According to 10x Research founder Markus Thielen, the days of consecutive double-digit Bitcoin price surges are behind us: Wall Street traders and profit-taking whales are changing the market structure.
Institutional traders’ sales of call options after the rally have made the sharp price spikes $BTC characteristic of previous years less frequent, Thielen says in the latest episode of Cointelegraph’s Trade Secrets.
Thielen is also the author of “Crypto Titans,” a history of the industry. Working on the book helped him notice that each cycle brought different people pitching cryptocurrencies to investors.
“There were actually different promoters in each cycle, and different promoters attracted different investors,” he says.
This time, the promoters came from Wall Street, where investors trade based on economic data and Federal Reserve decisions. Thielen says he expects Bitcoin to rise quickly on the news, then move sideways on the chart for a while before the next major macroeconomic event.
Who is actually buying Bitcoin?
Thielen estimates that market makers account for as much as half of the $60 billion in net inflows into spot Bitcoin ETFs that he analyzed. These firms hold ETF shares as a way to hedge their options trades, so those positions do not necessarily indicate a bet on Bitcoin’s price rising.
“So in the end, it wasn’t a direct purchase,” he says.
His estimate is based on an analysis of 13F filings, which disclose investment managers’ holdings of certain securities.
Thielen says the first wave of money flowing into ETFs also included retail investors buying through institutional structures and corporate vehicles. Some paid substantial premiums over the value of the underlying crypto assets.
“I still think institutional investors could come in. I also think some sovereign wealth funds could come in,” Thielen says.
Bitcoin could reach $90,000 by year-end
Thielen still expects $BTC to reach $90,000 by year-end. First, he says, it could fall into the mid-to-high $70,000 range.
Bitcoin has already traded in that range, falling to around $76,100 on Friday after the $6.3 billion Binance hack. According to Coinglass, $BTC ended October down 7.3%.
Thielen compares the price recovery in recent months to early 2023, when Bitcoin rose from around $20,000 to $30,000. He says the doubts surrounding this year’s recovery are familiar to investors looking for the next price dip and an entry point.
“It feels like everyone kind of missed it. So everyone wants to buy again.”
BTC’s return to $90,000 may partly depend on how much further the Fed raises borrowing rates. In September, the central bank raised its benchmark rate by a quarter of a percentage point, setting the target range at 3.75–4%.
Last Wednesday, the Fed held rates steady in a divided vote, with two officials voting for another quarter-point increase. The Fed’s statement said inflation remained elevated, leaving the door open to further rate hikes.
Thielen expects one more rate hike in December, after which the Fed may take a more cautious stance on further hikes, potentially helping Bitcoin rise by year-end.
Ethereum needs to show holders where the money is
Thielen expects Bitcoin to outperform Ether, arguing that too much of the value created by activity on Ethereum flows to layer-2 networks.
“I see it more as useful infrastructure that has value, but nobody wants to pay for it.”
Making these networks cheaper to use was an intentional part of Ethereum’s development. However, cheaper transactions could weaken ETH’s investment appeal.
Ethereum burns the base fees paid by users, removing those coins from circulation. Its supply shrinks when the amount of coins burned exceeds the amount of new ETH issued to validators. Lower fees could mean less ETH is burned.
Thielen, who says he has been bearish on Ether for more than a year, compares Ethereum to a highway.
“Everyone wants the highway to be empty so they can drive fast, and the roads need to be very, very clean, repaired and so on, but nobody wants to pay for it,” he says.
He points to Hyperliquid as an example of how trading activity can fund token purchases. The decentralized perpetual exchange’s assistance fund converts trading fees into HYPE, after which the tokens are burned.
When it comes to Ethereum, he wants a closer link between network usage and financial benefits for holders.