Author: China Asset Management Hong Kong
A review of crypto assets in the first half of 2024
The U.S. spot Bitcoin ETF was approved on January 10, 2024, and the Hong Kong spot Bitcoin and Ethereum ETF was approved on April 29, 2024.
Bitcoin halving milestone on April 20, 2024
The Bitcoin miner reward halving event occurs every time an additional 210,000 blocks are mined, which happens approximately every four years. This year's halving event will take place on April 20, 2024. This event will reduce the total issuance of Bitcoin from 900 Bitcoins per day (annual issuance rate of 1.8%) to 450 Bitcoins per day (0.9%). Approximately 13,500 Bitcoins will be added to the total supply each month.
Halving events continue on the same schedule until 21 million Bitcoins are mined, which is expected to happen around 2140.
Figure 1: Historical Bitcoin halving timeline
US spot Ethereum ETF approval process has made a major breakthrough
On May 23, 2024, the U.S. Securities and Exchange Commission (SEC) approved the 19-b4 filing applications of VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK21Shares, InvescoGalaxy and Bitwise, which is equivalent to giving the green light to the issuance and listing of the spot Ethereum ETF.
If the U.S. Securities and Exchange Commission (SEC) follows a similar timeline to the spot Bitcoin ETF process, a spot Ethereum ETF could be launched as early as early July, according to analysis by Bloomberg ETF analysts.
Figure 2: Bitcoin and Ethereum price trends year to date
Active Bitcoin supply is on a downward trend in the second quarter of 2024
Historical data shows that the decline in active Bitcoin supply, which is the number of Bitcoins that have been traded in the past three months, usually lags behind local price highs, indicating a slowdown in market trading volume. Active Bitcoin supply fell from a local high of 4 million Bitcoins in early April to 3.1 million Bitcoins in early June.
At the same time, however, Bitcoin’s inactive supply, or the amount of Bitcoin that has not been moved in a year, has remained stable year to date. We believe this indicates that recent market enthusiasm has faded somewhat, although long-term cyclical investors remain wary.
Figure 3: Bitcoin supply vs price
Market focus on long-term Bitcoin holders
The market value to realized value (MVRV) ratio for long-term holders is close to 3.5, which consolidates the Bitcoin bull market to a certain extent, but has not yet entered the historical "mania phase".
In the past two weeks (June 5 to June 19), long-term large holders sold $120 million.
Figure 4: Bitcoin: Ratio of market value to realized value for long-term holders
The number of active and new Bitcoin addresses is declining.
Current state of the Bitcoin market
The U.S. Bitcoin spot ETF saw outflows of approximately $64 million, $200 million, and $226 million on June 10, 11, and 13, respectively, which led to weakness in Bitcoin prices.
Figure 5: Total cumulative inflows into US Bitcoin spot ETFs
Bitcoin Market Outlook
The 21 basis point adjustment in the 10-year U.S. Treasury yield between 4.43% on June 7 and 4.22% on June 14 is a favorable factor for all risky assets, especially Bitcoin. This means that investors’ demand for risky investments has increased, including demand for Bitcoin.
The Bitcoin Miner Stock ETF (WGMI) is one of the leading indicators of Bitcoin prices, and the indicator shows an upward trend. During the week, the price of the Bitcoin Miner Stock ETF rose by 21%. This shows that smart money continues to actively buy Bitcoin when the price is weak, expressing positive confidence in the future trend of Bitcoin.
The progress of the U.S. Securities and Exchange Commission (SEC) in approving a spot Ethereum ETF has had a positive impact on the market and further boosted Bitcoin's performance.
The current bubble in the Bitcoin market has not yet reached its historical peak, and Bitcoin may have the potential to rise further.
In summary, although Bitcoin prices have weakened at certain times, a series of positive factors are still supporting the Bitcoin market. Investors can continue to pay close attention to the impact of these factors on Bitcoin prices and carefully evaluate risks and returns to formulate corresponding investment strategies.
In addition, we are also closely watching the impact of the US election in November on digital assets. If Trump comes to power again, he will adopt more supportive crypto regulatory policies, which may have a broadly positive potential impact on the crypto market.
Ethereum Market Outlook
Recently, Bloomberg ETF analyst Eric Balchunas said on Twitter that the listing date of the Ethereum spot ETF may be advanced to July 2. This news has aroused widespread attention and discussion in the market.
According to a report by Standard Chartered Bank, Ethereum may usher in a large-scale ETF-driven inflow, referring to the situation after the approval of the Bitcoin ETF. It is expected that within the first 12 months after approval, the spot Ethereum ETF will bring in about US$15 billion to US$45 billion.
Figure 6: Spot Ethereum ETF forecast inflows over the next 12 months
Recently, everyone in the market has been paying attention to the decline in inflation data and the hawkish policy stance of the Federal Reserve, which seem to have sent some mixed signals to crypto assets. The U.S. Consumer Price Index (CPI) has fallen year-on-year for the second consecutive month. The continued downward trend in inflation data will be beneficial to the prices of crypto assets. And Federal Reserve officials have adjusted their expectations for future interest rates, predicting two rate cuts in 2024, exceeding the previously widely predicted one rate cut, which will further drive the rise of risky assets.
While the Fed has been pushing up long-term interest rates, the upward trend in 10-year Treasury yields has been broken, showing that the market is anticipating a looser monetary policy. Although low inflation may allow the Fed to adjust its policy response, the Fed's stimulus measures are expected to further boost crypto asset prices by the end of 2024.
