfers, which often take days and are characterized by low capital efficiency, tokenized forms allow for near-instant trading and settlement, with better automation and lower costs.

This hybrid approach creates a bridge between traditional and crypto finance, providing investors with benefits from both worlds – the stability of regulated financial products and the speed, transparency, and efficiency of blockchain technology.

Source: cointelegraph

Why is the BUIDL fund essential for crypto?

BlackRock’s BUIDL fund represents a new level of institutional legitimacy within the crypto ecosystem. Thanks to it, regulated financial institutions can now step into the world of blockchain with greater confidence – especially through proven networks like Ethereum and the increasingly popular Solana.

This fund shows how blockchain technology can have concrete and beneficial applications beyond speculative investments. For years, investing in crypto was reserved for those brave (or curious) enough to trade tokens directly or study the complexities of decentralized finance (DeFi), which was too risky for most institutional investors.

On top of that, vague regulatory frameworks have often made it completely impossible for institutional funds, such as BlackRock, to get involved in the crypto space altogether.

For many years, the crypto community has sought recognition and acceptance from the traditional financial sector. BUIDL is not just a sign of acceptance – it is a green light for the active participation of the biggest players in global finance. Its rapid success could be the trigger for a wave of institutional investment as crypto moves closer to widespread, mainstream use.

Source: cointelegraph

The Impact of the BUIDL Fund on Traditional Finance

The BUIDL fund represents a high-profile example of how traditional finance products can be improved through tokenization and blockchain technology. It shows the potential for further tokenization of money markets and real-world assets (RWAs), opening the door to a more innovative design of financial instruments.

“In the year since the launch of BUIDL, we have witnessed a significant increase in demand for tokenized real assets, which confirms the value of institutional product offerings on the blockchain,” said Carlos Domingo, CEO and co-founder of Securitize, BlackRock’s partner in the launch of the BUIDL fund on the Solana blockchain. As the market for tokenized treasury bills and RWAs gains momentum, switching to Solana – known for its speed, scalability, and low cost – was the logical next step.

Unlike traditional money market funds, which often operate within a limited time frame, tokenized funds like BUIDL provide uninterrupted, 24-hour access and liquidity, transforming the way investors manage their cash and short-term assets.

BlackRock is not the only player in the tokenized fund space. Franklin Templeton developed a similar product on the blockchain, whose market capitalization exceeded $600 billion by February 2025, while Figure Markets launched its own interest-bearing stablecoin – YLDS.

Interestingly, BUIDL attracts not only traditional institutions – but also blockchain-native projects. For example, just a week after the launch of the BUIDL fund in March 2024, Ondo Finance moved as much as $95 million from its own tokenized short-term bond fund to BUIDL, confirming confidence even among the most innovative players in the DeFi space.

Source: cointelegraph

Benefits of the BUIDL Fund for Investors

Traditional MMFs have been around for decades, but BUIDL brings a number of key advantages that adapt them to the modern digital age. By using blockchain technology, the fund offers greater speed, availability and transparency compared to traditional financial products.

Improved speed and efficiency: When investing in BUIDL, transaction settlement times are significantly shorter than in traditional finance. This reduces administrative costs and burdens, making the entire process more investment-efficient.

Greater liquidity and availability: Investors can buy and sell the fund’s tokens 24 hours a day, seven days a week – with no closed markets or weekends. This means that assets always remain liquid, thereby improving capital efficiency.

New ways to earn returns: BUIDL targets a stable value of $1 per token, and dividends are calculated daily and paid monthly in the form of new tokens directly into the investor’s wallet. This approach can potentially bring higher returns compared to classic forms of fixed income investments.

Transparency and security: All transactions and assets of the fund are tokenized and recorded on relevant blockchain networks, allowing investors full visibility over their own investments and a higher level of security and accountability.

Source: cointelegraph

Risks and Challenges of the BUIDL Fund

The rapid growth of the BUIDL fund represents a positive shift in connecting traditional finance and blockchain technology. However, with this innovation comes new risks that many investors may not yet fully understand – which is especially important for MMF markets where liquidity and technological reliability are key factors.

It is important to understand the following potential challenges:

Liquidity issues: Liquidity is critical to the success of any asset class, especially for derivative products. BUIDL currently targets qualified investors, which can limit wider market adoption and create some illiquidity in trading.

Technical vulnerability: The foundation of the BUIDL fund uses smart contracts on the Ethereum network to tokenize U.S. Treasury bills. Any vulnerability in these smart contracts can expose the fund to technical failures or hacker attacks.

Market manipulation: The crypto market is notorious for volatility, often caused by manipulative tactics such as “wash trading” and “pump-and-dump” schemes. As a new tokenized product with limited trading volume and liquidity, BUIDL may be vulnerable to such manipulations.

Counterparty Risk: While BlackRock has a strong reputation and represents security from the traditional side, there is significant risk from brokers in the crypto space. For example, if an exchange that trades BUIDL tokens runs into financial difficulties, this can negatively impact the availability and reliability of the fund.

We hope you enjoyed reading today’s blog, and that you learned something new and useful. If you have any questions or suggestions, you can always contact us on our social networks (Twitter, Instagram).

How Hedge Funds Enter the Crypto Market

What are hedge funds and why are they interested in crypto?

Think of hedge funds as exclusive financial clubs where large capital managers compete in search of extraordinary returns, often using sophisticated strategies and a large dose of freedom in investing. Unlike traditional investment funds, hedge funds do not play by strict rules – their strength lies precisely in their flexibility and willingness to make risky, but potentially very lucrative moves. That’s why their growing interest in the crypto market doesn’t come as a surprise. Driven by clearer regulatory frameworks, such as Europe’s MiCA law, and the advent of spot Bitcoin ETFs, hedge funds are now entering the world of digital currencies with more confidence. But their interest is not only motivated by regulation – the crypto market offers an opportunity to diversify portfolios and achieve high returns through innovative projects and tokenized assets.

Source: cointelegraph

Crypto Hedge Funds to Watch in 2025 |

Choosing the best crypto hedge funds is not easy – the market changes rapidly, and strategies evolve day by day. Nevertheless, several key players are already shaping the future of the crypto space with their moves and large investments.

Pantera Capital is one of the pioneers in this space, with a history of investing in Bitcoin dating back to 2013 when BTC was worth just $65. Today, their portfolio is full of strong projects and early-stage venture capital, including Polkadot, Cosmos, and Filecoin. Pantera doesn’t just invest in tokens – their early moves, such as buying 2% of the global BTC supply, speak to the vision and courage with which they approach the market.

