For a moment, bitcoin surpassed the US$30,000 level, recording a 10% increase in a single day, only to fall back to the vicinity of US$28,000. We have seen this kind of volatility in the cryptocurrency market over the past months, suggesting that the biggest players of the so-called whales may be regularly buying this digital currency. This could be a result of preparing for the upcoming halving or waiting for the launch of the first ETF on BTC. What conclusions can we draw from the current market situation?
Analysis of BTC purchases
If we look at the price movements of bitcoin, we notice characteristic price increases, which often go hand in hand with a marked increase in trading volume. These are immediately followed by declines. This phenomenon occurs when large volumes of bitcoin are placed on the market in a low liquidity situation. This may suggest that someone is regularly acquiring significant amounts of this cryptocurrency. It is possible that this is related to the expectation of the launch of the first bitcoin ETF, which could trigger capital inflows from a number of new sources.
Source: BTCUSD, H4
Halving bitcoin as early as six months from now
Block halving involves a systematic reduction in the rate of production of new cryptocurrencies. In particular, this involves periodic events in which the rewards given to so-called miners for solving blocks are reduced. Halving plays a key role in the economic framework of cryptocurrencies, as it guarantees consistent coin issuance, according to a predictable decreasing rate. This controlled approach to monetary inflation is the fundamental difference between cryptocurrencies and conventional fiat currencies, which essentially have an unlimited supply.
Source: Nicehash
Why is this so important for the cryptocurrency market as a whole? Because historically, each halving has initiated another long-term cycle of cryptocurrency appreciation by drastically halving the supply of newly mined coins. Bitcoin alone accounts for 51% of the capitalisation of the entire cryptocurrency market. Will we see a cryptocurrency rally this time too?
BTC ETF what about it?
The reported firing of the cryptocurrency began after news was published on the X platform that the US Securities and Exchange Commission (SEC) had approved BlackRock's iShares spot bitcoin exchange-traded fund, or ETF. However, it quickly became apparent that this was just fake news, resulting in a return to previous levels.
What is the situation at the SEC regarding the cryptocurrency ETF? Efforts to introduce a US ETF investing directly in bitcoin took another step when the regulator decided not to appeal a court ruling that recognised its earlier refusal to allow the $16.7 billion Grayscale Bitcoin Trust (GBTC) to be converted into an ETF. The decision appears to have increased the chances of such an ETF being approved, hence investor expectations may arise. Other firms, including BlackRock, Fidelity, Ark Invest and many others, have also applied for a spot Bitcoin ETF, and approval processes appear to be ongoing. The SEC's final decision could pave the way for the introduction of new ETFs investing in BTC. It seems that this could be the factor that starts a new bull market for the entire cryptocurrency market. When will this happen? While it is difficult to pinpoint a specific date, it is safe to say that it will happen... sooner rather than later.
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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