For cryptocurrencies, 2024 is expected to bring many significant positive factors, including the approval of a Bitcoin spot ETF, Bitcoin halving, and interest rate cuts by the Federal Reserve. Will these events lead to a bull market? This article is sourced from the author’s “Chain Research Society” and compiled by PANews.
Table of Contents:
Predicting the Approval Time of ETF and the Start of the Bull Market
Bull Market Scenario Preview
Looking back at the Starting Point of the 20-Year Bull Market: The Journey of the Grayscale GBTC Trust Approval
Potential Starting Point and Incremental Capital for the Next Bull Market
Three Necessary Conditions for the Start of the Next Bull Market
What Will Happen with the Approval of the ETF? Will the Bull Market Come?
Looking Back at the Approval Process of Gold ETF
Economic Environment and Monetary Policy at the Time
Historical Performance of Gold Before and After Approval
Historical Journey of Bitcoin Spot ETF
Current Economic Environment and Monetary Policy
Conclusion
Predicting the Approval Time of ETF and the Start of the Bull Market
Bull Market Scenario Preview
Based on the time it took for the approval of the Grayscale Trust, the most likely scenario is as follows:
January 2024: Approval of the Bitcoin spot ETF application (assuming the Federal Reserve does not raise interest rates or the market does not expect an interest rate hike).
April 2024: Bitcoin spot ETF becomes effective (helps attract capital before the Bitcoin halving).
July 2024: Official start of the Bitcoin bull market (market adjusts after the halving and anticipates loose monetary policy).
September 2024: The Federal Reserve begins an interest rate cut cycle and implements loose monetary policy (once the expectation of interest rate cuts is released, the risk market will realize it immediately, 1-2 months in advance, with GDP>CPI as a prerequisite indicator).
Why is the official start of the bull market predicted to be around July, not when the Bitcoin spot ETF becomes effective? It is because usually within 2-3 months after the halving, there is a period of adjustment before the bull market starts. Considering the current market’s expectation of an interest rate cut cycle, July is chosen as the time.
Extended Reading:
PlanB announces the arrival of a “Bitcoin raging bull market”: showcases the RSI indicator, suggesting that the risk of going long is gradually decreasing
Looking back at the Starting Point of the 20-Year Bull Market: The Journey of the Grayscale GBTC Trust Approval
November 2019: Grayscale submits the GBTC Trust fund registration application to the SEC.
January 2020: Grayscale GBTC Trust is approved for registration by the SEC, becoming the first digital asset tool to meet the standards of the U.S. Securities and Exchange Commission.
April 2020: Grayscale Bitcoin Trust (GBTC) becomes effective and rapidly expands in scale. Three Arrows also quickly grows by taking advantage of GBTC arbitrage.
During this bull market, Grayscale brought in over $10 billion in incremental capital to the cryptocurrency market, with the total incremental capital possibly reaching billions.
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The GBTC secondary market premium rate once reached over 30%. After February 2021, Grayscale no longer accumulated BTC. Previously, Grayscale held 654,885 BTC, estimated at a cost of $8.931 billion, with an average cost of about $13,700.
Potential Starting Point and Incremental Capital for the Next Bull Market
In the last bull market, Grayscale brought in incremental capital of about billions, with the cryptocurrency market’s total market value reaching a peak of $3 trillion, compared to just over a billion in 2019, an increase of about 30 times.
If we follow a similar bull market pattern, we need inflows of over billions to see results. The approval of a Bitcoin spot ETF by BlackRock is seen as a necessary condition for the next bull market. However, it will take about six months for the ETF to be approved (Grayscale applied in November 2019, became effective in April 2020, and Bitcoin halving occurred in May 2020).
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Therefore, the incremental capital from the ETF alone will exceed Grayscale’s current capital scale ($25.5 billion), but that’s not enough! Another necessary condition for a major bull market is sufficient market liquidity. After the approval of the Bitcoin spot ETF, it is expected to bring liquidity of billions to the cryptocurrency market, and the total market value will at least reach the trillions level, surpassing the market value of the current highest-valued company, Apple.
Three Necessary Conditions for the Start of the Next Bull Market
SEC approval of a Bitcoin spot ETF
Next Bitcoin halving
Loose monetary policy and market liquidity surplus
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What Will Happen with the Approval of the ETF? Will the Bull Market Come?
Based on the process of the approval of the gold ETF in the United States, I have reached the following conclusions regarding what might happen if a Bitcoin spot ETF is approved (for reference only):
Before the approval of the Bitcoin spot ETF, the market’s continuous anticipation can be seen as positive.
