Bitcoin’s rise has lasted for almost two months. Coindesk statistics show that in less than two months, the price of Bitcoin rose from $38,554 on January 23 to over $73,000 on March 14, an increase of more than 90%. The last "highlight moment" occurred more than two years ago. In November 2021, Bitcoin hit a record of $68,999.99 per coin. Until the evening of March 5 this year, Bitcoin exceeded US$69,000. Since then, it has continued to rise and hit new highs many times.
The logic behind this wave of rising prices is also relatively clear. First, the issuance of Bitcoin spot ETFs brings more incremental funds to the market. On January 11, 2024, the U.S. Securities and Exchange Commission officially approved 11 Bitcoin spot ETF applications, including BlackRock and other institutions. Prior to this, investors in the cryptocurrency market were mainly "stragglers", and the entry of these asset management giants announced that "regular troops" are accelerating their entry into the market. After the "regular army" enters the market, it brings incremental funds to the market. Farside Investors data shows that as of March 12, the Bitcoin spot ETF has accumulated a net inflow of US$10.1003 billion since its launch. Second, the fermentation of good information such as "halving" has pushed market sentiment to a high point. On April 23, 2024, Bitcoin will usher in the four-year "halving". At this stage, the number of Bitcoins obtained by "miners" for mining on computers will decrease. It is expected that the block reward will be From 6.25 (BTC) to 3.125 (BTC). Zhang Liangwei’s team at Soochow Securities believes that the halving rule objectively limits the growth rate of Bitcoin supply, has an anti-inflation effect, and helps promote currency price appreciation. Third, the Federal Reserve's expectation of a mid-year interest rate cut has also added fuel to the skyrocketing price of Bitcoin. Recently, Federal Reserve Chairman Powell reiterated that interest rates will fall this year. Many overseas institutions predict that the Federal Reserve will cut interest rates soon. According to CME Group data, the probability of a 25 basis point interest rate cut in June is 57.4%. A report released by Goldman Sachs in February showed that the Federal Reserve will begin to significantly cut interest rates in 2024, at least four times, and the first interest rate cut will begin in June. Industry insiders believe that once the Federal Reserve enters the interest rate cut range, risk assets will benefit, and digital currencies will also benefit from this.
In the secondary market, the core factor affecting price fluctuations is the relationship between supply and demand.
The adoption of the Bitcoin ETF has caused huge changes on the demand side. Wall Street financial giants have entered the market and bought BTC "regardless of the cost." This has brought about a "demand shock" for Bitcoin, which is why the price is so rapid.
The ETF launch on January 11 resulted in an average daily demand of 4,500 Bitcoins (trading days only), while at the same time, the average daily mining of new Bitcoins was only 921, a month after the halving, the average daily mining Quantity is only 450 pieces.
The current supply and demand data are 10 times different. This has led to a sharp rise in Bitcoin prices in recent weeks as the supply of newly mined Bitcoins has fallen far short of demand, resulting in ETF issuers having to source from the secondary market. Data shows that BTC held in the OTC market has dropped by more than 70% since its peak in 2020. It may be that demand for ETFs has dried up OTC liquidity.
In the first two months of the ETF's passage, BTC saw an inflow of US$10 billion, while the first gold ETF in 2005 had a net inflow of only US$28.8 million in the first two months. The madness of Wall Street's funds is evident.
There’s also a trend: exchanges are holding significantly less Bitcoin, down 29% since 2020, as investors are keeping their Bitcoins themselves, reflecting their increasing Think of it as a store of value.
Bitcoin's EFT news was an application filed by BlackRock in June 2023, when the price of Bitcoin was about $25,000. It can be said that the rise of Bitcoin from that time on was driven by ETFs. Bitcoin ETFs have seen inflows of approximately US$10 billion so far, while the market value has increased by more than US$800 billion.
It’s unclear how long the current demand rate for Wall Street ETFs of about 4,500 Bitcoins per day will continue. Bitcoin has a fixed and unchanging supply mechanism model. In the end, the market can only seek a new balance at the intersection of supply and demand, that is, it can only find a new balance through price increases. Price increases suppress demand. Promote stock supply. This is why the price of Bitcoin has risen so sharply in recent months, with expectations fueled by demand for ETF issuance and the upcoming halving.
As prices continue to rise, capital inflows will eventually decrease. When we see Wall Street institutions stop buying BTC in large quantities and even start selling, it may be the peak of this round of rise.
In the bull market mood, large investors and institutions do not sell, and the existing liquidity is continuously bought by ETF funds and becomes less and less, so the actual supply of Bitcoin is very small. This low liquidity and high degree of control by Wall Street are very conducive to price manipulation in the derivatives market. The spot market only requires a small amount of trading volume to produce more than ten times the effect in the derivatives market.
If there is no major reversal of expectations at the macro level, it will be difficult for this trend to end. 2024 is destined to be an extraordinary year. After the Federal Reserve cut interest rates in the second half of the year, it started printing money again. The currency tide is coming, and BTC has to ride the wave again.
