The crypto market experienced a remarkable rally from late last year up to now. However, all good things eventually come to an end. The market is facing a shortage of compelling short-term narratives, significant selling pressure, and unfavorable seasonal trends. While increased liquidity might provide some relief, it is unlikely to make a significant impact in the near term.
Over the weekend, geopolitical tensions sent Bitcoin and Ethereum tumbling, but the crypto market quickly rebounded, arguably thanks to Hong Kong’s new ETF approvals and the upcoming Bitcoin halving. Despite this recovery, ongoing Iran-Israel tensions could still disrupt the market.
Since their debut three months ago, the US-based Bitcoin spot ETFs have attracted a significant inflow of capital, totaling $12.5 billion. The momentum does not stop here, with additional countries poised to roll out their own exchange-traded Bitcoin products.
Bitcoin is at the forefront of the market, with other cryptocurrencies attempting to keep pace. We anticipate a continued upward trajectory until a shift occurs, particularly for Bitcoin, in the months following the upcoming Bitcoin halving.
We foresee the next Bitcoin halving as a short-term “buy the rumor, sell the news” event, echoing the 2016 halving’s pattern, this time around even with heightened anticipation from Bitcoin ETF holders. However, long-term, we expect it to bolster Bitcoin’s price significantly, as the market tends to underappreciate the impact of these supply shocks.
The crypto market is getting less speculative by the minute. There is no need to chase the next big thing by risking funds on obscure altcoins or memecoins. Instead, by aligning with institutional movements, crypto investors stand to gain significantly without taking on too much risk.
Looking ahead to the next week in the crypto market, we envision two potential scenarios. One possibility is that Bitcoin reaches a new all-time high, with Ethereum quickly on its heels. On the other end of the spectrum, the market could experience a minimum 10% decline as it sheds excess leverage. Intriguingly, it is possible that both events could unfold.
It seems that a significant portion of the crypto market turned bearish following Jerome Powell’s speech yesterday. However, we remain bullish. We believe the speech did not bring about significant changes; liquidity is still expected to increase, Bitcoin is experiencing substantial ETF inflows, and the crypto market is on the verge of embracing three powerful narratives.
In this issue, we explore the initial week of Bitcoin spot ETFs through various charts. For months, many claimed that the ETFs were not just a case of “buy the rumor, sell the news.” Now, these same voices argue that the net inflow will soon boost prices. Once again, we adopt a contrasting viewpoint to this popular opinion.
While the approval of the Bitcoin spot ETF did not spark a significant reaction in the market for Bitcoin, Ethereum emerged as the clear winner, securing a substantial 15% gain over Bitcoin post-ETF approval. Our expectation is that Ethereum stands to reap further rewards in the coming months, while Bitcoin experiences slow bleeding.
As we step into 2024, it seems like everyone is long crypto left, right, and center. This environment does not elicit much enthusiasm from us, as it brings back memories of the exact opposite situation just a year ago. We have identified five key factors that we believe will shape 2024. Among them, three are anticipated to pose potential downsides, one holds the potential for an upside surprise, and there is a joker that seems to be completely overlooked.
We align with the market consensus that the approval of a Bitcoin spot ETF in the US is imminent. Given this widespread belief, we contend that this ETF might already be priced in, particularly considering the risk of Grayscale releasing billions of dollars’ worth of bitcoins into the market. Our assessment leans towards anticipating more downward selling pressure than the opposite, contrasting with the prevailing market sentiment.