After the approval of the Bitcoin spot ETF, there may still be a small surge.
Shortly after the start of trading of the Bitcoin spot ETF, there may be a significant decline, even below the price before the ETF was approved.
Next is a rational analysis. Will the bull market come just because of the approval of the Bitcoin spot ETF?
If the Bitcoin spot ETF is approved now, based on overall analysis, I believe it is not necessarily good news. The approval mostly influences market sentiment and drives in-market capital affecting prices. Due to the world economy’s lack of recovery and extremely tight monetary policy, it is still difficult for funds to continue to flow in.
Of course, it is possible to maintain high volatility, but it is difficult to sustain it for a long time. One cannot expect the cryptocurrency market to have an independent trend; the probability is very small. Additionally, it is not profitable to release such a heavyweight positive news in a bear market. In a bull market, it might rise by 100%, but in a bear market, it might only rise by 30%. Take a look at the recent performance of the U.S. stock market. If the U.S. stock market falls, then there is basically no hope.
Therefore, based on the current information, I do not believe that the approval of the Bitcoin spot ETF will directly usher in a major bull market.
Extended Reading:
Silicon Valley Venture Capitalist Tim Draper: Bitcoin has the potential to reach $250,000
Looking Back at the Approval Process of Gold ETF
March 2003: Australia launched the world’s first gold ETF.
October 2004: SEC approved the first gold ETF, GLD, in the United States.
November 2004: The U.S. gold ETF GLD officially became effective and began trading.
Economic Environment and Monetary Policy at the Time
Economic Environment: In 2004, the macroeconomic environment in the United States was relatively stable. The country’s GDP showed a growth trend, the unemployment rate was relatively low, and the inflation rate was moderate. Although there were some economic challenges, the U.S. economy was not in a crisis state.
Monetary Policy: In 2004, the monetary policy implemented by the Federal Reserve in the United States was relatively loose. The Federal Reserve gradually raised interest rates (from 1% to 1.75% in 2004), but short-term interest rates remained relatively low. The loose monetary policy created support for gold’s performance, as gold is often seen as a hedge against inflation and currency depreciation.
Historical Performance of Gold Before and After Approval
Gold experienced a significant increase after the approval of the first gold ETF and continued to rise until the U.S. ETF started trading.
The U.S. gold ETF GLD continued to have small surges after SEC approval.
Shortly after the start of trading of the U.S. gold ETF, the market declined by about 9% within the next two months, falling below the price before the ETF was approved.
The approval of the gold ETF allowed more traders to invest through ETFs without the need to store physical gold or hold it in banks. In the following years, more funds entered this market, and the financial crisis in 2008 pushed gold to $1,000.
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Historical Journey of Bitcoin Spot ETF
February 2021: The world’s first Bitcoin ETF was approved in Canada, and BTC reached its peak of 65,000 in the following two months before starting to decline, experiencing the 5/19 event.
October 2021: The first Bitcoin futures ETF was launched in the United States, and after a surge to around 69,000 in the following month, a year-long decline began.
July 2023: BlackRock, one of the world’s largest asset management companies, started applying for a Bitcoin spot ETF. BTC reached a high of 31,800 that month and then started to decline.
Current Economic Environment and Monetary Policy
Economic Environment: The macroeconomic environment in the United States in 2023 is not stable. It experienced a banking crisis at the beginning of the year. The inflation rate is relatively high, and the U.S. GDP growth remains weak, not fully recovering from the recession. The unemployment rate is relatively low, and there is an inverted yield curve, facing economic challenges. Although the Federal Reserve wants a soft landing, it has not yet escaped the crisis state.
Monetary Policy: The monetary policy implemented by the Federal Reserve in 2023 is in a tightening phase. To control inflation, an extremely aggressive interest rate hike policy was implemented. The Federal Reserve raised rates to 5.25%, and although the rate hikes have not stopped, they are nearing the end. The market expects interest rate cuts in September 2024.
The approval of the Bitcoin spot ETF will allow tens of millions of new investors and traders to invest through ETFs, further legitimizing Bitcoin. There will be more funds entering this market in the future.
Extended Reading:
Wall Street Analyst Tom Lee: Fed interest rate cuts are favorable for Bitcoin, expected to return to the high point this year
Conclusion
The three necessary conditions for the start of the next bull market are:
SEC approval of a Bitcoin spot ETF
Next Bitcoin halving
Loose monetary policy and market liquidity surplus
Currently, the timing is not right, but I will adjust the judgment based on market information and changes in fundamentals. Let us witness the historic moment of the approval of the Bitcoin spot ETF and the next grand bull market together.
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Related Reports:
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