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The price of Bitcoin could go even higher in 2024 as the US Securities and Exchange Commission approved the first spot Bitcoin exchange traded funds (ETFs), experts told Zawya.
On Wednesday, the US SEC finally granted permission to the sponsors of 10 ETFs, including Fidelity and Invesco, and the funds are expected to start trading on Thursday morning.
The move, referred to in the industry as a ‘milestone’, is likely to increase in value throughout 2024 as it will attract retail and institutional investors, experts said.
Other factors include ongoing accumulation of the asset by long-term holders, reluctance to sell by crypto miners, as well as the next ‘halving’ - a phenomenon when Bitcoin cuts the number of coins that can be earned by miners.
Carsten Menke, head of next generation research, Julius Baer, told Zawya that on a bigger picture level, Bitcoin is also being impacted by US monetary policy and has been benefitting from expectations of a rapid reversal in interest rates – with the next Federal Reserve meeting scheduled for the end of January.
Bitcoin nudged $46,650 this week, although it is still some way from its 2022 all-time high of $68,789.63.
Moving on from SBF and CZ
Addressing the recent high profile crypto scandals involving Sam Bankman-Fried of the now bankrupt FTX and the departure of Binance’s Changpeng Zhao, who admitted money laundering failings in a US court last year Menke said the crypto market had simply ‘moved on’.
“From our point of view, it looks like the market is more able to differentiate between events that have a fundamental impact and those that don’t.
“Specifically for Bitcoin, which operated as intended even during the crypto crisis, this means that investors are focusing much more strongly on its value proposition as a store of value.”
He said the US ETFs have been the dominant topic and the approval was ‘well reflected’ in prices and that there will be a ‘fundamentally positive’ impact on Bitcoin demand.
“We also need to acknowledge that the list of potential buyers is limited to retail investors and asset managers, which thus far refrained from allocating funds to cryptos because of the complexities involved,” he said.
“Sticking with demand, we see very strong ongoing accumulation from long-term holders as 80% of all circulating coins have not moved within the past six months,” he added.
Menke concluded that while there is a supply squeeze in the making, the question remains as to how much of it is priced in, as the US ETF approval could result in ‘buy the rumour, sell the fact’ situation.
Expectations of a rapid reversal of US monetary policy are ‘too aggressive’ he said, in the view of Julius Baer.
“Both of these could cause an intermediate correction or a consolation, before the longer-term fundamental factors of sound demand growth and slowing supply growth kick in again,” he said.
Matthew White, CEO of Dubai's Virtual Assets Regulatory Authority (VARA), said: "Without a doubt, this ETF approval is a significant milestone for the industry. We need to wait and see what the capital inflows look like to see the real impact, but in theory we could see increased liquidity and reduced volatility of Bitcoin over time, which is good for the industry as a whole in the long term.
Stability and transparency pave the way for more innovation and I expect this move to eventually spark further investment into this sector."
Institutional focus
Citi’s head of future finance, Ronit Ghose, said traditional financial institutions have been expanding their crypto currency and blockchain ventures behind the scenes, but it will take time for new technologies and products to emerge.
The market is reaching a stage of ‘almost maturation’ in the cycle when banks and regulators have been working on crypto topics for three to five years, he said, with work that had gone on behind the scenes coming to fruition.
“There is an underlying trend which is real – the institutions are coming,” he said. “Money has already been going into it in terms of their investing – they have been building teams and resources going into the space.
“What you are going to see in 2024 particularly in the retail space is big institutions selling into retail markets particularly in the US, and others such as Hong Kong,” he said.
In addition to the SEC approval, the introduction of Markets in Crypto Assets (MiCA) in Europe in June as well as new regulations in Hong Kong will all contribute to growth, he said.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
