16 February 2024

We thought this was a seasonal rally into Chinese New Year and may fade out soon. We were wrong!

Bitcoin has surged 13% last week and has taken out key resistances at $48,000, $50,000 and $52,000 comfortably. These are levels last seen in 2021. Is this the bull run we were all promised?

Ethereum’s rally has been far more impressive. It has outdone BTC this week and is in touching distance of $3,000. If Bitcoin consolidates above $52,000, altcoins can rally well in the next two weeks.

We are so excited about the possibilities. So we cover these in detail in our Hot Take today.

But before that, here are the top stories and important stats from this week:

Top-3 stories of the week:

1

2

3

The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.96 trillion - UP 12%

• Bitcoin price - $52,210 - UP 13%

• The dollar index (DXY) - 104.4 - UP 0.2%

• Bitcoin Dominance - 53.65% -  UP 0.7%

• Crypto Fear and Greed Index - 72 - the market is in greed

THE HOT TAKE

The beginning of the bull…

Great news from the crypto assets front! Bitcoin is back, touching prices not seen since 2021, and Ethereum is keeping up in pace, reaching its highest levels since early 2022. The institutional world is making waves too. Franklin Templeton has stepped into the spotlight with a new filing for a spot Ether ETF, a clear sign of growing interest from the big players. Meanwhile, the enthusiasm for Bitcoin ETFs has boosted institutional holdings to the highest we've seen in two years. It's an exciting time for all crypto enthusiasts.

It's a fascinating period for the crypto community, bridging the gap more than ever between digital assets and traditional finance.

Let's look at the events that are moving the market.

ETFs: BlackRock's IBIT and Fidelity's FBTC reigns the throne

Bitcoin rallied from $45,000 to $52,000 this week. GBTC outflows have trickled compared to past weeks, confirming that the selling pressure is diminishing. According to data from Bitcoin tracking platform Apollo, the 10 spot Bitcoin BTC ETFs have had 43,300 Bitcoin — worth $2.3 billion at current prices — in inflows over the last four days alone. BlackRock's IBIT and Fidelity's FBTC registered a record first month, while IBIT surpassed GBTC in daily trade volume for the first time on February 7. 

Last week, the trend of decreasing BTC outflows from Grayscale persisted, with the total outflows for the 7-day period reaching -$414.8 million, marking a 50% reduction compared to the previous week. Despite these outflows, BTC ETF products experienced net inflows of approximately $1.2 billion, nearly doubling the net inflows from the week before.

Franklin Templeton files for Ethereum ETF

Franklin Templeton became the eighth institutional asset manager to file for a spot Ethereum ETF. The news helped to drive early-week gains for ETH, which traded above $2,800 for the first time since May 2022. As of Thursday, Franklin Templeton, BlackRock, Fidelity, Ark and 21Shares, Grayscale, VanEck, Invesco and Galaxy, and Hashdex, had all submitted applications for a ETH spot ETF.

ETF analysts from Bloomberg tip that the regulator could be lining the funds for approval in May, coinciding with the final deadline for VanEck's application. This implies that we could see price actions moving in tandem with BTC leading up to the event in May or early June.

Is sky the limit for BTC? 🚀

As Bitcoin enthusiasts and investors, one question that often keeps us on our toes is: ‘How high can BTC price go and how soon?’ While predicting the exact future of Bitcoin's price trajectory is akin to forecasting the weather in the unpredictable world of crypto, we can certainly look at factors that suggest its potential upward journey.

• Institutional adoption and favourable regulations

As more institutional investors enter the space, their substantial buying power can significantly push prices upwards. The interest from heavyweight financial institutions is likely to continue until they amass a bigger portion of the asset into their funds.

Clear and supportive regulatory frameworks can enhance investor confidence, potentially leading to higher demand and prices. We have already seen how the BTC ETFs are performing with investors warming up to the idea of upcoming ETH ETFs.

• Increase in buying pressure post halving 

Net inflows to the newly launched spot bitcoin ETFs have reached over $4 billion in the first month since their launch, far surpassing Bitcoin issuance rates from mining. Current investment trends are yielding a daily ETF inflow 4.6x higher than average Bitcoin issuance post-halving, creating even greater buy side pressure on the asset.

• Supply shock set to hit the market

According to the chart below, 18 million BTC are sitting in dormant wallets. This means the owners does not plan to immediately sell these. This situation effectively leaves fewer than 2 million BTC available for acquisition by new investors, which constitutes less than 10% of the total supply of Bitcoin.

Now, we already know that ETFs are reported to be purchasing an average of half a billion dollars worth of Bitcoin daily, equating to approximately 10,000 BTC at current market prices. A straightforward calculation suggests that at this rate of acquisition, the available supply of 2 million liquid Bitcoins could be exhausted in approximately 200 days.

In a realistic sense this is not possible. We can assume that someone will always be ready to sell their BTC, if the price is right. However, with retail and exchanges fighting for a piece of the pie, we sure can expect BTC to surge in coming months.

What does it mean for you, the investor?

There is a possibility that Bitcoin can do a new all-time high (ATH) this year post its halving. The narratives are set up for it. However, the journey will not be straight-forward. Pullbacks (even 30-40%) are always likely in crypto as profit taking begins. For example, Genesis got a court approval to sell its Grayscale shares (link). If they choose to do this immediately, a short term price impact will happen.

Also, the possibilities of recession declarations in key countries remain. UK has just slid into a technical recession. When recessions hit, markets take a break.

We believe that all investment portfolios should be ready for both eventualities. Bitcoin, Ethereum and altcoins can run well for months but macroeconomic risks need to be accounted for in your risks.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.