Morgan Creek Digital, as a crypto-firm of the famous Morgan Creek Capital, targets institutional investors such as pension funds. By partnering with Bitwise, they launched the Digital Asset Index Fund, offering exposure to the top 10 cryptocurrencies and building a long-term strategy based on blockchain and artificial intelligence.

BH Digital, the crypto arm of the Brevan Howard Fund, combines cutting-edge risk management with deep knowledge of the crypto market. They are active across the spectrum – from liquid tokens to venture investments and blockchain governance. In 2024, as many as 51% of their activities were focused on staking and node operations, in addition to investments in projects such as Messari, Injective and Ethen.

Galaxy Digital offers both actively managed funds and index solutions, with a portfolio that includes Monero, EOS, and Avalanche. They are particularly interesting in that they follow trends – while the challenges in Bitcoin mining are piling up, Galaxy is turning to the AI sector, further diversifying its revenues. Their hedge strategy has jumped by a whopping 90% in 2024.

Multicoin Capital is building its name through diversification and a focus on long-term blockchain potential. They recognized Solana early on, and today they are also investing in projects such as Algorand and Near. With an emphasis on liquidity and market action, Multicoin shows how classic strategies can be successfully mapped to a decentralized world.

Interestingly, many funds are increasingly exploring alternative digital assets – stablecoins, tokenized commodities and NFTs, further expanding their presence in the digital economy.

Source: cointelegraph

How Hedge Funds Make Big Moves in the Crypto Market

Hedge funds don’t enter the crypto world just for the sake of experimentation — they enter with precise strategies and the goal of maximizing returns, even in the most volatile market conditions. The key to their success lies in the use of advanced tactics that have already been proven in traditional finance, but are now adapted to digital currencies.

One of the most popular strategies is long and short positions – funds invest in tokens that they believe will rise (long), while at the same time taking short positions against those for which they expect to fall. This two-way bet allows them to make a profit both when the market is rising and falling, which is especially useful in volatile conditions such as are common in crypto.

There is also quantitative trading, where advanced algorithms and models are used to analyze the market in real-time. These strategies rely on vast amounts of data to identify micro-trends and opportunities for quick and accurate trades – often faster than a human trader could react.

Arbitrage is another smart move – taking advantage of the price differences of the same crypto asset on different exchanges. Buying on one platform and selling on another almost instantly allows funds to make sure profits without exposing them to a lot of risk.

As market makers, hedge funds actively buy and sell tokens, providing liquidity to the market. In turn, they make money on the spread – the difference between the buy and sell price – while stabilizing the market environment.

Likewise, several funds are exploring opportunities within the DeFi space – from yield farming to staking. By locking tokens in decentralized protocols, they earn passive income and further diversify their portfolios.

Source: cointelegraph

Should You Invest in Crypto Hedge Funds?

Crypto hedge funds are definitely getting attention – but does that mean you should jump in too? Before making any decisions, it is crucial to assess your own willingness to take risks. The crypto market is extremely volatile and unpredictable, so this type of investment is not for everyone. If you’re stressed about keeping track of prices on a daily basis or aren’t comfortable with the prospect of significant losses, you may be better off considering more conservative options.

Also, it is important to define your own investment goals – are you looking for quick gains or long-term positioning in digital innovations? The right hedge fund can be a great opportunity, but only if its strategy and risk level match yours. Pay attention to the fund’s reputation, historical track record, and team experience, as well as the specific strategies they use – whether it’s arbitrage, yield farming, or quantitative trading.

Don’t forget about the practical aspects: fees, transparency and liquidity. Some funds have high management costs or lengthy lock-up periods during which you cannot withdraw your capital. Also, check how compliant they are with the regulatory framework, as the safety of your investment largely depends on the legal standards that the fund respects.

In conclusion, investing in crypto hedge funds can yield significant gains – but only to those who are well-informed, risk-aware, and invest in accordance with their financial profile, and only invest what they are willing to lose.

We hope you enjoyed reading today’s blog. If you have any questions or suggestions, you can always contact us on our social networks (Twitter, Instagram).

DeepSeek vs. ChatGPT (main differences, benefits, what they are used for)

DeepSeek

DeepSeek is a Chinese AI company founded in 2023 with the aim of developing advanced models and accelerating the path towards artificial intelligence (AI). Their latest model, DeepSeek-R1, unveiled in early 2025, has garnered a lot of attention due to its exceptional efficiency and low training cost of just $6 million, while achieving results comparable to OpenAI’s GPT-4o. The key to its strength lies in its innovative mixture of experts (MoE) architecture, which allows the model to dynamically select specialized neural components to process each task, rather than activating the entire network. In addition, DeepSeek-R1 excels in mathematical reasoning and programming, where it uses the chain-of-thought reasoning method for improved logical reasoning. Unlike most competing AI models, DeepSeek promotes an open-source approach, allowing developers and organizations to freely use and customize its models. Its growth has shaken up the AI industry, and even the launch of DeepSeek-R1 caused a historic drop in Nvidia’s market value of $589 billion in a single day.

Source: cointelegraph

ChatGPT

ChatGPT is a generative AI chatbot developed by OpenAI and launched in 2022. years. Based on the GPT-4o language model, it allows users to communicate naturally and fluidly, customizing the style, length, and language of responses. In addition to advanced understanding and natural language generation, ChatGPT stands out for its multimodal integration, which means that in addition to text, it can process and generate images and voice responses. Also, it supports advanced data analysis, allowing users to upload documents to summarize or extract key information. A big advantage of ChatGPT is also support for external plugins, including web search tools, code interpretation, and integration with platforms such as Expedia, OpenTable, and Slack. Its development required a huge financial investment – estimates suggest that it cost between $41 million and $78 million to train the GPT-4 model alone, highlighting OpenAI’s resource advantage compared to many competitors.

Source: cointelegraph

DeepSeek vs. ChatGPT: Artificial Intelligence Performance Analysis

When comparing DeepSeek R1 and ChatGPT-4o, key factors include accuracy, efficiency, and adaptability. DeepSeek R1 excels at structured reasoning, especially in math and coding, achieving 90% accuracy in solving math problems, while ChatGPT-4o scores 83% on advanced STEM tests. In programming, DeepSeek R1 has a 97% success rate in logic tasks, while ChatGPT-4o excels at multi-step reasoning and general knowledge processing, with an 89th percentile on Codeforces, making it a powerful tool for developers.

