The Bitcoin ETFs approved by the Securities and Exchange Commission (SEC) have given a new lease of life to this pioneering crypto. The Securities and Exchange Commission has lifted the institutional investment barrier by giving its blessing.
This barrier is gone financial Advisors, Mutual Funds, Pension Funds, Insurance Companies and Retail Investors can now get Bitcoin exposure without the hassle of direct custodianship. Bitcoin has also been cleansed of a stigma that was previously associated with it. “tulip mania”, “rat poison”Or “index of money laundering”.
After the domino effect of cryptocurrency bankruptcies in 2022 the Bitcoin price returned by the year’s end to its November 2020 $15.7k level. Bitcoin’s price slowly recovered in 2023, and by 2024, it was back to the $45k mark, which had first been reached in February of 2021.
What should Bitcoin investors look forward to as the fourth Bitcoin halving occurs in April and ETFs set new market dynamics? next? For this, it is important to understand that Bitcoin ETFs increased BTC’s trading volume and stabilized Bitcoin’s volatility.
Understand Bitcoin ETFs Market Dynamics
Bitcoin is the embodiment of democratization. Bitcoin, with its decentralized network and algorithmically based monetary policies isn’t governed by a central authority such as the Federal Reserve.
This means that BTC investors can invest in an asset which does not have a devaluation trajectory, in contrast with all fiat currency in existence. Bitcoin’s value is based on this.
Exchange-traded Funds (ETFs), another path to democratization, are exchange-traded funds. ETFs track the value of assets represented as shares and allow for trading at any time, unlike actively managed funds. ETFs have lower fees due to their passive price tracking.
It would of course be the responsibility of Bitcoin custodians such as Coinbase to take sufficient measures. cloud security Investor confidence is important.
Bitcoin ETFs are gaining popularity in the ETF world. They have shown a high level of demand as a decentralized, non-centralized asset. Grayscale Bitcoin Trust BTC GBTC has exerted pressure on the market for $14.9 billion in total over the past 15 days.
The results are not unexpected. The Bitcoin ETF hype caused the price of Bitcoin to rise, and 88% all Bitcoin owners entered into profit in December 2023. 90% In February. In response, GBTC Investors were Cashing Out, Placing a Downward Pressure of $5.6 Billion on Bitcoin Price.
GBTC shareholders also took advantage lower fees on the newly approved Bitcoin-based ETFs to shift funds from GBTC’s high 1.50% charge. BlackRock’s iShares Bitcoin Trust, or IBIT, is the clear winner with a fee of 0.12%. After a waiver period, the fee will rise to 0.25%.
To place this in the context of the wider ETF universe, IBIT and FBTC managed to outpace iShares Climate Conscious & Transition MSCI USA ETF (USCL), launched in June 2023, within a month of trading.
It is especially indicative that Bitcoin has been attacked by the sustainability side. The Bitcoin price dropped 12% in May 2021. Elon Musk tweeted Tesla is no longer accepting BTC as payment due to ecological concerns.
During January, IBIT and FBTC found themselves at 8th and 10th place respectively as ETFs with the largest net asset inflows, headed by iShares Core S&P 500 ETF (IVV), according to Morning Star report. This is a huge demand with daily flows of 10,000 BTC into ETFs. ~900 BTC The average amount of mined each day is
As the GBTC pressure to outflow decreases and the inflow trend rises, the constant stream of money into Bitcoin ETFs will stabilize the BTC rate.
Stabilization: The Mechanism
The selloff can pressure come from a variety of sources: institutional, miners and retailers. It is important to note that the trend of increased inflows into Bitcoin ETFs will help prevent a selloff, particularly as we approach another event. 4th Bitcoin halving.
The smoothing of price fluctuations is a result of higher trading volumes. It’s possible because higher volumes of trading between buyers and vendors absorbs temporary imbalances. In January, CoinShares’ report Bitcoin inflows were $1.4 Billion, with $7.4 billion coming from US funds newly created, compared to GBTC’s $5.6 Billion outflows.
While waiting for the large financial The institutions have set new baselines for liquidity. Fidelity Canada has set a 1% Bitcoin allocation in its portfolio as of the 6th February. All-in-One Conservative ETF Fund. . “conservative” This moniker indicates even higher percentages of future funds that are not conservative.
Bitcoin’s market cap would reach $7.4 trillion if it were to tap into just 1% (749.2 billion) of this $749.2 billion market of different asset classes. This could bring the Bitcoin price up to $400k.
Large aggregated trades can reduce the market’s impact from potential miner sell-offs, as Bitcoin ETFs offer a constant and transparent price benchmark. The impact is evident from FalconX ResearchThis is a huge increase in the daily average volume, which was previously 5%, now it’s between 10 – 13 %.
