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ETFs: Will Bitcoin hit a fresh all-time high in 2024?

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ETFs: Will Bitcoin hit a fresh all-time high in 2024?

Exchange-traded funds (ETFs) have emerged as a significant topic, particularly concerning their potential to fuel the Bitcoin (BTC) price to surpass its previous all-time high (ATH) of nearly $70,000.

Furthermore, BTC proponents are optimistic that the upcoming halving event scheduled for April 2024 will provide a further boost to the world’s flagship cryptocurrency.

Bitcoin’s bullish momentum

Bitcoin (BTC) hit its highest price since 2021 and neared its record peak of $69,000 achieved in November 2021, before undergoing a significant correction. The price remains comfortably above the $62,000 price region at press time.

Bitcoin’s strong bullish momentum has been mainly credited to significant fund inflows into the global cryptocurrency market, driven by the long-awaited approval of spot exchange-traded funds (ETFs) for the orange coin in the United States.

These ETF approvals have attracted billions of dollars in institutional investments, contributing to Bitcoin’s strong upward momentum.

Despite subsequent volatility, Bitcoin’s resilience and growing institutional interest have fueled optimism among investors.

Out of the 11 spot Bitcoin ETFs approved by the Gary Gensler-led Securities and Exchange Commission (SEC) in January, 10 are actively trading and attracting significant inflows.

According to K33 data research, the nine newly approved spot Bitcoin exchange-traded funds (ETFs) in the U.S. now collectively manage more than 300,000 Bitcoin (BTC), valued at over $17 billion at the time the data was collected. This figure represents a new high for these funds, as it accounts for approximately 1.5% of the total 19.6 million BTC currently in circulation.

The newborn nine have amassed 300,000 BTC!

— Vetle Lunde (@VetleLunde) February 27, 2024

The latest data from the GBTC website reveals that Grayscale holds approximately 445,386.8454 BTC, valued at around $27.61 billion at press time. When considering the combined holdings of both the recently approved spot Bitcoin ETFs and Grayscale’s assets, the total worth of the cryptocurrency held by these entities stands at around $43 billion.

Notably, the total mentioned does not encompass the holdings of Grayscale, which converted its longstanding Bitcoin Trust (GBTC) into a spot Bitcoin ETF following approval by the SEC. You might also like:

Bitcoin ETFs fueling investor demand

While the debate over the impact of ETFs on Bitcoin’s price continues, other factors have also influenced the asset’s solid performance thus far.

A vast array of fund managers are swiftly acquiring the virtual currency in response to client demand, as investors seek to purchase ETF shares that mirror the underlying price of the asset.

Among the newest batch of Bitcoin ETF operators, BlackRock, the world’s largest fund manager, leads with assets under management exceeding $7 billion.

[1/3] Bitcoin ETF Flow – 26th Feb 2024

All data in. Strong day with $520m net inflow

Total net inflow since 11th Jan is $6,030m.

— BitMEX Research (@BitMEXResearch) February 27, 2024

According to FactSet, trading volume for the iShares Bitcoin Trust (IBIT) surged on Feb. 28, with approximately 96 million shares traded, more than double its previous record of about 43 million shares set on Feb. 27.

These ETF products have proven immensely successful as investors, previously unable to access Bitcoin in a secure and regulated manner, now gravitate towards the space.

Conversely, sceptics warn that the introduction of a Bitcoin ETF could exacerbate volatility and speculative trading, leading to unpredictable market dynamics. They cite concerns about market manipulation, lack of oversight, and the potential for investor losses as reasons to proceed with caution.

Bitcoin Halving: a catalyst for price surges

The Bitcoin halving event, occurring approximately every four years, has significantly influenced Bitcoin’s price trajectory and market dynamics over the years. During each BTC halving event, the reward for mining new blocks is halved, effectively reducing the influx of new coins into the market and impacting its supply.

Historically, Bitcoin halvings have heralded substantial price rallies. Following the 2012 halving, Bitcoin’s price surged by 80-fold, while post-2016 halving, it witnessed a 300% rise. Notably, in the 16 months after the 2020 halving, Bitcoin’s price skyrocketed by over 600%.

Many analysts and experts are optimistic about the potential of the upcoming halving to propel Bitcoin’s price to new all-time highs. Forecasts predict a surge to at least $130,000 by the close of 2024.

Not everyone agrees.

JPMorgan, for example, expects Bitcoin’s price to drop to $42,000 after the halving.

For those who are unaware, the halving event serves to maintain Bitcoin’s scarcity and prevent excessive price inflation. By reducing mining rewards from 6.25 Bitcoins per block to 3.125 BTC, the halving further accentuates Bitcoin’s scarcity and aligns with its deflationary principles.

This scarcity-based model underpins Bitcoin’s controlled supply mechanism, ensuring that only 21 million BTC will ever be in circulation.

As of the time of writing, Bitcoin is exchanging hands for $62,413, with a market cap of over $1.2 trillion. Whether the bullish predictions of analysts concerning a significant ATH for the world’s flagship crypto will come to pass in 2024, remains to be seen.