Bankless: ETFs, Halving, interest rate cuts, where is Bitcoin going next?

Original Title: Where Bitcoin Goes Next

Original article by Jack Inabinet

Original compilation: Luccy, BlockBeats

Editor’s note: Bitcoin continues to dominate the narrative of the new year, with sentiment soaring as the SpotBitcoin ETF adjudication deadline approaches, with a Matrixport report leading to more than $450 million in online Get Liquidated.
Bankless analyst Jack Inabinet analyzes the different adoptions for SpotBitcoin ETFs in Canada and Europe and the global market’s investment attitudes towards Bitcoin. Jack Inabinet stressed that Halving and rate cuts are not necessarily favourable information in the context of global economic uncertainty. BlockBeats compiled the original text as follows:

At the start of 2024, the basic narrative of Bitcoin looks as strong as ever, and crypto analysts are almost unanimously bullish on Bitcoin!

As next Wednesday’s deadline for the approval of SpotBitcoin ETFs approaches, industry insiders are optimistic about the introduction of these instruments, which they believe will pave the way for tens of billions of dollars to flow into Bitcoin over the next few years.

In addition, market participants are full of optimism about the upcoming BitcoinHalving, an event in April that will reduce the Inflation of BitcoinBlock subsidies by 50%, and historically this has often led to a decrease in Miner sales, driving Bitcoin prices higher.

While just two obvious Bitcoin catalysts are enough to set the stage for Bitcoin prices to rise, the expected Intrerest Rate cut next year has traders eagerly anticipating a more favorable macro environment that will allow Bitcoin to break through new all-time highs.

Still, the recent bullish rhetoric on Bitcoin has not been stingy. However, there are some important caveats to keep in mind before not hesitating to emulate Bitcoin to enjoy the huge gains that may come in 2024.

Requirements must be fulfilled

Spot crypto ETFs may still be new to Americans, but these instruments already exist in Canada and Europe, and their adoption is varied.

Since the end of September last year, Canada’s Purpose SpotBitcoin ETF has increased its Bitcoin under management by 50% to 35, 000, which is a respectable increase. Meanwhile, European publisher Jacobi has managed to amass only a modest $1.7 million in assets since its launch in November.

Global investors face the same investment story as Americans, and their lack of demand for SpotBitcoin products could mean that U.S. inflows may be less than ideal.

In order for the approval of Bitcoin ETFs to have an immediate positive impact, issuers must meet new demands from external investors seeking exposure to Bitcoin; however, it is unclear whether such a demand exists.

Making it easier to invest in Bitcoin will be a bullish catalyst for the asset in the long term. However, if the ETF is approved and the resulting immediate inflows are disappointing, the bulls are still at risk of trading errors.

History just rhymes

Just because a previous BitcoinHalving event was bullish does not mean that future Halving events will also be bullish.

Just as Ethereum small reduction in issuance after the merger failed to drive Ethereum price in the months that followed (the ETH/BTC ratio has fallen by more than 30% since then), the reduction in issuance from this BitcoinHalving is not guaranteed to have a positive impact on Bitcoin prices.

While reducing selling pressure by reducing Block issuance will undoubtedly have a somewhat bullish impact on Bitcoin prices, the impact of this Halving will be significantly diminished compared to previous Halving, and don’t be surprised if the expected post-BitcoinHalving price increase pattern doesn’t materialize.

Rate cuts are not automatically favourable information

Many people confuse lower Intrerest Rates with easing economic conditions, but they are just one input in the macro story.

All other things being equal, dropIntrerest Rate does drop the desired rate of return, making venture capital (such as Crypto Assets) more attractive. However, it is crucial to remember that interest 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 unclear whether dropIntrerest Rate will be strong enough to fight an economy that is showing signs of recession.

Crypto Assets don’t exist during a long period of economic contraction, and Intrerest Rate peaking suggests that the worst recession is yet to come.

Link to original article