The new Bitcoin ETF market is, in other words, reducing the overall volatility of the market. Bitcoin miners were the major price-suppressing force on the other end of the liquidity equation. Bitfinex’s most recent weekly on-chain reports showed that mining wallets accounted for 10200 BTC of outflows.
As a result, the price is stable. This corresponds to the previous 10,000 BTC flows into Bitcoin ETFs. The price of Bitcoin is relatively stable as miners invest and upgrade Another stabilizing option could be implemented to mine rigs in advance of the fourth half-doubling.
The SEC still hasn’t approved the option to trade spot BTC ETFs. However, this will expand ETF liquidity. The greater range of investment strategies that revolve around hedging will increase liquidity for both parties of the trade.
In terms of a forward looking metric implied volatility Options trading is a good way to gauge the market’s sentiment. The greater maturity of the market that will be evident after the BTC ETFs are introduced, the more stable the pricing for options and derivatives contracts.
The Market’s Sentiment and Inflows
Grayscale Bitcoin Trust ETF, Grayscale Bitcoin Trust (GBTC), held 468 786 BTC as of February 9. The BTC price increased 8.6% in the last seven days to $46.2k. Concurrently with the previous forecastThe BTC dump is expected to be spread across multiple rallies in the lead up to and after the 4th half-doubling.
The latest figures provided by Farside InvestorsAs of 8th Feburary, Bitcoin ETFs received $403 million in flows, totaling $2.1 Billion. GBTC’s outflows totalled $6.3 billion.
From 11 January to 8 February, GBTC withdrawals decreased steadily. During the first seven days, the average was $492 Million. In the second and third weeks, GBTC’s outflows averaged an average of $313 millions.
Weekly, the reduction in sell pressure is 36% from one week to two weeks, and 63% from two weeks to three.
As GBTC FUD unfolded up to February 9th, crypto fear & greed index elevated to “greed” This is a revisit to the 12th of January, at 71 points. The price is now at 72 points.
In the long term, Bitcoin is dependent on global liquidity. In March 2022, the Fed raised interest rates, causing a wave of cryptocurrency bankruptcies that culminated in the FTX crash. Fed fund futures indicate that the cycle will end in either May or June.
It is also unlikely that Federal Reserve will change its course on money printing. Bitcoin’s price has always followed the Federal Reserve on such occasions.
The national debt is insurmountable at $34 trillion. Federal spending continues to increase. outpacing revenueBitcoin has positioned itself to be a secure asset. Bitcoin is a currency that awaits capital to flow into the 21 million coins it has.
The Historical Context of the Future
Gold Bullion Securities launched in Australia Securities Exchange as the first Gold ETF (GBS), a similarly safe asset. In the next year, SPDR Gold Shares GLD will be launched at New York Stock Exchange.
A week after the 18th of November 2004, GLD’s total net assets The increase from $114.920,000 to $1.456.602,906 was a significant one. At the end December, it was $1,327.960.347. BlackRock IBIT Market Value is $3.5 billionIt took GLD until November 22, 2005.
This is not adjusted for inflation, but it shows Bitcoin has a better market sentiment than gold. Bitcoin is digital but it’s based on a proof-of-work Global mining network. Digital nature allows for portability, which is not possible with gold.
In 1933, President Roosevelt’s Executive Order 6102 required citizens to dispose of their gold bullions. Gold is also limited in supply, as new veins of gold are discovered frequently.
Bitcoin ETFs are still a few years away. Standard Chartered’s analysts still predict $50 to $100 billion worth of Bitcoin ETFs before the year 2024. MicroStrategy is not the only company that has converted shares into depreciating assets.
BTC’s price will skyrocket if even 1% of the funds allocated to BTC are BTC. As an example, Advisors Preferred Trust Set up an indirect exposure to Bitcoin of 15% via BTC ETFs and futures contracts.
The conclusion of the article is:
Bitcoin, after 15 years surrounded by doubts and abuses has finally reached a high level of credibility. First wave believers of sound money made sure that its blockchain-based version was not lost to the coding bin.
Bitcoin investors have been the second wave due to their high level of confidence. Bitcoin ETF represents a third-wave exposure milestone. As governments continue to spend, central banks all over the world have continued to lose confidence in their currency.
Bitcoin, by removing the noise from the value exchange process, represents a return back to sound money. Digital but also physically, it is the saving grace. proof-of-work as energy. Bitcoin may even surpass gold in terms of traditional assets that are considered safe, if the USG does not take extreme measures to undermine institutional exposure.
Shane Neagle is the author of this guest post. All opinions are the author’s. own These views do not reflect the opinions of BTC Inc.
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
Source: bitcoinmagazine.com