Unprecedented Bull Market: The Bitcoin ETF Impact
As a Social Investment marketplace with a vested interest in the vitality of the markets, Zignaly consistently engages in consultations with our advisors. By and large, a unanimous consensus prevails amongst them, as with anyone else you speak with on the markets, that 2024 will be the “Year of the Bull.” Nevertheless, one of our advisors, without deviating from this overarching consensus, provides a distinctive perspective on why this forthcoming bull market may diverge from conventional expectations
Confluence Across Factors
The macroeconomic landscape is exhibiting improvement, characterized by a noteworthy moderation in inflation rates and a prevailing sentiment that interest rates may have peaked. Anticipations are increasing that the onset of the first-rate cuts could materialize in the coming year. This development bodes well for the crypto markets, particularly in terms of their correlation with traditional asset classes.
Yet, an indigenous element that imparts the most optimism pertains to the impending Bitcoin halving scheduled for March/April 2024. It is noteworthy that preceding each crypto bull market, the occurrence of the halving has been a consistent precursor. In conjunction with the positive macroeconomic developments, the confluence of these factors is aligning for the commencement of the next bull run in the second quarter of 2024.
Institutional Interest Is Peaking
Our advisor concurs with the prevailing sentiment but asserts that this forthcoming bull market will deviate significantly and points to an unprecedented surge in institutional interest in Crypto as the main factor. In earlier times, institutional involvement was marked by caution, with substantive forays materializing only after the DeFi summer of 2020. The ensuing bull run, catching many stalwarts of traditional finance (TradFi) unprepared, marked a paradigm shift.
Since then, these TradFi giants have also had a first-hand look at the resilience of the space in the shape of the cataclysmic systematic risks that emanated from the USTC depeg to the bankruptcy of the FTX empire. This also includes fierce legal battles that have been fought in the case of Ripple Labs and the SEC, Binance and the US Department of Justice, the trial of Sam Bankman Fried, and enforcement actions across the board.
Despite these adversities, Crypto stands resolute, and firmly rooted. Its unwavering endurance is encapsulated by the Lindy effect, a concept well-acknowledged on Wall Street. In essence, the longer Crypto persists and navigates regulatory landscapes, the greater the likelihood that its technological longevity will endure.
This is all culminating in a multitude of TradFi giants filing for approval of a spot Bitcoin ETF, the likely date for approval for which currently stands at January 10th, 2024. If approved, this will usher in new capital into the markets and potentially lead to fundamental changes for the industry itself.
This Bull Market May Come Earlier
Research by Morningstar shows that a 1% allocation to BTC does not significantly alter the risk profile of a traditional 60:40 portfolio of stocks and bonds. So if portfolio managers cautiously shift just 1% of client portfolios into Spot BTC ETFs, there could be a $100bn (total ETF market size is $10 Trillion) inflow in absolute terms.
That said, pinpointing the exact timing and quantum of fresh capital inflow into BTC and the broader crypto sphere following ETF approval remains speculative but our advisor posits that the ETF could very much be the catalyst this time instead of the BTC halving event as has been the case in the past.
He contends that institutional interest is so strong this time that upon ETF approval, retail participation is expected to surge immediately. Notably, several market analysts echo the sentiment that current retail involvement has yet to reach the fervor witnessed in 2021 before the market downturn. According to him, the ensuing mania is anticipated to generate its network effect, spurred by a dual influx of retail investors through conventional crypto on-ramps and the ETF avenue.
Key Takeaway
Everything is theory unless proven right (or wrong) and while we respect all opinions, the fact of the matter is that you are never really sure just when a bull market begins. To some market commentators, the bottom at $15,000 for BTC and the current price at $44,000 is just the market correcting. However, 2 years into the future, anyone looking at a chart would probably call the reversal of the bottom at $15,000 as the beginning of the bull market. It’s all very relative.
Hence, our takeaway is — invest with an expert trader today. No matter when the bull market comes (or has already come), you don’t want to be left behind.
Kick off your expert-managed Investment journey here.
