Key Insights:
Bitcoin made a new all-time high of $69,170 and quickly reversed back to $62K between March 5-6, 2024. The reversal seems mostly due to the profit booking in the markets, and subsequent shorting at the all-time high (ATH) price.
However, prices are not expected to come crashing down like last time due to the presence of the upcoming halving event, ETF inflows, and the presence of steady long-term investors.
We have divided the article into three phases showing how ETFs propelled the price, how long-term investors stabilized the markets, and how the halving event can push the prices further up.
The last all-time high of Bitcoin was in November 2021, when the cryptocurrency scaled to a price of $69k, only to fall in a downtrend for the next year.
The new ATH was created on March 05, 2023, after 16 months (Nov 10, 2021 – Mar 05, 2023).
In the intervening time, several developments have occurred in Bitcoin's technology as well as in its adoption. The community saw the birth of Ordinals, BRC-20 tokens, and even blockchain games in Bitcoin's network.
One of the primary reasons why Bitcoin rose so fast in 2023 was because of Spot ETF speculations. After recovering from lows of $15.8k in Jan and Feb 2023, Bitcoin remained subdued near $25k price range until Blackrock surprised the markets with its spot Bitcoin ETF application.
It was estimated that the investment by Blackrock could alone be around $2 billion. Even that was an underestimate.
Bitcoin ETF Tracker by Blockworks shows that the Bitcoin ETF market is roughly $50 billion as of March 06, 2024, with BlackRock alone accounting for $10 billion in AUM.
Spot ETFs have witnessed up to $300 million in inflows per day since their launch. These ETFs not only lend regulatory approval for retail subscriptions but also lend credibility to Bitcoin for institutional purchase.
Only a few companies made considerable Bitcoin investments before Spot ETF approval. A couple of well-known names were Grayscale (as GBTC Trust) and Microstrategy.
Now that it's beyond any regulatory capability to ban Bitcoins, newer institutions are starting to foray into these markets. Among them, JP Morgan would probably be the biggest buyer shortly.
Institutions have started adding large capital which is visible through the large transactions being made on Coinbase. In the recent couple of weeks, the average transaction size has increased. Note the spike in the blue line which represents the average transaction size in Coinbase.
Also, following the lead of these corporations, hedge funds, family investment offices, PE funds, and even Pension funds could enter the markets.
An analysis by Glassnode revealed that most of the wallets that were in profit actually belonged to long-term investors. On average, these long-term investors are sitting on roughly 228% in profits.
The analysis also explains how the conclusion was made.
Short-term holders (STH) realized price sits at $45.8K i.e., they have bought Bitcoin at the average price of $45.8k. Now, the same figure for long-term investors sits at $20.7k and the average price for the whole market is at $24.4k.
This clearly shows that the weightage of long-term investors is more in the realized prices which point towards their domination.
Halving is the phenomenon that limits the price of new Bitcoins entering the markets. A unique price pattern that is repeated around each halving cycle shows that after the halving, a meteoric rise in prices is almost sure. The same has already occurred in the past three halvings in 2013, 2016, and 2020.
The rise of prices post-halving is confirmed by yet another crypto analyst Rekt Capital. The firm specializes in Quant courses and Blockchain Analytics, and has identified a pattern that it calls the "Macro Diagonal".
The Macro Diagonal theory states that Bitcoin's price goes through six different steps (a cycle) during the halving period.
They are listed below.
Till now we have already observed a pre-halving rally which took Bitcoin prices to a new all-time high. This rally made a few super-large bullish candles on the daily charts as shown below.
We anticipate that this pre-halving rally has finished and the next phase, the Pre-Halving retrace might have started. If so, Bitcoin might retrace its price to around $55K-$60K before starting another rally toward $100k after the halving in April 2024.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.