Original title: Where Bitcoin Goes Next
Original author: Jack Inabinet
Original translation: Lucy, BlockBeats
Editor’s Note:
Bitcoin remains the main narrative of the new year. As the deadline for the spot Bitcoin ETF ruling approaches, market sentiment is rising. A report from Matrixport even caused a liquidation of more than $450 million across the entire network.
Bankless analyst Jack Inabinet analyzed the different adoption of spot Bitcoin ETFs in Canada and Europe and the global market's investment attitude towards Bitcoin. Jack Inabinet emphasized that halving and interest rate cuts are not necessarily positive signals in the context of uncertainty in the global economy. BlockBeats translated the original text as follows:
As 2024 begins, Bitcoin’s fundamental narrative looks as strong as ever, with crypto analysts almost unanimously bullish on Bitcoin!
As the deadline for the approval of a spot bitcoin ETF approaches next Wednesday, industry insiders are optimistic about the introduction of these tools, which they believe will pave the way for tens of billions of dollars to flow into bitcoin in the coming years.
Additionally, market participants are optimistic about the upcoming Bitcoin halving, an event in April that will reduce inflation in Bitcoin’s block subsidy by 50% and has historically led to a reduction in miner sales, driving a surge in Bitcoin prices.
While just two clear Bitcoin catalysts alone are enough to set the stage for a rally in Bitcoin prices, expected interest rate cuts next year have traders eagerly anticipating a more favorable macro environment that would allow Bitcoin to break out to new all-time highs.
Nonetheless, there has been no shortage of bullish talk on Bitcoin lately. However, before jumping on Bitcoin’s bandwagon to enjoy the massive gains that could arrive in 2024, there are some important considerations to keep in mind.
Requirements must be met
Americans may be new to spot crypto ETFs, but these instruments already exist in Canada and Europe, and their adoption has varied.
Canada’s Purpose spot bitcoin ETF has increased its bitcoins under management by 50% to 35,000 since the end of September, a respectable increase. Meanwhile, Europe-based issuer Jacobi has only managed to amass a meager $1.7 million in assets since launching in November.
Global investors face the same investment story as Americans, and their lack of demand for spot Bitcoin products could mean that U.S. inflows may be less than ideal.
For the approval of a Bitcoin ETF to have an immediate positive impact, issuers would have to meet new demand from outside investors seeking to gain exposure to Bitcoin; however, it is not clear whether such demand exists.
In the long term, making it easier to invest in Bitcoin would be a bullish catalyst for the asset. However, bulls still face the risk of making the trade wrong if the ETF is approved and the resulting immediate inflows disappoint.
History just rhymes
Just because previous Bitcoin halving events have been bullish, it does not mean that future halving events will be bullish as well.
Just as the tiny reduction in Ethereum issuance following the merger failed to boost Ethereum prices in the months that followed (the ETH/BTC ratio has fallen by over 30% since then), the reduction in issuance from this Bitcoin halving is not guaranteed to have a positive impact on Bitcoin prices.
While alleviating selling pressure by reducing block issuance will undoubtedly have some degree of bullish impact on Bitcoin prices, the impact of this halving will be significantly lessened compared to previous halvings; if we expect Bitcoin Don’t be surprised if the post-halving price increase pattern doesn’t materialize.
Rate cuts are not automatically good news
Many people confuse lower interest rates with easing economic conditions, but they are just one input into the macro story.
All else being equal, lowering interest rates does lower the required rate of return, making risky investments like cryptocurrencies appear more attractive. However, it is key to remember that rate cuts have historically been a monetary response to a deteriorating economy.
The biggest risk for any investor, regardless of asset class, is the market, and it's unclear whether lower interest rates will be enough to combat an economy that's showing signs of recession.
Cryptocurrencies have not existed during a prolonged economic contraction, while peak interest rates suggest the worst of the recession is yet to come.
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