In terms of efficiency, the DeepSeek R1 uses the MoE (Mixture of Experts) architecture, which allows it to activate only 37 billion parameters per query, despite having 671 billion of them. In contrast, ChatGPT-4o uses a monolithic structure of 1.8 trillion parameters, which increases resource requirements. DeepSeek R1 training lasted 55 days and cost $5.5 million, while ChatGPT-4o required over $100 million, making DeepSeek a more affordable solution for businesses.

In terms of scalability, ChatGPT-4o outperforms DeepSeek R1 with a contextual window of 200,000 tokens, while DeepSeek supports 128,000 tokens, limiting its ability to work with long documents. Additionally, ChatGPT-4o is multimodal and supports text, voice, and images, while DeepSeek R1 is a text-only model, which reduces its versatility in AI applications that include visual and audio data.

Source: cointelegraph

Concern for privacy and data security

Both platforms face challenges related to data privacy and security, but DeepSeek is under greater scrutiny due to its connection to China. DeepSeek stores user data on servers in China, which has raised concerns, especially in the United States, where experts warn of potential access to the data by the Chinese government – similar to the TikTok controversy. Its privacy policy also reveals that it collects a wide range of user data, including text and voice inputs, uploaded files, and conversation history, which has prompted warnings against sharing sensitive information on the platform.

On the other hand, ChatGPT also collects user data, including personal information and usage details, but OpenAI has implemented data protection measures. Nevertheless, security risks still exist – for example, between June 2022 and May 2023, around 100,000 ChatGPT user accounts were compromised and sold on the dark web, which pointed to vulnerabilities in data protection.

Source: cointelegraph

Regulatory Compliance

Ethnic and ethical concerns about AI language models include bias, misinformation, and censorship. It is noticeable that DeepSeek censors discussions on topics that the Chinese government considers sensitive, such as protests and human rights issues in China. Similar reviews are not limited to DeepSeek; ChatGPT also faces condemnation for generating biased or discriminatory content and occasionally produces harmful or misleading information. These issues stem from the bias contained in the training data, further highlighting the challenges in ensuring ethically acceptable AI outputs. While OpenAI recognizes these concerns and is working on strategies to mitigate them, problems still persist.

Source: cointelegraph

Choosing between DeepSeek and ChatGPT

DeepSeek has proven that AI models can be efficient, affordable, and competitive, even without the enormous financial and computing resources that OpenAI or Google have. However, ChatGPT still has an edge in certain areas, so the choice between these two models depends on the specific needs of the user.

When to choose DeepSeek R1?
Affordable AI Solutions – Suitable for businesses looking for high-performance AI at lower operating costs.
Technical and STEM tasks – Ideal for complex coding, debugging, and logical problem solving.
Customizable and open-source – Allows organizations to modify the model according to their own needs.

When to choose ChatGPT-4o?
Multimodal functionality – The best choice for tasks involving text, voice, and images.
Customer support and wide application – Great for chatbots, document processing, and general communication.
Long-Term Context – Supports longer conversations and complex memory tasks.

This growing competition in the AI industry favors innovation, lowering costs and increased availability, preventing monopolies from dictating the development and prices of artificial intelligence, so we can conclude that competition favors users, who will obviously gain access to better and cheaper AI models.

We hope you enjoyed today’s blog, and that you learned something new. If you have any questions or suggestions, you can always contact us on our social networks (Twitter, Instagram).

Mark Uyeda – New SEC Chairman

Uyeda's educational and professional background

Mark Toshiro Uyeda graduated from Georgetown University with a degree in business administration in 1992 and received his legal education at Duke University School of Law, where he served as an editor at the Duke Law Journal. He began his career as a lawyer at the renowned law firms of K&L Gates (1995–1996) and O’Melveny & Myers (1997–2004), specializing in securities and financial law. From 2004 to 2006, he served as a senior advisor to the California Department of Corporations before moving to the Securities and Exchange Commission (SEC), where he held a number of key positions, including advisor to the chairman and trustee. His rich career in regulatory institutions and expertise in financial law have cemented his reputation as one of the leading capital markets experts in the US.

Source: cointelegraph

A Turning Point for Crypto Regulation

Under the leadership of Mark Uyeda, the Securities and Exchange Commission (SEC) is taking key steps towards clearer regulation of cryptocurrencies. One of the most important initiatives in this direction is the establishment of the Crypto Task Force on January 21, with the aim of creating a secure regulatory framework for crypto startups. This working group focuses on strengthening cooperation between regulators, harmonizing rules globally, and developing transparent guidelines for business compliance in the crypto sector. Particular emphasis is placed on public involvement and open discussions on future policies. After a period of uncertainty caused by the aggressive regulatory approach of former SEC Chairman Gary Gensler, Uyeda’s strategic and balanced approach brings new hope for the long-term development of the industry. Also, under his leadership, the SEC is considering new rules for DeFi projects, which would create a legal framework for decentralized finance for the first time in the US.

Source: cointelegraph

Trump's SEC strategy for 2025 and beyond

The Securities and Exchange Commission’s (SEC) strategy under the Trump administration, which began with the appointment of Mark Uyeda, is aimed at reducing regulatory barriers and boosting economic growth. Trump’s policy of deregulation, visible during his first term, continues in his second term, which began on January 20, 2025. This will have a significant impact on the crypto industry, which under former SEC Chairman Gary Gensler has been subjected to strict regulation and legal action against leading companies such as Binance, Ripple, and Coinbase. Uyeda, on the other hand, advocates the opposite approach – instead of restricting the market, it will focus on clearer regulation and encouraging innovation in blockchain technology, which could open up space for a new wave of development in the digital asset sector.

Source: cointelegraph

Uyeda's attitude towards the crypt

Mark Uyeda advocates a consistent and transparent regulatory framework as a key factor for the growth of digital assets. In addition to launching the Crypto Task Force, its policy could bring clearer legal classifications for cryptocurrencies, thereby reducing legal uncertainty in the sector. Unlike his predecessor Gary Gensler, Uyeda is expected to be a leader who will work closely with industry leaders, promoting a business-friendly approach. His vision is aimed at creating a regulatory environment that will prevent the outflow of crypto companies to areas such as Dubai or Singapore, which could allow the US to maintain its competitiveness in the global digital economy.

Source: cointelegraph

Uyeda and crypto regulations: what to expect?

