Can we expect Bitcoin to reach a new record peak in 2024 through ETFs?
Exchange-traded funds (ETFs) have become a major topic of discussion, especially in relation to their potential impact on the price of Bitcoin (
BTC
), which has the potential to surpass its previous all-time high (ATH) of nearly $70,000.
Moreover, advocates of BTC are optimistic that the upcoming halving event, scheduled for April 2024, will provide an additional boost to the leading cryptocurrency.
Bitcoin’s bullish momentum
Bitcoin (BTC) reached its highest price since 2021 and came close to its record peak of $69,000, which was achieved in November 2021, before experiencing a significant correction. At present, the price remains comfortably above the $62,000 mark.
The strong bullish momentum of Bitcoin can largely be attributed to significant inflows of funds into the global cryptocurrency market, driven by the long-awaited approval of spot exchange-traded funds (ETFs) for Bitcoin in the United States.
These ETF approvals have attracted billions of dollars in institutional investments, contributing to the strong upward momentum of Bitcoin.
Despite subsequent volatility, Bitcoin’s resilience and growing institutional interest have fueled optimism among investors.
Out of the 11 spot Bitcoin ETFs approved by the Securities and Exchange Commission (SEC) led by Gary Gensler in January, 10 are actively trading and attracting significant inflows.
According to data research from K33, the nine newly approved spot Bitcoin exchange-traded funds (ETFs) in the U.S. now collectively manage more than 300,000 Bitcoin (BTC), valued at over $17 billion at the time the data was collected. This figure represents a new high for these funds, as it accounts for approximately 1.5% of the total 19.6 million BTC currently in circulation.
The latest data from the GBTC website reveals that Grayscale holds approximately 445,386.8454 BTC, valued at around $27.61 billion at present. When considering the combined holdings of both the recently approved spot Bitcoin ETFs and Grayscale’s assets, the total value of the cryptocurrency held by these entities stands at around $43 billion.
Notably, the total mentioned does not include the holdings of Grayscale, which converted its longstanding Bitcoin Trust (GBTC) into a spot Bitcoin ETF following approval by the SEC.
Bitcoin ETFs driving investor demand
While the debate over the impact of ETFs on Bitcoin’s price continues, other factors have also influenced the strong performance of the asset so far.
A wide range of fund managers are quickly acquiring the virtual currency in response to client demand, as investors seek to purchase ETF shares that mirror the underlying price of the asset.
Among the newest batch of Bitcoin ETF operators, BlackRock, the world’s largest fund manager, leads with assets under management exceeding $7 billion.
According to FactSet, trading volume for the iShares Bitcoin Trust (IBIT) surged on February 28, with approximately 96 million shares traded, more than double its previous record of about 43 million shares set on February 27.
These ETF products have proven to be immensely successful as investors, who were previously unable to access Bitcoin in a secure and regulated manner, are now gravitating towards this space.
Conversely, skeptics warn that the introduction of a Bitcoin ETF could exacerbate volatility and speculative trading, leading to unpredictable market dynamics. They cite concerns about market manipulation, lack of oversight, and the potential for investor losses as reasons to proceed with caution.
Bitcoin Halving: a catalyst for price surges
The Bitcoin halving event, which occurs approximately every four years, has had a significant impact on Bitcoin’s price trajectory and market dynamics over the years. During each BTC halving event, the reward for mining new blocks is halved, effectively reducing the influx of new coins into the market and affecting its supply.
Historically, Bitcoin halvings have been followed by substantial price rallies. After the halving in 2012, Bitcoin’s price surged by 80 times, while after the halving in 2016, it experienced a 300% rise. Notably, in the 16 months after the halving in 2020, Bitcoin’s price skyrocketed by over 600%.
Many analysts and experts are optimistic about the potential of the upcoming halving to drive Bitcoin’s price to new all-time highs. Forecasts predict a surge to at least $130,000 by the end of 2024.
However, not everyone agrees. JPMorgan, for example, expects Bitcoin’s price to drop to $42,000 after the halving.
For those who are unaware, the halving event serves to maintain Bitcoin’s scarcity and prevent excessive price inflation. By reducing mining rewards from 6.25 Bitcoins per block to 3.125 BTC, the halving further emphasizes Bitcoin’s scarcity and aligns with its deflationary principles.
This scarcity-based model underlies Bitcoin’s controlled supply mechanism, ensuring that only 21 million BTC will ever be in circulation.
As of now, Bitcoin is being traded at $62,413, with a market cap of over $1.2 trillion. Whether the bullish predictions of analysts regarding a significant ATH for the world’s leading cryptocurrency will come true in 2024 remains to be seen.
