Bitwise: ETFs can be seen as Bitcoin's "IPO," after which it will enter a new price discovery phase.

2024.02.19

Bitwise: ETFs can be seen as Bitcoin's "IPO," after which it will enter a new price discovery phase.

Bitwise predicted in its research at the beginning of the year that BTC would trade above $80,000 following inflows into spot ETFs and the anticipated supply contraction after Bitcoin's upcoming halving.

2024.02.19 - 08:30:15

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Source: Decrypt Translation: Blockchain Knight Matt Hougan, Chief Investment Officer at Bitwise, said that with the recent successful approval of ETFs, BTC is poised to enter new territory, and its price could surpass $80,000 this year. The early success of BTC ETFs has broken records for similar products, triggering a sustained inflow of funds into BTC since mid-January. Hougan noted that Bitwise launched its BITB spot ETF on January 10 alongside nine other firms. The company had long heard interest from clients about such products and anticipated strong demand. Nevertheless, Hougan said the sustained demand observed last month was surprising, given that ETFs typically experience more volatile growth after launch. He believes that as investment channels for BTC expand, increasing numbers of institutions will participate, driving up demand for BTC. "Think of the ETF launch as Bitcoin's initial public offering in the U.S. market," Hougan said. "The ETF has just unleashed a massive wave of interest from traditional finance, exceeding my expectations." Indeed, by any measure, spot BTC ETFs have been historically successful—but Bitwise’s performance stands out particularly. Just in the past day alone, Bitwise attracted approximately $126.5 million in inflows—the second-largest daily inflow since its launch—and recently crossed $1 billion in assets under management (AUM). So far, Bitwise ranks fourth in AUM behind BlackRock, Fidelity, and Ark Invest’s 21Shares. Hougan believes that although ETFs are now available for purchase, not all financial institutions can immediately buy them; most trading activity so far has been driven by retail investors. He explained that banks and financial service providers are still far from entering the market—a predictable situation, as each ETF must undergo extensive due diligence before these institutions offer it to their clients. Like any other asset, BTC prices are influenced by supply and demand dynamics. Analysts say a "second wave" of institutional demand could drive prices higher. In research published at the beginning of the year, Bitwise forecast that following inflows into spot ETFs and the upcoming halving-induced supply contraction, BTC could trade above $80,000. Halving refers to a programmed event on the BTC blockchain that occurs roughly every four years. Miners—individuals responsible for securing the BTC network—see their BTC rewards cut in half after each halving, which is expected around April 20. The purpose is to control BTC inflation by slowing down the rate at which new BTC enters the market. "If we see sustained demand exceeding net supply, that will positively impact prices," Hougan said. "This will remain the case until long-term holders become satisfied and are ready to sell." That said, this isn't a guaranteed smooth ride to astronomical prices—there are caveats. One risk remains regulatory uncertainty surrounding crypto assets, especially during another contentious U.S. presidential election. Regardless of the outcome, the regulatory landscape is expected to shift. Another variable is the pool of dormant BTC that exists beyond current circulating supply. About 70% of these dormant pools remain untapped, Hougan said, but if released, they could create supply pressure and push prices down. These holdings may be controlled by governments or frozen due to litigation related to bankrupt firms like FTX. This dynamic has already surfaced post-ETF launch: Grayscale saw outflows of BTC after transitioning its trust into an ETF, which briefly weighed on BTC prices. However, as those outflows appear to have slowed, BTC prices resumed their upward trajectory. Despite these risks, Hougan believes ETFs currently provide a promising path for BTC adoption, and the foothold gained in traditional finance is likely to yield further gains. "The level of attention Wall Street is now paying to BTC has changed dramatically," Hougan said. "I don't think this genie is going back in the bottle."

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Bitwise: ETFs can be seen as Bitcoin's "IPO," after which it will enter a new price discovery phase.

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