The United States has faced vague and tightly regulated crypto legislation for years, but under Mark Uyeda’s leadership, significant changes could occur. Its policy is aimed at eliminating legal uncertainty and providing clear guidelines for crypto businesses. Among the key regulatory priorities is defining the status of digital assets – whether cryptocurrencies will be classified as securities or commodities – which could be resolved in cooperation with the Commodity Futures Trading Commission (CFTC). Also, the Uyedin SEC could encourage institutional adoption of cryptos and the expansion of investment products, especially after the approval of the spot Bitcoin ETF, while the application for a Litecoin ETF from Canary Capital is still under consideration. Although he did not explicitly comment on regulations related to Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, it is possible that he will try to find a balance between regulatory measures and encouraging innovation in the digital asset market.

Source: cointelegraph

Is Uyeda an advocate of blockchain technology?

Although blockchain technology is not Mark Uyeda’s primary focus, he does not deny its potential. Compared to its predecessor, its regulatory approaches lean more towards fostering blockchain innovation, except when it comes to companies operating in legal gray areas. The Trump administration has already shown interest in adopting blockchain as a tool to improve the efficiency of financial markets, which opens up space for strategies that could encourage its wider application. There is the possibility of launching incentive programs for companies involved in fraud prevention, smart contract development, and decentralized finance (DeFi). Also, the SEC’s Crypto Task Force, launched in 2025, is the first regulatory unit within the SEC dedicated exclusively to blockchain and digital assets, highlighting the growing importance of this technology in the U.S. financial system.

Source: cointelegraph

SEC and crypto regulations around the world

The regulation of cryptocurrencies in the United States is closely monitored around the world, as the SEC’s decisions often affect the regulatory approaches of other countries. If the SEC, led by Mark Uyeda, establishes a clear regulatory framework for digital assets, many states could follow a similar model to stay compliant with global financial standards. This could have a positive impact on the retention of capital and talent within the US, as innovation in a business-friendly environment stimulates economic growth. Currently, many crypto companies have moved their operations to countries like Singapore, Switzerland, and the UAE, where regulation is more favorable and predictable. Uyeda’s success in reducing regulatory uncertainty through the Crypto Task Force could reverse this trend, benefiting investors and accelerating the growth of blockchain technology in the US market. Time will tell whether the SEC under his leadership will be able to consolidate the position of the US as a global leader in the digital economy and encourage international regulatory cooperation. We hope you enjoyed today’s blog. If you have any questions or suggestions, you can always contact us on our social networks (Twitter, Instagram).

What if Bitcoin had never been invented?

Digital currencies without Bitcoin

Argument 1. "A Kind" of Bitcoin Was Inevitable

Bitcoin didn’t come into existence all at once – its foundations were built on decades of previous attempts to create digital money. Back in 1990, David Chaum developed DigiCash, an anonymous payment system that used cryptography to protect user privacy, but its centralized nature prevented it from achieving wider acceptance. Later, e-gold offered a digital currency backed by gold reserves, but it ran into regulatory hurdles. In 2005, Nick Szabo went a step further with Bit Gold, a concept of a decentralized digital currency that used cryptographic puzzles and a public ledger. Although it was never implemented, Bit Gold was the obvious predecessor of Bitcoin. Moreover, the foundations of blockchain technology were laid back in the early 1990s through the work of Stuart Haber and W. Scott Stornette, who designed a cryptographically secured timestamp for digital documents. All these innovations indicate that some kind of Bitcoin was inevitable – even if Satoshi Nakamoto hadn’t created Bitcoin, someone would have come up with a similar solution sooner or later.

Source: cointelegraph

Argument 2. Without Bitcoin, crypto would be delayed for decades

Without Bitcoin, there is a high probability that cryptocurrencies would not even exist in a recognizable form today. Projects like DigiCash and e-gold have shown serious challenges such as centralization, regulatory hurdles, and scalability issues, and no solution has been able to overcome these hurdles until the advent of Bitcoin. Even Nick Szabo’s Bit Gold didn’t completely address the issue of decentralized consensus, but was intended more as a reserve currency than an everyday means of payment. Bitcoin was a key milestone – without it, even altcoins would have nothing to build their infrastructure on. Litecoin, created in 2011, has improved its design precisely on the basis of Bitcoin’s innovations. Ethereum, while having a broader vision of decentralized applications, relied on Bitcoin’s proven technology as proof that decentralized networks can work. Even Ripple, although designed for institutional transactions, has profited from the credibility that Bitcoin has brought to blockchain technology. Bitcoin’s proof-of-work (PoW) was a model for a number of early cryptocurrencies, and if it didn’t exist, the exploration of alternative mechanisms such as proof-of-stake (PoS) or DAGs could have been delayed for years. Additionally, without Bitcoin, advances in cryptographic security, decentralized governance, and blockchain scalability would likely occur at a much slower pace. In other words, the financial world without Bitcoin would look completely different – and far less innovative.

Source: cointelegraph

Bitcoin's Impact on the Global Financial System

Argument 1. A Potentially Better Life Without Bitcoin

Without Bitcoin, the incentive to research and apply blockchain technology might be significantly weaker, and financial institutions would likely be more cautious about investing in decentralized systems. However, this is exactly where some see the positive side – the capital that was directed into cryptocurrencies during the 2010s could have ended up in other fast-growing industries. Fintech, which was already transforming the financial sector through mobile banking, online payments, and peer-to-peer lending, could have thrived even faster. Artificial intelligence and machine learning may become key parts of various industries sooner, while renewables would attract more investment, accelerating the development of solar and wind technology. Also, biotechnology and personalized medicine could have made revolutionary breakthroughs in healthcare earlier. In addition to missed investment opportunities, there is also the question of tax revenues – without cryptocurrencies, fewer people would avoid taxation, which would increase government revenues. Research has shown that a significant portion of crypto-assets remain undeclared, and the industry has also led to billions of dollars lost in fraud, large capital outflows from economies, and even funding for shady regimes and criminal activities. All this leads to the conclusion that the world without Bitcoin would not only be different – it might even be better.

