Authur: Wisdom Odion
The noise surrounding the SEC and cryptocurrency has kept eyes peeled and spurred a massive move for Bitcoin in the past month. Ever since the SEC gave its thumbs up back in January, allowing institutional investors to hop on board, Bitcoin has been on quite the ride this year.
Bitcoin (BTC) skyrocketed to a historic high of $73,777, surpassing its previous peak in Q4 2021, fueled by the demand from spot exchange-traded funds (ETFs) in the U.S. However, unlike past trends, the leading cryptocurrency swiftly retreated as bearish sentiments took hold.
But what really should we look out for? What’s next for Bitcoin? Do we expect more spikes towards a new ATH or are the bears gearing up for a nosedive?
Why Bitcoin is going up now
BlackRock's iShares Bitcoin ETF (IBIT), among the 11 newly introduced spot bitcoin ETFs, made a significant splash by acquiring over $778 million worth of BTC on March 6 alone. This influx amounted to 12,600 bitcoins flowing into IBIT's reserves, effectively reducing the global supply of available bitcoins. Moreover, fueled by increasing demand, IBIT's acquisition contributed to the overall rise in BTC's value.
The current bullish sentiment in the bitcoin market coincides with the announcement from the U.K.'s Financial Conduct Authority (FCA), its counterpart to the U.S. Securities and Exchange Commission (SEC). The FCA expressed openness to considering the trading of bitcoin and Ethereum-based exchange-traded notes (ETNs) in the U.K. These ETNs function similarly to exchange-traded funds (ETFs) in the United States.
This development follows the ongoing optimism among investors following the SEC's approval of 11 spot bitcoin ETFs on January 10. Spot bitcoin ETFs enable institutional trading of bitcoin at its current market price.
Institutional investor rampage on Bitcoin
In the spot Bitcoin ETF market, GBTC led with $2 billion in outflows. However, despite these outflows, there were $1.1 billion in new inflows for spot Bitcoin ETFs in the week leading up to March 25. Meanwhile, the rest of the altcoin space performed positively, with a net inflow of $16 million.
Weekly Crypto Asset Flows (US$m)
Source: CoinShares
CoinShares data reveals a significant milestone in the digital asset investment landscape, with a record weekly outflow of $942 million. This marks the first instance of outflow after an impressive seven-week streak of inflows totaling $12.3 billion. To put this into perspective, in the entirety of 2021, crypto products attracted a record $10.6 billion in yearly inflows.
Conversely, short-bitcoin products experienced minor outflows amounting to $3.7 million.
Out of the $12.3 billion directed towards crypto assets in 2024, a substantial majority of over $11.96 billion flowed into Bitcoin specifically. Currently, Bitcoin dominates the digital asset landscape with total assets under management (AUM) standing at $68.8 billion.
Flows by Asset (US$m)
Source: CoinShares
The numbers look good and the general bias might be optimistic.
But wait…
What does the price jump mean for Bitcoin investors?
While it’s looking more and more like bitcoin is on a long-term rise again, traders in BTC and other cryptocurrencies find themselves navigating uncharted waters influenced by various factors. These include geopolitical tensions, economic indicators, regulatory shifts in the crypto sphere, and the Federal Reserve's stance on interest rates.
Cryptocurrency industry investors have learned that even in the best of times, predicting short-term price movements in digital assets, even during favorable conditions, is challenging. This challenge is particularly pronounced in the current market conditions.
Speculatively, a mere interpretation of the past week record outflows following a prolonged period of inflows, could signal a turning point in investor sentiment towards the cryptocurrency market as a whole. Investors may be becoming more cautious or taking profits after a period of significant gains.
On the other hand, despite the outflows, the total AUM for Bitcoin remains substantial at $68.8 billion, highlighting the continued interest and investment in Bitcoin from institutional and retail investors alike.
What to look out for with Bitcoin by close of Q1
Since Bitcoin has subjective value and does require a cost to produce—its price is entirely subject to supply and demand dynamics. The halving typically has a positive impact on Bitcoin because it further limits the supply, and historically, Bitcoin has tended to perform well following previous halving events.
Following the 2020 halving, which occurred after the 2017 bull market, Bitcoin saw a 33% increase in the next three months and surged by over 80% within six months.
Bulls are particularly optimistic about the upcoming halving due to current demand trends, driven by the introduction of new exchange-traded funds from companies like BlackRock and
Fidelity Investments.
However, not everyone shares this optimism. Traders have been aware of the April halving for some time and have already driven up prices in anticipation. While Bitcoin typically performs well post-halving, some analysts argue that this potential increase may already be factored into current prices.
The outcome from the halving event will be revealed in April 2024 and we are here for it all.