In a momentous stride forward for the cryptocurrency landscape, the U.S. Securities and Exchange Commission has greenlit 11 spot Bitcoin Exchange Traded Funds (ETFs), much to the delight of digital asset enthusiasts. This landmark decision was poised to potentially herald a significant uptick in Bitcoin’s valuation; yet contrary to expectations, the market has witnessed an 8% downturn since these ETFs opened for trading.
The unveiling of spot Bitcoin ETFs, expected to carry substantial weight within the financial sphere, has prompted comparisons to the historic introduction of the first Gold ETF, SPDR Gold Shares (GLD). Howard Lutnick, the CEO of Cantor Fitzgerald Asset Management, pointed out that an instantaneous demand spike for the asset was absent. He further elucidated that the true growth in gold’s value materialized progressively over years following the GLD launch.
When the Gold ETF first came onto the scene in November 2004, gold was priced around $700 per ounce. Nearly two decades later, in December 2023, it hit a record peak of $2,145, with market capitalization burgeoning from an estimated $1 trillion to $2 trillion before the ETF to $16 trillion years later.
Similarly, experts assess that the real influence of the Bitcoin ETFs will emerge incrementally, rather than overnight. Projections by CoinShares suggest that the U.S. holds an impressive $14.4 trillion in assets that are poised for investment in such financial vehicles. Even under conservative assumptions that only 10% of these assets allocate a mere 1% to the Bitcoin ETFs, the cryptocurrency could see inflows of about $14.4 billion within the first year alone—potentially igniting a significant price rally.
Yet, according to Lutnick, it is the anticipated Bitcoin halving event in April that stands as the promising propellant for Bitcoin’s value growth—a sentiment echoed by historical patterns observed in previous halving occurrences. Past Bitcoin halving events have typically preceded robust market rallies, followed by a slight downturn and stabilization phase, ultimately culminating in a monumental bull run peaking around 18 months post-halving.
The first Bitcoin halving in 2012 saw the block reward halved to 25 BTC, with prices soaring from approximately $13 to a then-unprecedented $1,152 within a year. The second and third halving events mirrored this trajectory with similar consequential rallies and, despite price corrections, the trends affirm the crucial impact halvings have on Bitcoin’s market value.
The forthcoming halving in April 2024 is expected to be a pivotal catalyst for Bitcoin. However, it is imperative to recognize that Bitcoin ETFs are slated to play a substantial role in shaping the cryptocurrency’s future, bolstering its price, fostering inflows, and attracting a fresh wave of interest into the crypto marketplace.