Source: cointelegraph

Argument 2. Bitcoin was needed for global financial progress

Bitcoin has served as a catalyst for financial innovation, particularly in the field of decentralized finance (DeFi). Its success has proven the sustainability of blockchain technology and spurred the development of numerous applications beyond digital currencies, including data governance, security, and decentralized governance. These technologies are used today in logistics, healthcare, and even voting systems, increasing transparency and security. Additionally, cryptocurrency transactions allow for lower fees – while traditional international transfers can cost up to 10% commission, crypto transfers significantly reduce these costs. Also, transactions are faster and more efficient than traditional bank transfers, which often take days. Bitcoin has also contributed to financial inclusion, allowing people without access to banking services to participate in the global economy. Without it, the world would still rely on slower and more expensive centralized systems. Its influence is especially visible in developing countries – in 2021, El Salvador became the first country to adopt Bitcoin as an official currency, which boosted tourism, foreign investment, and made it easier to send remittances through the Chivo wallet. Similarly, in Kenya, Bitcoin provides financial services to people without bank accounts, proving its potential in improving global financial inclusion. Bitcoin was not just an innovation – it was a necessary step towards a more efficient and equitable financial system.

Source: cointelegraph

Without Bitcoin: Would the World Be Better or Worse?

Thinking about a world without Bitcoin raises many questions and possibilities, many of which are conditioned by a number of interrelated factors. Would another digital currency appear in its place, or would the development of blockchain technology be postponed indefinitely? It is true that we can speculate, but we will never know for sure what the world would look like without Bitcoin. Rapid technology developments, regulatory decisions, and market forces are constantly shaping the financial ecosystem, making it impossible to make a final judgment on whether the world would be better or worse without Bitcoin. What is certain is that Bitcoin has left a lasting mark on the global financial system – and its emergence will continue to shape innovation for years to come.
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Token burning (token burning)

What is token burning?

Token burning is a process in which a certain amount of cryptocurrency is intentionally removed from circulation, thereby reducing the total supply of tokens available. Imagine a popular restaurant that removes several tables from the dining room to create a sense of exclusivity and increase the value of the remaining tables. In a similar way, burning tokens can increase the value of the remaining tokens by reducing their availability. This process is usually carried out by sending tokens to a special, non-returnable address, known as a “burn address”, which can receive tokens but can never send them. Since no one can retrieve or use these tokens, they are considered permanently “burned.” Projects often use token burning as a strategy to control supply, create scarcity, and stabilize the market, which can attract investors and increase the value of the remaining tokens in the long run.

Source: cointelegraph

How does token burning work?

Burning tokens is not just a decision made overnight, but a carefully controlled process that permanently makes it impossible to trade these tokens. The burning process takes place in several key steps to ensure that the tokens are irreversibly removed from circulation.

Step 1: Decision to burn tokens

The decision to burn tokens is usually made by the project’s developers or governing bodies. Tokens can be burned as part of an economic strategy to increase scarcity or in response to community demands. Some projects have built-in deflationary mechanisms, where tokens are periodically burned to reduce the total supply, while others burn a certain percentage of transaction fees or staking rewards. For example, Binance conducts quarterly token burns, adjusted for trading volume, while Ripple burns a portion of transaction fees to prevent unwanted activity on the network. With stablecoin cryptocurrencies like Tether’s USDt, the burn is used to maintain stability – when users exchange USDt for fiat currency, the corresponding amount of tokens is burned to maintain a 1:1 ratio with reserves.

Step 2: Determining the Number of Tokens to Burn

Once the decision is made, the project defines the amount of tokens that will be removed from circulation. This can be a fixed number or a percentage of the total supply, depending on the goals of the burn. A smart contract on the blockchain verifies that a user or project has enough tokens to burn and ensures that the amount entered is valid and greater than zero. If the conditions are not met, the incineration process will not be carried out.

Source: cointelegraph

Step 3: Send the token to the burn address

Tokens intended for burning are sent to a special “burn address” or “eater address”, which can receive them, but can never send them again. This address does not have a known private key, which means that the tokens are permanently lost. The burn is initiated by running the “burn” function on the blockchain, whereby the amount of tokens to be removed is defined.

Step 4: Blockchain Burn Verification

Each burn transaction is recorded on the blockchain, allowing anyone to verify the authenticity of the process. Many projects are announcing token burns to ensure transparency and community trust. The community can track these events and verify that the tokens have indeed been removed from circulation.

Interestingly, some projects use the “burn rate” as an indicator of financial health – a high burn rate can mean a decrease in supply and an increase in the value of the token, but also a potentially unsustainable business model if the rate is too high.

Source: cointelegraph

Why do projects burn tokens?

While it may seem illogical at first glance to destroy tokens, burning has several key purposes that contribute to the growth, security, and stability of projects. The primary reason is often the increase in the value of tokens by decreasing supply, but the benefits of this process go far beyond scarcity.

Increasing investor confidence
Regular token burns can help boost investor and community confidence. When a project carries out planned burns, it is often interpreted as a sign of a long-term commitment to stability and sustainable growth. In this way, projects can allay investors’ fears of inflation or over-issuance of tokens.

Correction of technical errors
In some cases, token burning serves as a solution to inadvertently created tokens or technical errors. For example, if a bug in the system causes additional tokens to be accidentally minted, burning the excess can prevent the ecosystem from destabilizing.

Stabilization of algorithmic stablecoins
With algorithmic stablecoins, token burning plays a crucial role in maintaining a stable value. These tokens are usually pegged to a specific fiat currency, and the burning is used to control their supply. If the value of the stablecoin falls below the target price, the system can burn excess tokens to incentivize price growth and restore stability.

Increase security and reduce spam
Some blockchain networks use token burning as a protection mechanism. For example, certain projects burn a small portion of transaction fees to discourage spam transactions and protect the network from overload or DDoS attacks. Adding a cost to each transaction reduces the possibility of malicious actors taking advantage of the system to make a quick profit or disrupt it.

Proof-of-Burn (PoB) as a consensus mechanism
Some blockchains use a Proof-of-Burn (PoB) model, where miners burn a portion of their tokens to earn the right to mine new blocks and win rewards. By doing so, miners prove their commitment to the network, which helps maintain the security of the system without the high energy costs characteristic of Proof-of-Work (PoW) methods.

Interestingly, certain projects apply “community-driven burns”, where the community decides through voting whether the tokens will be burned, giving tokenholders a direct role in shaping the project’s strategy.

Source: cointelegraph

Burning vs. minting tokens

Burning and minting tokens are two key processes that help manage the supply and value of tokens in the blockchain ecosystem.

Minting refers to the creation of new tokens and their addition to the blockchain. Tokens are minted during initial sales, as rewards for miners or validators, or to fund the development of a project. This process ensures that there is a sufficient amount of tokens to meet demand, especially when the network grows or requires additional liquidity.

