For cryptocurrencies, there are many major positive expectations for 2024: the approval of a Bitcoin spot ETF, the Bitcoin halving, and the Federal Reserve (Fed) interest rate cut. Will the bull market really come when all of this gradually falls into place? This article is sourced from the author’s Chain Research Society and compiled and written by PANews.
Table of Contents:
Predicting the Approval Time of ETF and the Start Time of the Bull Market
Bull Market Script Rehearsal
Review of the Starting Point of the 20-year Bull Market: The Process of Approval for Grayscale GBTC Trust
Possible Starting Point and Incremental Funding for the Next Bull Market
3 Necessary Conditions for the Start of the Next Bull Market
What Will Happen When the ETF is Approved? Will the Bull Market Come?
Review of the Approval Process for Gold ETF
Economic Environment and Monetary Policy at the Time
Historical Performance of Gold Before and After Approval
Historical Progress of Bitcoin Spot ETF
Current Economic Environment and Monetary Policy
Conclusion
Predicting the Approval Time of ETF and the Start Time of the Bull Market
Bull Market Script Rehearsal
Referring to the time it took for the approval of the Grayscale Trust, I believe the most likely script at the moment is as follows:
January 2024: Approval of the Bitcoin spot ETF application (the Federal Reserve will no longer raise interest rates or the market does not anticipate a rate hike);
April 2024: The Bitcoin spot ETF becomes effective (before the Bitcoin halving, which helps attract funds);
July 2024: The official start of the Bitcoin bull market (after experiencing adjustments following the halving and market expectations of loose monetary policy being realized);
September 2024: The Federal Reserve begins an interest rate cut cycle and implements loose monetary policy (once the rate cut expectations are released, the risk market will immediately respond, about 1-2 months in advance. We can refer to the prerequisite indicator of GDP > CPI).
Why do I expect the bull market to officially start around July, not when the Bitcoin spot ETF becomes effective? It’s because we often experience a wave of adjustments within 2-3 months after the halving, rather than an immediate start. Considering the current market’s expectations of an interest rate cut cycle, I’ve set the timing in July.
Extended Reading:
PlanB announces the arrival of a “furious bull market” for Bitcoin: Shows RSI indicators, suggesting decreasing risks
Review of the Starting Point of the 20-year Bull Market: The Process of Approval for Grayscale GBTC Trust
November 2019: Grayscale submits the registration application for the GBTC Trust to the SEC;
January 2020: The 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: The Grayscale Bitcoin Trust (GBTC) officially becomes effective and rapidly expands in scale, with Three Arrows contributing to the rapid growth of GBTC’s arbitrage opportunities;
During this bull market, Grayscale brought in more than $10 billion in incremental funds to the cryptocurrency market, and the total incremental funding for the entire market may be in the range of hundreds of billions.
The GBTC secondary market premium rate once reached more than 30%. After February 2021, Grayscale no longer purchased BTC. Prior to that, Grayscale held 654,885 BTC, estimated to have a cost of $8.931 billion, with an average cost of about $13,700.
Possible Starting Point and Incremental Funding for the Next Bull Market
In the 20-year cycle, Grayscale brought in incremental funds of about hundreds of billions to the market with an investment of $10 billion. In 2021, the total market capitalization of the cryptocurrency market reached a peak of $3 trillion, compared to just over $100 billion in 2019, an increase of about 30 times.
If we follow the same bull market pattern, we need inflows of funds of over hundreds of billions to see a similar effect. The approval of the Bitcoin spot ETF by BlackRock is seen as a necessary condition for the next bull market. The actual approval of the ETF will take about half a year (Grayscale applied in November 2019, became effective in April 2020, and the Bitcoin halving took place in May 2020).
In that case, the incremental funding from the ETF alone would exceed Grayscale’s existing fund size ($25.5 billion), but that’s not enough! Another necessary condition for a big bull market is sufficient market liquidity. After the approval of the Bitcoin spot ETF, it is expected to bring hundreds of billions of dollars in liquidity to the cryptocurrency market. The increase in total market capitalization will be at least in the trillions, surpassing the market capitalization of the world’s highest-valued company (currently Apple).
3 Necessary Conditions for the Start of the Next Bull Market
Approval of Bitcoin spot ETF by the SEC
Next Bitcoin halving
Loose monetary policy and excess market liquidity
What Will Happen When the ETF is Approved? Will the Bull Market Come?
Referring to the historical process of the approval of the gold ETF in the United States, I have reached the following conclusions regarding what will happen if the Bitcoin spot ETF is approved (for reference only):
Before the approval of the Bitcoin spot ETF, the market’s sustained anticipation can be seen as positive news.
