Bankless analyst analyzed the different adoption situations of Bitcoin spot ETFs in Canada and Europe and compared the global market’s attitude towards Bitcoin investment. The analyst believes that in the face of uncertain global economy, halving and interest rate cuts may not necessarily be positive news. But the Bitcoin narrative for 2024 is still very strong. What will be the next step for Bitcoin? This article is sourced from “Where Bitcoin Goes Next” published by Bankless analyst Jack Inabinet, compiled, translated, and written by BlockBeast.
(Summary: Fox: SEC to “approve” Bitcoin spot ETF as early as Friday, trading to begin next week, BTC rises back to $43,000)
(Background: BTC culprit for the plunge? Matrixport: SEC will not approve any spot ETF in January, Bitcoin plummets 20%)
Table of Contents:
Demands must be met
History is just rhyming
Interest rate cuts are not automatically positive
Bitcoin is still the main narrative for the new year. With the approaching deadline for the decision on the spot Bitcoin ETF, market sentiment has soared, and a report from Matrixport has led to over $450 million in liquidation across the network.
Starting in 2024, the fundamental narrative for Bitcoin looks as strong as ever, with crypto analysts overwhelmingly bullish on Bitcoin! But is it really the case?
With the approaching deadline for the approval of the spot Bitcoin ETF on Wednesday next week, industry insiders are optimistic about the introduction of these tools. They believe that this will pave the way for billions of dollars to flow into Bitcoin in the next few years.
In addition, market participants are optimistic about the upcoming Bitcoin halving event, which will occur in April. This event will reduce the inflation of Bitcoin block subsidies by 50%, and historically, it has led to a decrease in miner sales, thereby driving up the price of Bitcoin.
Although only two apparent catalysts for Bitcoin are enough to create conditions for its price increase, traders are eagerly looking forward to a more favorable macroeconomic environment next year due to the expected interest rate cuts. This will push Bitcoin to new historical highs.
Nevertheless, the recent bullish sentiment towards Bitcoin is not generous. However, before imitating Bitcoin without hesitation to enjoy the potential huge returns that may come in 2024, there are some important points to keep in mind.
While spot crypto ETFs may still be new to Americans, these tools have already existed in Canada and Europe, and their adoption situations vary.
Since the end of September last year, Purpose Bitcoin ETF in Canada has increased its managed Bitcoin by 50% to 35,000, which is a respectable growth. Meanwhile, the European issuer Jacobi has only accumulated a meager $1.7 million in assets since its launch in November.
Global investors face the same investment story as Americans, and the lack of demand for spot Bitcoin products may mean that the inflow of funds into the United States may not be ideal.
In order for the approval of Bitcoin ETF to have an immediate positive impact, issuers must meet the new demand from external investors seeking Bitcoin exposure. However, it is currently unclear whether such demand exists.
In the long run, making it easier to invest in Bitcoin will be a catalyst for the bullish outlook of this asset. However, if the approval of ETF leads to disappointing immediate inflows, the bullish side still faces the risk of trading mistakes.
Just because previous Bitcoin halving events have been bullish does not mean that future halving events will be bullish as well.
Just as the slight decrease in the issuance of merged Ethereum did not push up the price of Ethereum in the following months (the ETH/BTC ratio has dropped by more than 30% since then), reducing the issuance from this Bitcoin halving event cannot guarantee a positive impact on the price of Bitcoin.
While reducing the block issuance undoubtedly has a certain bullish impact on the price of Bitcoin by reducing selling pressure, the impact of this halving will be significantly weakened compared to previous halvings. Don’t be surprised if the expected price increase pattern after this Bitcoin halving does not appear.
Many people confuse lower interest rates with an easing economic situation, but they are just one input in the macroeconomic story.
Under unchanged conditions, lower interest rates do lower the required rate of return, making risk investments (such as cryptocurrencies) more attractive. However, it is important to remember that interest rate cuts have always been a monetary response to economic deterioration in history.
Regardless of the asset class, the biggest risk for any investor is the market, and it is currently unclear whether lower interest rates are sufficient to counter the economic signs of recession.
Cryptocurrencies do not exist during prolonged economic contractions, and the peak of interest rates indicates that the worst economic recession has not yet arrived.
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