Burning, on the other hand, removes tokens from circulation to prevent inflation and maintain market stability. The key is to find a balance between minting and burning — enough new tokens to support the ecosystem, but without an oversupply that could reduce their value.

Many projects use both mechanisms to maintain a stable economy. For example, tokens can be minted to reward users, but at the same time, they are burned to reduce inflation and increase scarcity. Burning can create deflationary pressure, increasing the value of the remaining tokens.

Together, minting and burning allow supply and demand to adjust dynamically, ensuring the long-term viability of the token economy.

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Bitcoin Miners and the Energy Network

Bitcoin miners as buyers of electricity

Bitcoin miners act as dynamic energy buyers with exceptional flexibility to adjust consumption according to supply and demand in the electricity market. By using sophisticated energy management strategies, they can optimize their operations to ensure stable operation and profitability. Because mining requires significant amounts of electricity to solve the complex mathematical problems needed to secure the Bitcoin network, miners are actively looking for reliable and affordable energy sources. This high energy requirement often leads them to regions with electricity surpluses or favorable tariffs, which not only reduces their own costs but also affects the balance of local energy networks.

Source: cointelegraph

How do Bitcoin miners buy electricity?

Understanding how Bitcoin miners buy electricity reveals how the mining network contributes to a more efficient and adaptable use of energy. Their cooperation with energy markets brings many benefits.

First, miners help stabilize the power grid by adjusting their consumption in real-time. By doing so, they act as a demand response service, reducing the load during high-consumption hours or absorbing excess energy when demand drops. In addition, mining can provide additional services to electric utilities, such as frequency and voltage regulation, which is crucial to prevent instability and failures in the grid.

Another significant advantage is the reduction of energy losses from renewable sources. Because solar and wind farms often produce excess energy that cannot be absorbed by the grid, miners strategically locate their operations in regions with surplus renewable energy, improving the economic viability of such projects. In this way, mining not only uses affordable energy sources but also supports the wider integration of renewable resources into the energy system.

Source: cointelegraph

Benefits of Bitcoin Miners for the Network

Although often perceived as an energy-intensive activity, Bitcoin mining can be a driver of sustainable energy, innovation, and economic growth, especially in regions rich in renewable energy sources.

From an economic point of view, energy producers with excess capacity can sell electricity to miners, thereby maximizing revenues. This cooperation is particularly useful in areas where a large amount of energy is available, but local demand is not high enough to use full capacity. The result is a triple benefit: higher profitability for energy companies, lower costs for miners, and more favorable electricity prices for consumers.

From an environmental perspective, mining drives demand for low-cost renewable energy sources, which can accelerate investment in green infrastructure. Rather than being an obstacle to climate goals, integrating mining with sustainable energy sources can accelerate the transition to renewable energy sources. Aware of this, miners are actively looking for solutions to build carbon-neutral operations.

In addition, the growing need for efficient energy sources is driving innovation in energy production and storage. These technological upgrades not only benefit miners but also the entire energy sector. An example of this is the use of flare gas to generate electricity, which reduces methane emissions and creates added value at the same time.

Source: cointelegraph

How do miners affect the price of electricity and investments?

The cryptocurrency mining industry is changing the energy sector in certain parts of the world, encouraging investment in renewables and improving the financial stability of energy projects.

Bitcoin miners are purposefully looking for low-cost energy sources to maximize profits, often in areas with excess production or low demand. This creates additional demand for such energy, which can stabilise or even reduce electricity prices in some regions. An example of this is Texas, which has become a hub for Bitcoin mining thanks to its high share of renewable energy sources (around 40%), with miners using excess energy and contributing to the stabilization of local electricity prices.

In addition, mining encourages investments in renewable energy sources. According to data from the Bitcoin Mining Council, 59% of mining operations use carbon-free sources, and this number is growing at a rate of 4.5% per year. Miners’ steady demand for electricity is making investments in wind farms, solar farms, and other renewables more cost-effective, accelerating the global transition to a cleaner energy grid.

In addition to stabilizing prices, miners improve the financial viability of energy projects by providing additional sources of income. There are more and more examples where mining supports projects such as nuclear power plants and ocean thermal energy conversion (OTEC). In Ethiopia, for example, mining already consumes 600 MW of energy, which encourages the development of hydroelectric power plants as miners guarantee a stable demand for electricity, making infrastructure investments profitable in the long run.

Source: cointelegraph

The Perspective of Bitcoin Miners as Energy Buyers

Future trends geared towards sustainability provide an opportunity for Bitcoin miners to align their operations with global environmental goals, while also positively impacting the energy sector. The ongoing debate about the environmental impact of mining between cryptocurrency proponents and critics highlights the need for further monitoring and adaptation. As governments and corporations increasingly focus regulation on emissions and social factors, miners are likely to turn even further to sustainable energy sources.

From a societal perspective, this transition can improve Bitcoin’s reputation, increasing its acceptance among regulators and consumers. Criticism for high electricity consumption and CO₂ emissions – which in 2020 and 2021. 5.89 million tonnes of carbon dioxide equivalent – could be mitigated by applying innovative solutions in energy storage and management. The mining mechanism based on the proof-of-work model can also be considered a new form of virtual energy storage, which opens up additional opportunities for integration with renewable sources.

Future regulation will play a key role in shaping the global impact of Bitcoin mining on energy markets. Some countries, such as Kuwait, have banned mining despite low energy prices, while in the US, political attitudes towards Bitcoin differ – the Trump administration, for example, has expressed support for domestic mining. However, it remains to be seen how regulatory decisions around the world will affect the development of the industry and the role of miners as key energy customers.

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What is a “bull trap”?

What is a bull trap?

Bull trap (eng. bull trap) is a false signal that leads investors to believe that the market is entering an uptrend, when in fact it is on the verge of falling. This phenomenon is common in the cryptocurrency world and can lead to significant financial losses for those who do not recognize the warning signs. A bull trap works the opposite of a bear trap, which falsely suggests a market crash before prices rise again. Both traps take advantage of investors’ psychological weaknesses, such as fear and greed, which is why education is key to avoiding them.

Source: cointelegraph

Why do bull traps occur?

Bull traps are primarily psychological in nature and arise from investors’ fear of missing out on an opportunity to make money (FOMO – Fear of Missing Out). When the market shows signs of growth, investors often act impulsively, failing to analyze the underlying reasons behind the trend. However, the real cause of growth is often more important than the growth itself – if money flows into a project for unfounded or manipulative reasons, that growth can be short-lived and lead to a sharp decline.

