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After a difficult start to April, the cryptocurrency market strongly rebounded over the last weekend before falling back into its current consolidation channel. Ultimately, the week has still been positive for Bitcoin. At the time of writing, it is the inflation data in the United States holding investors’ breath. These data, published at 8:30 am this Wednesday morning, may dictate the short-term price direction.
Less than nine days now separate us from the next Bitcoin halving. Halving events, which cut the block rewards in half, occur every four years or every 210,000 Bitcoin blockchain blocks. The initial block reward was 50 BTC. The current reward is 6.25 BTC, and the next will be 3.125 BTC. This reduces the rate at which new bitcoins are generated. Halving is periodic and programmed into Bitcoin’s code. Historically, this event has always been a precursor to significant bullish movements. While it might be considered “priced in” short term due to the recent months’ surge, the market is nevertheless flourishing and continues to paint a bullish picture.
The cumulative transaction volume for U.S. exchange-traded funds (ETFs) in spot Bitcoin recently surpassed the $200 billion threshold, a notable advancement that occurred less than three months after the Securities and Exchange Commission (SEC) approved ETFs from major entities like BlackRock, Fidelity, and Bitwise. This milestone was reached as ETFs recorded continuous net outflows during a session where Bitcoin lost about 5% of its value. The cumulative trading volume for these Bitcoin ETFs nearly doubled last month, peaking at $201.7 billion at market close. During this period, BlackRock’s IBIT led in volume, followed by Grayscale’s GBTC and Fidelity’s FBTC. While BlackRock’s ETF consolidated its dominance with nearly 50% market share, Grayscale’s GBTC saw its dominance wane, illustrating the dynamism and increased competition in this sector.
When will Grayscale’s outflows stop exerting downward pressure? The Grayscale Bitcoin spot ETF has been experiencing significant capital outflows as investors turn to competing products, raising questions about the viability of its BTC reserves. Since its transition from a closed-end fund to a spot Bitcoin ETF in January, Grayscale has seen over $15 billion in outflows, a record withdrawal for an ETF since March 2009. With more than 328,000 BTC in reserve, the fund could deplete by July if the current trend continues. However, a significant slowdown in recent withdrawals offers a glimmer of hope. In response, Grayscale is considering launching a new Bitcoin ETF with lower fees to remain competitive, awaiting regulatory approval.
Cryptocurrency investment products have recorded record net inflows of $13.8 billion since the beginning of the year, with an addition of $646 million last week. However, James Butterfill, head of research at CoinShares, notes a slowdown in enthusiasm for ETFs. Last week saw asset management funds, such as BlackRock, Bitwise, Fidelity, Grayscale, ProShares, and 21Shares, accumulate $646 million in global fund inflows. These recent inflows bring the total investments since the start of the year to a record $13.8 billion, far surpassing the previous annual record of $10.6 billion set in 2021, just a few months into 2024. This momentum marks a significant rebound after the outflows of nearly one billion dollars observed at the end of March. Despite this positive trend, the fervor around ETFs appears to be waning, with weekly inflows not reaching the levels of early March, and a decrease in volumes to $17.4 billion from $43 billion at the beginning of the month. Bitcoin investment products remain in focus, with $663 million in additions, while funds betting against Bitcoin experienced a third consecutive week of outflows, suggesting a reduction in bearish positions. The U.S. spot Bitcoin ETFs continue to dominate the market with $484.5 million in net inflows last week.
According to a Glassnode report, the cryptocurrency market has entered a phase of euphoria, marked by a substantial influx of investment capital and growing speculative interest, in anticipation of Bitcoin’s halving event. This situation mirrors the dynamics seen during the 2021 bullish rally and suggests significant directional price movements. Since October 2023, Bitcoin’s bullish momentum has intensified, propelling the market into a period of high liquidity and volatility. With the launch of U.S. spot Bitcoin ETF trading in January, spot Bitcoin exchange volumes surged, reaching peaks in March. Glassnode also notes a significant increase in Bitcoin flows entering and exiting exchanges since July 2023, with daily trading averages surpassing those of the 2021 market peak. This activity is interpreted as a sign of a booming market, supported by a notable rise in spot exchange volumes and blockchain flows. Moreover, with the imminent halving and high liquidity, the market seems to be firmly anchored in its bullish phase. Glassnode also highlights the entry
of new investors into the market, evidenced by the increasing proportion of bitcoins held for less than six months, an indicator that has risen sharply since the start of 2023.
Despite this overwhelmingly positive context, according to Joe Vezzani, CEO of LunarCrush, public interest in cryptocurrencies remains modest compared to the last major surge, despite the approaching Bitcoin halving. Retail investors have yet to be convinced by the current excitement, even as Bitcoin and other digital asset prices rise. Compared to the previous boom, social interaction and general interest from retail investors are low. Although there were spikes in activity mentioning Bitcoin in January and March, related respectively to the excitement around Bitcoin ETFs and Bitcoin reaching new highs, participation on social media has remained steady. For cryptocurrencies like Ethereum and Solana, social mention trends have been relatively stable, with a decline noted since early March. Vezzani observes that even significant events like Bitcoin’s halving are unlikely to generate marked retail engagement, considering the event more technical and potentially off-putting for novices.
Not everyone is convinced that the imminent halving will benefit prices, at least in the short term. Arthur Hayes, co-founder of BitMEX, predicts a period of high volatility for cryptocurrencies in the second half of April, influenced by Bitcoin’s halving and certain actions by the U.S. Federal Reserve and Treasury Department. According to him, these events could lead to a significant market downturn for several weeks. In an April 8 blog post, Hayes suggested that while the Bitcoin halving is generally seen as a positive price catalyst, the convergence of opinions on this effect could result in the opposite outcome. He anticipates a price drop around the halving, exacerbated by currently tight dollar liquidity. Hayes also discussed how Federal Reserve and Treasury policies might impact markets, expecting a relaxation after May 1 with the likely introduction of new liquidity, which could then buoy markets. In this context, he has chosen to abstain from trading activity until May, despite a notable rise of more than 61% in Bitcoin since the beginning of the year.
Brad Garlinghouse, CEO of Ripple, speaking to CNBC, is particularly optimistic. He believes the global cryptocurrency market could see its market capitalization double by the end of 2024, potentially exceeding $5 trillion. This forecast is based on the anticipated positive impact of the spot Bitcoin ETFs and the upcoming Bitcoin halving event. Garlinghouse is particularly excited about the “real” institutional investments these ETFs are expected to bring into the sector. Additionally, he anticipates improved regulatory clarity in the U.S. with the new administration.
The U.S. Securities and Exchange Commission has postponed its decision to allow trading of spot Bitcoin ETF options on the New York Stock Exchange, the regulatory body announced on Monday. In its statement, the SEC extended the initial review period for trading any Bitcoin ETF option by 45 days, until the end of May, to examine the proposed rule change. “The Commission believes it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change,” wrote SEC Assistant Secretary Sherry R. Haywood.
Finally, it is worth noting that Coinbase announced on Wednesday that it has become the first international cryptocurrency exchange registered in Canada, achieving a regulatory milestone it has not been able to secure in its home country, the United States. According to a company blog post, the exchange is now a “restricted dealer” under the Canadian securities regulators (CSA) after filing its pre-registration undertaking about a year ago. The registration means that Coinbase meets Canada’s strict legal requirements for cryptocurrency trading and investment access.
The presented information is as of April 10th, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