After the approval of the Bitcoin spot ETF, there will still be a slight surge.
Shortly after the Bitcoin spot ETF starts trading, there will be a larger decline, even falling below the price before the ETF approval.
Next is a rational analysis. Will there be a bull market just because the Bitcoin spot ETF is approved?
In my opinion, if the Bitcoin spot ETF is approved now, it is not necessarily good information overall. The approval will mostly affect market sentiment and drive the inflow of funds within the market. However, with the world economy still in recovery and monetary policy extremely tight, it is still difficult for funds to flow in consistently.
Of course, maintaining a high level of volatility is possible, but it is difficult to sustain over time. We cannot expect the cryptocurrency market to have an independent trend, as the probability of this happening is very small. Additionally, it would be a loss to release such a heavyweight positive news during a bear market. In a bull market, it may increase by 100%, but in a bear market, it may only increase by 30%. Look at the recent performance of the U.S. stock market. If the U.S. stock market declines, there will be little chance for a bull market.
Therefore, based on the current information, I do not believe that the approval of the Bitcoin spot ETF will directly trigger a big bull market.
Extended Reading:
Bitcoin to reach $250,000 in 2024! Silicon Valley venture capitalist Tim Draper: BTC’s potential is comparable to Microsoft
Review of the Approval Process for Gold ETF
March 2003: The world’s first gold ETF was launched in Australia.
October 2004: SEC approves the first gold ETF, GLD, in the United States.
November 2004: The U.S. gold ETF GLD officially becomes effective and begins 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 gross domestic product (GDP) showed a growth trend, unemployment rates were relatively low, and inflation rates were 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 were still relatively low. The loose monetary policy created support for gold, 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 first gold ETF was approved and continued to rise until the start of trading of the U.S. ETF.
The U.S. gold ETF GLD continued to experience slight surges after SEC approval.
Shortly after the U.S. gold ETF started trading, the market fell by about 9% in the following two months, falling below the price before the ETF approval.
The approval of the gold ETF allowed more traders to invest through ETFs without the need to store physical gold or custody it in banks. In the following years, more funds entered this market, and the financial crisis in 2008 pushed gold up to $1,000.
Historical Progress of Bitcoin Spot ETF
February 2021: The world’s first Bitcoin ETF was approved in Canada, and BTC reached a peak of 65,000 before starting to decline in the following two months, experiencing the 5/19 event.
October 2021: The first Bitcoin futures ETF in the United States was listed, followed by a month-long surge to 69,000, starting a year-long bear market.
July 2023: BlackRock, one of the world’s largest asset management companies, begins to apply for a Bitcoin spot ETF, reaching a high of 31,800 that month, followed by a decline.
Current Economic Environment and Monetary Policy
Economic Environment: In 2023, the macroeconomic environment in the United States is unstable, as it experienced a banking crisis earlier in the year. The inflation rate is high, U.S. GDP growth is weak and has not fully recovered from the recessionary trend, the unemployment rate is relatively low, and long-term and short-term bond yields are inverted. It is facing economic challenges, and although the Federal Reserve wants a soft landing, it has not yet gotten rid of the crisis.
Monetary Policy: The monetary policy implemented by the Federal Reserve in the United States in 2023 is in a tight phase with interest rate hikes and balance sheet reduction. In order to control inflation, an extremely aggressive interest rate policy has been implemented, with the Federal Reserve rate reaching 5.25%. Although interest rate hikes have not stopped, they are nearing the end. The market expects interest rate cuts to begin 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 increasing the legitimacy of Bitcoin. In the future, more funds will enter this market.
Extended Reading:
Wall Street analyst Tom Lee: Federal Reserve interest rate cuts are beneficial for Bitcoin, which is expected to return to its high point this year
Conclusion
The three necessary conditions for the start of the next bull market are:
Approval of a spot BTC ETF by the SEC
Next Bitcoin halving
Loose monetary policy and excess market liquidity
Currently, the timing is not right, but I will adjust my judgment based on changes in market information and fundamentals. Let us witness the historic moment when the Bitcoin spot ETF is approved and the next exciting bull market unfolds.
Related Reports:
BlackRock warns: Market estimates of a March interest rate cut are “too optimistic”; Fed’s Daly calls for rate reduction next year
7 practical tips for newcomers to the crypto market to have a fruitful harvest in the next bull market
Crypto Market November Battle Report: Internal response, fifth round of bull market arrows on the string
Tags:
BTC
ETF
FED
Cryptocurrency
Bitcoin
Bull Market