Bitcoin stood above the $52,000 mark, and spot ETFs "absorbed" more than $2 billion in a week

Bitcoin stood above the $52,000 mark, and spot ETFs "absorbed" more than $2 billion in a week

The Bitcoin craze continues to heat up.

After two consecutive days of small shocks, on February 18, Bitcoin once again stood at $52,000 per coin, up nearly 2% in the day. On February 19, the price of bitcoin continued to run above $52,000 per coin. As of press time, Bitcoin was trading at $52,323 per coin.

In fact, the price of bitcoin has been soaring since January 24. According to data from the global currency price website Coin Gecko, on January 24, the price of bitcoin was still below $40,000 per coin, and then rose rapidly for many trading days, rising to $52,660 per piece on February 15, a new high since December 2021. Compared with the stage low of $26,750 per coin in mid-October 2023, the increase is close to 100%.

In addition to spot bitcoin, new bitcoin ETFs will continue to be popular in 2024, and the momentum of "gold absorption" is fierce. Some industry insiders said that the bitcoin market is recovering strongly thanks to the first batch of spot ETF issuance, the Federal Reserve's interest rate cut expectations and other factors, however, the future performance is still difficult to predict. The Bitcoin market is highly volatile, and the regulatory policies for digital assets in different countries and regions are quite different, so it is not possible to blindly enter the market.

The influx of funds continues

Industry insiders believe that this round of bitcoin market began with the issuance of ETFs.

On January 11, 2024, the U.S. Securities and Exchange Commission officially approved the application of 11 Bitcoin spot ETFs, including BlackRock and other institutions. Prior to this, investors in the cryptocurrency market were dominated by "stragglers", and the entry of these asset management giants announced that the "regular army" was accelerating its entry into the market, bringing more incremental funds.

In fact, after the "regular army" entered the market, the Bitcoin ETF continued to be popular and "attracted gold". According to BitMEX Research data, last week alone (February 12 ~ February 16), the above 11 Bitcoin ETFs had a net inflow of more than $2.27 billion.

Among them, BlackRock's Bitcoin spot ETF (IBIT) led the inflow. Bloomberg ETF analyst Eric Balchunas disclosed data showing that BlackRock's Bitcoin spot ETF (IBIT) has reached $5.2 billion in 2024 so far, while BlackRock's 417 ETFs have a total inflow of about $10.4 billion, which means that IBIT inflows have accounted for about 50% of BlackRock's total inflows of 417 ETFs so far this year.

The industry has different views on the huge sources of funding. "There is speculation that some market investors choose to sell gold ETFs and buy bitcoin ETFs. A domestic cryptocurrency observer told reporters that while Bitcoin ETFs have attracted a lot of gold, the scale of gold ETF redemptions has been expanding, showing certain signs of market adjustment.

Balchunas, a senior analyst at Bloomberg, previously wrote that the incremental funds of the Bitcoin ETF may come from the Grayscale Bitcoin Trust (GBTC). GBTC was originally one of the largest bitcoin trust products in the market, with assets of more than $40 billion at one point, but it has brought a lot of sell-off after the listing of the Bitcoin spot ETF. Between February 12 and 16, GBTC outflows exceeded $600 million.

The return of risk capital is also seen by the market as a potential positive factor. According to PitchBook, a U.S. data analytics company, in the fourth quarter of 2023, venture capital investment in crypto-related companies totaled $1.9 billion, an increase of 2.5% from the previous quarter. This marks the first time since the third quarter of 2022 that venture capital investment in crypto startups has increased.

It is worth noting that ETFs have also been "transfused" into the Bitcoin market after they have swept up market funds. CryptoQuant data shows that between January 11 ~ February 15, about $9.5 billion of new funds have been invested in the Bitcoin market through these ETFs. HODL15Capital monitoring data shows that nine new spot bitcoin ETFs bought 273,500 bitcoins worth $14 billion in 26 trading days. The influx of funds into the market through ETFs has led to an increase in the price of Bitcoin.

There are signs that the bitcoin market is entering recovery territory. In addition, the above-mentioned industry insiders told reporters that in addition to the positive market information brought by ETFs, Bitcoin will usher in the quadrennial "halving" in April, and at this stage, the number of bitcoins obtained by "miners" mining on computers will decrease, which is generally considered by the market to be a signal to promote price increases.

"The law of halving objectively limits the growth rate of bitcoin supply, has an anti-inflation effect, and helps to promote the appreciation of the currency price. Zhang Liangwei's team of Soochow Securities pointed out in the research report that since 2009, Bitcoin has been halved three times, and the price of the currency has risen significantly after each halving. The fourth halving is expected in April 2024.

What is the future trend

What is the future trend of bitcoin and whether it can reach new highs?

Some analysts are not optimistic about the continued rise in the price of bitcoin. Crypto analyst Marcel Pechman wrote an analysis that the data shows that investors expect earnings growth of S&P 500 companies to reach 10.9%, up from 3.8% in 2023, assuming that the risks posed by current inflation are comparable to those posed by Bitcoin when it reached an all-time high, investors are likely to have no incentive to seek alternative assets. Bitcoin will need to rise by an additional 34.5% from its current level of $52,000 to an all-time high of $70,000, which would add $350 billion to its market capitalization.

Marcel Petchman believes that as long as the dollar continues to depreciate, there is still hope for bitcoin to rise above $70,000, but this is unlikely to happen before the block reward "halving" in April.

But there are also institutions betting that Bitcoin will continue to rise.

"It sparked a huge interest in traditional finance, which exceeded my expectations. Matt Hougan, chief investment officer at Bit Asset Management, said that bitcoin is expected to trade above $80,000 amid factors such as the supply crunch that will result from the halving.

The options market shows that investors are increasing their bets on bitcoin to move higher. According to crypto options exchange Deribit, there has been a significant increase in open interest in call options expiring on March 29 with strikes of $60,000 and $65,000, respectively.

In the long run, there are multiple positive factors accumulating in the Bitcoin market in 2024.

"In 2024, Bitcoin will usher in a triple positive of halving, the rise of the Bitcoin ecosystem, and the expectation of a Fed interest rate cut. Zhang Liangwei's team at Soochow Securities believes that the slowdown in economic growth brings expectations of interest rate cuts, and it is expected that the federal funds rate may fall to 4.6% in 2024. If the supply of the US dollar grows and the US dollar depreciates, Bitcoin may usher in more demand due to its anti-inflation effect.

It is worth noting that about 10 fund houses are preparing to launch virtual asset spot ETFs in Hong Kong, China. For example, there are rumours that Harvest Fund Hong Kong has submitted an application for a Bitcoin spot ETF to the Hong Kong Securities and Futures Commission, after Venture Smart Group Chairman Zhu Chengyu publicly revealed that Venture Smart intends to partner with a local fund house to submit an application before the Lunar New Year and launch it in the first quarter, with the initial goal of reaching $500 million in assets under management by the end of the year.

Hui Weizhi, a non-bank financial analyst at Guosen Securities (Hong Kong), believes that Hong Kong is becoming the first market in Asia to allow the listing of virtual asset spot ETFs, and the launch of virtual asset spot ETFs will strengthen Hong Kong's position as a leading digital asset center in the region.

However, some investors in the industry believe that the cryptocurrency market itself is highly volatile, requiring investors to have a certain professional threshold and risk tolerance. In addition, the regulatory policies of digital assets in different countries and regions are quite different and may change, so it is not possible to blindly enter the market.

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