Bull traps can arise due to several factors, such as fake news, market manipulation (rug pulls), excessive investor optimism, or misinterpretation of short-term trends as signs of long-term growth. Cryptocurrency markets are particularly susceptible to these pitfalls because they operate 24/7, and information spreads rapidly. That’s why it’s important to conduct thorough research, understand the background of the project, and not make decisions based solely on emotions.

How to recognize a bull trap?

Fortunately, proper education can help you identify bull traps and protect yourself before investing. It is crucial to monitor certain indicators that indicate that market growth may not be sustainable.

Some of the main signs of a bull trap include:

Sudden price increase: Rapid price spikes are common in the cryptocurrency world, but they usually have a clear cause, such as positive news. If you notice a sharp rise for no apparent reason in the news, be careful.
Constant sell-offs: If a sharp rise in price is accompanied by a large volume of sales, it may mean that investors are taking advantage of the current growth to make a profit, which is not a good sign for the stability of the trend.
Mismatch in trading volume: if the price is rising, but the trading volume is not following that trend, it is possible that the growth is being driven by a smaller group of investors rather than wider market support, which may signal manipulation.
Inability to break the resistance level: in a real bull market, the price usually breaks through the resistance levels without major problems. If you see price growth stagnating below key levels, it can be a warning that it is a bull trap.

Most of these indicators suggest that the price increase is the result of manipulation or short-term enthusiasm, rather than long-term market demand. The best way to avoid bull traps is continuous education, following the news and actively participating in the communities that follow the project you are investing in.

Source: cointelegraph

Bull Trap Trading Strategy

If you find yourself in a situation where you anticipate the possibility of a bull trap, implementing a few strategies can help you minimize your losses and make the most of your opportunity.

One of the basic strategies is patience. Avoiding impulsive decisions and the fear of missing out on an opportunity (FOMO) is key to preventing you from falling into a bull trap. While it may seem like you’re missing out on making a quick buck, patience combined with a thoughtful approach can help you stay in the game without putting yourself at risk.

Another effective tool is to place stop-loss orders. These orders allow an asset to be sold automatically when its price falls below a certain limit. If you’re not sure whether the price will continue to rise or fall, placing a stop-loss order can help you limit your losses. For example, if you buy a project coin that has jumped to $8,000 but are unsure about its future, you can place a stop-loss order at $7,950. That way, if the price drops sharply, your loss will be limited to just $50.

Source: cointelegraph

How to recover from a bull trap?

Recovery from a bull trap requires an objective assessment of losses, adjustment of strategies, and maintenance of emotional discipline.

First, assess your losses and avoid panicking. If the market has not completely collapsed, do not sell the asset immediately. Instead, analyze the basic fundamental factors of the project – if they are still strong, the price can recover. Use this experience as an opportunity to improve your risk management strategies, such as placing stop-loss orders or diversifying your portfolio.

Then, rethink your research process. Think about why you fell into the bull trap and adjust your methods to assess market trends and news sources. Educate yourself on trading indicators such as resistance levels and trading volume to identify pitfalls earlier.

In the end, emotional discipline should be a priority. Avoid “revenge trading” – impulsive attempts to recoup losses – as it often leads to further losses. Remember, every investor faces losses; The key is to use them as a stepping stone to trade better in the future.

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What is the flow of money in an ETF?

What is an ETF?

An exchange-traded fund (ETF) is an investment asset that represents a specific asset class or index, such as the S&P500. This tool allows investors to enter the financial markets more easily, without the need for detailed research on each individual investment. Instead of buying individual stocks or other assets, an ETF gives you the opportunity to invest in pre-stacked investment packages managed by professionals.

For example, an ETF that tracks the S&P 500 reflects the price movement of that index. In this way, you can make potential gains, without having to invest individually in all 500 companies that the index covers. Another great advantage of ETFs is that their shares can be bought and sold on exchanges, just like regular stocks, making them extremely affordable.

While ETFs are easy to use, it’s important to know that you don’t directly own the underlying asset. Also, there are management costs — fees you pay to fund managers to maintain and align your portfolio with the fund’s goals, such as tracking a specific index or asset class.

This structure makes ETFs attractive for beginners as well as experienced investors who want to diversify their portfolios at a lower cost and less risk. This is why ETFs often trigger large cash flows, as investors continuously buy and sell these funds. Tracking these money movements is known as the flow of money in ETFs, which we will explain in more detail below.

Source: cointelegraph

What is the flow of money in an ETF?

The flow of money in an ETF refers to the money that enters and exits ETF stocks at different time periods. These cash flows represent the net inflows and outflows of money into the ETF, and are not necessarily a reflection of its performance. Instead, they serve as indicators of investor sentiment. When we track money flows, we can see them as investors who “vote” with their cash investments, buying and selling ETF stocks for reasons that seem important to them.

Why do cash flows in ETFs matter? For example, if an ETF experiences several million dollars of outflows, it can look alarming. However, it’s important to look at the bigger picture: a few million can be negligible for an ETF that manages billions of dollars. While cash flows are not directly related to ETF prices, they can provide valuable insights into investor behavior and market trends.

There are two types of cash flows: inflows and outflows.

Inflows

An inflow occurs when an investor buys ETF stocks. When an ETF experiences significant inflows, it usually indicates positive, bullish sentiment towards that ETF.

Castings

An outflow occurs when an investor sells ETF stocks. When an ETF sees significant outflows, it often signals that investors do not trust the ETF, indicating negative, bearish sentiment.

For example, if the price of Bitcoin (BTC) falls, we could see significant outflows from Bitcoin-related ETFs, such as the VanEck Bitcoin Trust, which would indicate negative sentiment.

While cash flows do not directly track the price of an ETF, their importance lies in tracking the buying and selling of ETF stocks. Keeping an eye on these developments can help investors identify the broader market stance and potential investment opportunities.

What is the money flow in an ETF for?

Understanding the cash flows in ETFs can help you understand public sentiment and predict market trends. ETF cash flow insights serve as an important tool for investors, as they provide valuable indicators of investor confidence, acceptance, or, on the other hand, lack of interest in a particular ETF.

From a fund manager’s perspective, cash inflows can signal an opportunity to generate additional profits. For example, when an ETF experiences a significant influx of money, the fund manager may decide to create additional shares to meet the growing demand. This process, which is usually managed by an authorized participant — usually a large financial institution — ensures that the fund can grow and adapt to market conditions.

