Bitcoin
4 reasons to bet on Bitcoin ETFs for the rest of 2024
The cryptocurrency market experienced a lackluster April after a strong rally in the first quarter that took Bitcoin (BTC) to a new all-time high of $73,750. Last month (on May 9, 2024), Bitcoin fell by around 11%. The increase in the geopolitical crisis can also be blamed for this crisis. The decentralized nature of cryptocurrencies allows for quick reactions to geopolitical events, even faster than stocks.
The April drop may be temporary. Investor interest in Bitcoin is unlikely to wane. iShares Bitcoin Trust IBIT accumulated around US$1.62 billion in April, despite the drop in the price of bitcoin. IBIT’s 71-day streak of inflows ended in April, but it is still poised to become the largest spot Bitcoin ETF. Currently, IBIT has an asset base of over $17 billion.
In this context, we highlight below some factors that may favor investing in Bitcoin or cryptographic ETFs.
Bitcoin Halving to Boost Prices
One of the main reasons behind the volatility and decline in Bitcoin’s price was the recent halving event that took place last month. The Bitcoin halving event happens once every four years. Following the recent completion of the Bitcoin halving in April, there is widespread speculation that the dwindling supply of Bitcoin could result in a price increase for the cryptocurrency in the coming months due to increased scarcity.
Bitcoin has a fixed supply (21 million). Consequently, the demand for new Bitcoins increases, driving up prices. However, analysts argue that, as the timing of the halving is anticipated, its effects are already priced in and are not disruptive.
Arrival of Bitcoin ETFs increases cryptocurrency stability
Since the launch of the first Bitcoin ETFs on January 11, the asset has risen more than 50%, even reaching a record high of just under $74,000. ETFs represent a milestone in Bitcoin’s journey, offering retail and institutional investors a regulated and affordable way to invest in the cryptocurrency. This development not only increases liquidity, but also contributes to price stability.
Does Bitcoin perform well amid inflation?
Bitcoin is often touted as a hedge against inflation. Bitcoin has a fixed supply. This measure contrasts with traditional fiat currencies, which central banks can issue in unlimited quantities. Therefore, in times of inflation, the value of fiat currencies tends to fall. Meanwhile, some market observers view Bitcoin as a store of value due to its limited supply, which can preserve wealth amid high inflation. That being said, we would like to note that the crypto space is extremely volatile.
The story continues
Crypto creating wealth effect?
Cryptocurrencies have been making headlines lately as early investors take advantage of newfound wealth. Investors should note that early cryptocurrency investors saw life-changing wealth, but its impact on spending – known as the wealth effect – was not as generous as lottery winnings.
But over a decade, cryptocurrency windfalls increased household consumption by $30 billion, according to one study, with every unrealized dollar generating nine cents in spending. The number is almost double the marginal propensity to consume when it comes to stock market returns. It has also been noted that some of the sudden wealth generation from crypto goes into the real estate sector, boosting markets in crypto-friendly areas, according to Bloomberg, as cited in the Economic Times.
ETFs in focus
In this context, investors can track ETFs like Bitcoin Trust in Grayscale GBTC, Ibit, Fidelity Wise Origin Bitcoin Fund FBTC, ARK 21Shares Bitcoin ETF ARKB and Bitwise Bitcoin ETF Trust BITB.
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Grayscale Bitcoin Trust ETF (GBTC): ETF Research Reports
iShares Bitcoin Trust (IBIT): ETF Research Reports
Fidelity Wise Origin Bitcoin Fund (FBTC): ETF Research Reports
ARK 21Shares Bitcoin ETF (ARKB): ETF Research Reports
Bitwise Bitcoin ETF (BITB): ETF Research Reports