Cause for optimism
2024 could be the year of Bitcoin. There are various reasons for this. For one thing, in January the first exchange traded funds on the oldest cryptocurrency were finally licensed in the USA after more than a decade – it was in 2013 that the Winklevoss twins applied for the first spot Bitcoin ETF. For another, the halving – when the supply of Bitcoin is artificially reduced – is set to take place in April. Furthermore, the markets have been speculating about falls in interest rates for months already. According to the latest estimates, after eleven hikes since March 2022 the Fed will finally start opening the money tap again in June. Falling interest rates make cryptocurrencies, which are regarded as very risky, more attractive again compared with investments such as bonds.
An end to nail-biting
Taking one thing at a time, though, the licensing of the first Bitcoin ETF had long been feverishly anticipated. The stage was finally set at the start of this year, when the SEC, the US securities watchdog, cleared the path for exchange traded funds on Bitcoin. Market observers even call the approval a “milestone in the history of Bitcoin and the like”. The passive investment products quickly proved successful, with the eleven US spot Bitcoin ETFs licensed so far recording huge inflows. According to Bloomberg, the volumes and flows of the spot Bitcoin ETFs at this early stage in their life cycle have been greater than for any ETF asset launch in history. Disregarding the Grayscale Bitcoin Trust ETF, net inflows in the first four weeks amounted to USDbn 11.5 in total.
Massive increases in value
The emerging euphoria surrounding the new ETFs has also driven up the price of Bitcoin significantly, the coin gaining more than 40% in value in February alone. “There's only so much supply, but the demand unleashed by the spot ETFs seems to be relentless,” said Justin d'Anethan of Keyrock, an asset manager specialising in crypto stocks, commenting on the events. According to the CoinGecko platform, during the price rally in mid-February the digital currency passed the USDtn 1 mark for the first time since November 2021. The previous all-time Bitcoin market capitalisation high of USDtn 1.28 was reached in the same month. For James Butterfill, chief analyst of Coinshares, a specialist digital asset manager, the next attempt to reach the previous record high of a little under USD 69,000 is just a matter of time. In support of this assertion, he says that the new Bitcoin ETFs require 2,800 bitcoins per day, but only 900 new digital coins are being added daily.
Exciting event
While trading in BTC spot ETFs has got off to a successful start, then, the crypto world is already looking ahead to the next big event: the halving. Investors with a short-term outlook in particular are currently buying in the hope of further price gains due to the artificial reduction expected in mid-April. About every four years, the reward for the amount of bitcoin, which is limited to a total of 21 million tokens and can be obtained by “mining” within a certain period of time, is halved. The 2012, 2016, 2020 and now 2024 halving cycles, which always coincide with US presidential election years, have so far always been accompanied by increases in value. Six months after the first halving in 2012, the price of Bitcoin jumped from USD 12 to USD 126. Following the second halving in 2016, the crypto behemoth climbed from USD 654 to USD 1,000 within seven months, and in 2020 it shot up from USD 8,570 to USD 18,040 over the same length of time.
Source: Refinitiv