On the other hand, an authorized participant can sell shares or take advantage of open shares to balance supply and demand.

Cash flows also make it possible to assess general market sentiment. For example, if ETFs tied to the S&P 500 are experiencing cash outflows, while cryptocurrency-related ETFs are seeing significant inflows, it could be a signal of a lack of confidence in traditional markets or a reaction to news that has surfaced in the public.

Additionally, investors can analyze historical cash flows in ETFs during specific market conditions, such as a recession, to understand investors’ past behavior and spot possible patterns that can help inform future investment decisions.

Source: cointelegraph

How to analyze the flow of money in an ETF?

Analyzing cash flows in ETFs can be very useful for identifying market trends and investment sentiment. One of the quickest ways to analyze these flows is to use a cash flow calculator in ETFs. These calculators allow you to enter an ETF ticker and select a time period, thereby detecting trends such as daily, weekly, monthly, or yearly cash inflows and outflows.

When analyzing cash flows in ETFs, it’s important to keep a few key factors in mind:

Fluctuations in flows: the cash flows in ETFs fluctuate over time, showing periods of high and low activity.
Long-term perspective: Short-term changes don’t always reflect overall trends, so it’s important to look at the bigger picture.
Investor confidence: Significant cash inflows often signal positive investor sentiment towards the ETF.
Importance of scale: Smaller cash flows can have less impact on large ETFs.
Volatility insights: Analyzing trends over a long period of time helps to understand market fluctuations.

Using the example of an IBIT ETF, we can see how cash flows fluctuated from August to December 2024. years. Flows rose significantly in November, reaching around $6 billion, while October also saw a sharp increase. August, September and December had lower inflows, with December recording a moderate decline to around $2 billion, indicating fluctuating investor sentiment.

Another example comes from the world of Bitcoin. Although Bitcoin struggled to break the $100,000 mark in early December, causing the price to fall, investors invested significant funds in various Bitcoin ETFs, indicating positive sentiment. Increased inflows often preceded a price recovery, which happened when Bitcoin eventually crossed $100,000.

Using these tools and analysis can help investors better understand market changes and make informed investment decisions.

Source: cointelegraph

The Difference Between Passive and Active ETFs

When analyzing ETFs, in addition to cash flow data, it’s important to consider whether an ETF is active or passive, as this can significantly impact its strategy, costs, and potential returns.

Active ETFs

Active ETFs are constantly managed by a team of professionals who aim to outperform the market. They achieve this by buying and selling the fund’s shares based on market movements and the manager’s own experience. Active ETFs tend to be more expensive to invest in, as managing them requires more engagement and expertise. Also, the managers of these funds are not always transparent in their decisions, which can make it difficult to follow their strategies. Due to ongoing management activity, active ETFs carry higher risk, but at the same time offer higher potential returns.

Passive ETFs

Passive ETFs, on the other hand, aim to only track the price of the index they represent, without seeking to outperform it, as active ETFs do. Passive ETF managers typically mimic index activity, buying, holding, and selling the same assets that the index includes. These ETFs often charge lower fees because they are not demanding to manage and the activities are much less dynamic. Because passive ETFs track publicly traded indices, managers tend to be more transparent in their decisions. Passive ETFs are less risky than active ETFs, but because of this, they can provide lower returns over time.

Choosing between an active and passive ETF depends on several factors. Before investing in any of them, it’s important to assess your risk tolerance and your desired degree of involvement in investment management. If you’re willing to take more risk for potentially higher returns, active ETFs may be a better choice. If, on the other hand, you’re looking for stability and lower costs, passive ETFs may be more suitable. And here it is certainly important to note that Bitcoin ETFs are passive, as they continuously monitor the price of Bitcoin.

Source: cointelegraph

How to use money flow information in ETFs?

Investors can combine information about the flow of money in ETFs with other trading tools to make decisions. As mentioned above, cash flows in ETFs are a crucial tool in any trader’s portfolio. Understanding how the flow of money affects an ETF can help you compare, analyze, and develop different trading strategies.

Stream Comparison

One way to leverage cash flow data is to compare flows across different ETF classes. This comparison can help you predict which sectors or industries are gaining or losing money. For example, if energy-focused ETFs see a significant influx of money, investors could follow that trend and invest in similar funds.

Analyzing Streams in the Context of News

Cash flows are often associated with current events. Positive or negative news about a particular sector can have a significant impact on cash flows. By following the news, you can compare flows and predict when it’s best to get in or out of the fund. If, for example, the telecommunications sector is seeing an outflow of money, but the news about the sector turns positive, it could be a good time to invest. Additionally, it’s a good idea to invest in ETFs that you have a natural interest in.

For example, the introduction of spot Bitcoin ETFs in January 2024, coupled with the rise in the price of Bitcoin that reached $100,000 in December, has had a significant impact on the inflows and outflows in Bitcoin ETFs. The week ending December 6 brought an influx of $908 million for the iShares Bitcoin Trust ETF, a significant increase from the previous week. While it’s impossible to say for sure, these inflows are likely motivated in part by the U.S. Securities and Exchange Commission’s (SEC) progress in the process of listing the Bitwise Bitcoin ETF on the New York Stock Exchange (NYSE).

Combine Money Flows with Other Trading Tools

The way money flows in ETFs work is not too different from traditional crypto or stock charts. Combining cash flows with other technical indicators, such as the Relative Strength Index (RSI) or the Elliott Wave Theory, can be a great way to manage your investments. Also, one of the tools that is gaining popularity is the use of artificial intelligence (AI). Traders can use AI agents to provide financial advice, automate trades, or learn advanced strategies, and some even use AI to replace the professional teams typically associated with active ETFs.

Diversification of investments

The significance of cash flows in ETFs lies in the fact that almost every asset class experiences ups and downs. This highlights the importance of portfolio diversification – while one asset may be in decline, another may grow. Capitalization on every opportunity is key to successful investing. This approach can also extend beyond the cash flows in ETFs. For example, Solana saw positive price growth in early December, driven by expectations of potential approval of a SOL ETF. Investors can keep a close eye on the news and adjust their investments based on these changes.

By combining all of this information, investors can improve their strategies and make better decisions in a dynamic market environment.

We hope that you have learned something new and useful, and that it will help you when investing. If you have any questions or suggestions, you can always contact us on our social networks (Twitter, Instagram).