Spot Bitcoin ETFs and the 2024 Halving: A Swiss Bank’s Analysis of Potential for New All-Time Highs

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In the US, the debut of Bitcoin (BTC) ETFs on the exchange has reshaped the cryptocurrency market. According to Kitco’s article, these ETFs have simplified the process for various types of investors, such as retail investors, pension funds, and major financial institutions, to invest in cryptocurrencies through a more conventional and user-friendly approach.

An article penned by Jordan Finneseth for Kitco News, released on 10 April 2024, reports that Hong Kong intends to introduce spot Bitcoin ETFs. This move could potentially boost the already substantial interest in these financial instruments. As shared during an interview with Kitco News, Yves Longchamp, Managing Director and Head of Research at AMINA Bank (previously known as SEBA Bank), holds a firm belief that the expansion of Bitcoin and the wider crypto market is far from over.

Longchamp highlights that the debut of BTC ETFs in the US on January 11, 2024, has brought in a multitude of new investors, infusing substantial capital into the Bitcoin market. Moreover, he underlines that this surge in Bitcoin’s value has led to impressive price hikes for other cryptocurrencies like Solana (SOL) and Ether (ETH).

Based on Kitco’s report, Longchamp proposes two different methods for investing in cryptocurrencies. The first approach is to include crypto as a diversified asset class in your portfolio, using ETFs for ease and convenience. Alternatively, investors can embrace the novelty of crypto as a new paradigm by directly purchasing, holding, and transacting with their chosen digital currencies. Longchamp highlights that this second approach offers unique opportunities, such as participating in decentralized finance (DeFi) or facilitating international transactions, which are unavailable through ETFs.

According to Kitco’s article, there has been a large amount of investment flowing into recently launched Bitcoin spot ETFs. Together, these ETFs now manage over $12 billion in assets.

Bitcoin ETF Flow data – 09 April 2024

All data in. $19m net outflow on the day

— BitMEX Research (@BitMEXResearch) April 10, 2024

Longchamp explains that there’s been increasing investor demand to enter this new asset class, which can be linked to a generational change and the wider acknowledgment that having a native digital currency is essential in today’s digital era.

Longchamp highlights the importance of a robust link between conventional finance and the burgeoning crypto financial market. This connection is crucial for managing the rising inflows and volumes. Additionally, an effective platform for executing trades and settling transactions is required. Moreover, ETF providers are expected to request secure custody and trading solutions. They aim for trustworthy infrastructure and assets that adhere to KYC and AML regulations.

The Kitco report is now examining how the upcoming Bitcoin halving, estimated to take place between April 19th and 20th, could influence Bitcoin’s price. According to Longchamp’s analysis, Bitcoin’s market history shows that prices have generally risen following a Bitcoin halving event. The uptrend lasts for approximately 350 to 600 days after the halving occurs.

The Kitco article draws from an AMINA Bank report, pointing out that although each bitcoin halving is distinct, there are discernible patterns. According to the AMINA report, the ongoing cycle shares resemblances with the past three halvings. Additionally, the report suggests that the approval of eleven Bitcoin spot ETFs in the US during January 2024 has intensified institutional interest and anticipation for further growth.

Longchamp posits that the capacity of Bitcoin ETFs to mitigate the usual 50-80% price corrections after a bull market peak hinges on their ownership. He proposes that if institutional investors control these ETFs as part of their long-term investment plans, they will purchase Bitcoin during major price declines to restore portfolio balance, possibly lessening losses. However, he acknowledges that Bitcoin and cryptocurrencies have yet to gain widespread acceptance in strategic asset allocations.

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2024-04-11 11:22