Bankless analyst analyzed the different adoption of Bitcoin spot ETFs in Canada and Europe and compared the global market’s attitude towards Bitcoin investment. The analyst believes that halving and interest rate cuts may not necessarily be positive news in the face of global economic uncertainty. However, the Bitcoin narrative for 2024 remains strong. But where will Bitcoin go next? This article is sourced from “Where Bitcoin Goes Next” by Bankless analyst Jack Inabinet, compiled, translated, and written by BlockBeast.
(Table of Contents:
Demand Must Be Realized
History is Just Rhyme
Interest Rate Cuts Are Not Automatically Bullish
Bitcoin is still the main narrative for the new year. With the approaching deadline for the decision on the Bitcoin spot ETF, market sentiment is soaring. A report by Matrixport has even led to over $450 million in liquidations across the network.
Starting from 2024, the basic narrative for Bitcoin looks as strong as ever, and crypto analysts are almost unanimously bullish on Bitcoin! But is it really the case?
With the approaching deadline for the approval of the Bitcoin spot ETF next Wednesday, industry insiders are optimistic about the introduction of these tools. They believe that this will pave the way for billions of dollars to flow into Bitcoin in the next few years.
In addition, market participants are optimistic about the upcoming Bitcoin halving, an event in April that will reduce Bitcoin block rewards by 50%, historically leading to a decrease in miner selling and a surge in Bitcoin prices.
Although having just two clear Bitcoin catalysts is enough to create conditions for a price increase, traders are eagerly awaiting a more favorable macro environment with anticipated interest rate cuts next year, which will propel Bitcoin to new all-time highs.
Nevertheless, the recent bullish sentiment towards Bitcoin should not be taken for granted. However, before eagerly imitating Bitcoin to enjoy potential huge returns in 2024, there are some important points to keep in mind.
While the concept of spot crypto ETFs may still be new to Americans, these tools have already existed in Canada and Europe, with varying degrees of adoption.
Since the end of September last year, Canada’s Purpose Bitcoin ETF has increased its managed Bitcoin by 50% to 35,000, which is a respectable growth. Meanwhile, European issuer Jacobi has only accumulated a meager $1.7 million in assets since its launch in November.
Global investors face the same investment story as Americans, and their insufficient demand for Bitcoin spot products may mean that capital inflows into the US may not be ideal.
For Bitcoin ETF approvals to have an immediate positive impact, issuers must meet the new demand from external investors seeking Bitcoin exposure; however, it is currently unclear whether such demand exists.
In the long run, making it easier to invest in Bitcoin will be a catalyst for its bullishness. However, if the approval of the ETF leads to disappointing immediate capital inflows, the bullish side still faces the risk of trading mistakes.
Just because previous Bitcoin halvings were bullish does not mean that future halvings will also be bullish.
Just as the slight decrease in the issuance of merged Ethereum did not drive up Ethereum prices in the following months (the ETH/BTC ratio has dropped by over 30% since then), reducing the issuance from this Bitcoin halving also does not guarantee a positive impact on Bitcoin prices.
Although reducing selling pressure by reducing block issuance undoubtedly has a certain degree of bullish impact on Bitcoin prices, the impact of this halving will be significantly weaker compared to previous halvings. Do not be surprised if the expected price increase pattern after the Bitcoin halving does not occur.
Many people confuse lower interest rates with economic easing, but they are just one input in the macro story.
Under unchanged conditions, lower interest rates do lower the required rate of return, making risk investments like cryptocurrencies more attractive. However, it is important to remember that rate cuts have historically been a monetary response to economic deterioration.
Regardless of the asset class, the biggest risk for any investor is the market, and it is currently unclear whether lowering interest rates is sufficient to counter the economic signs of recession.
Cryptocurrencies do not exist during prolonged economic contractions, and peak interest rates indicate that the worst economic recession has not yet arrived.
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