The Secret Path of Traditional Finance Driving Up Bitcoin Prices

After eight weeks of gains in the crypto market, there has been a pullback. However, the author's enthusiasm for Bitcoin is even greater, as it is integrating into the traditional financial (TradFi) system.

The Rise of Passive Funds

Passive funds track specific market indices without seeking to outperform. Since 2009, they have developed rapidly due to reasons such as: low costs, algorithm-driven operations, low fees with high returns; easy access, integrating into distribution chains like 401(k); stable performance, with most actively managed funds underperforming their benchmarks over the past 15 years. Over the past decade, the assets in U.S. passive funds have quadrupled, and by December 2023, AUM exceeded that of active funds, prompting traditional finance to pay attention to Bitcoin ETFs, which may incorporate Bitcoin into retirement investment portfolios.

Cryptocurrency Investment Products

Index providers are slowly developing cryptocurrency indices, starting from single asset products. Bitcoin ETFs are gaining attention, and Ethereum staking ETFs are also in development. There is great potential for BTC hybrid products, such as a combination of 95% S&P 500 and 5% BTC, which is likely to be recommended, but promotion still requires time.

The Impact of MSTR

After MSTR was included in the Nasdaq 100 index, passive fund QQQ will buy in, and MSTR will use the funds to buy more Bitcoin. While it is challenging to be included in the S&P 500, new accounting rules in January 2025 may help it meet the criteria. As MSTR integrates into the traditional financial supply chain, traditional finance passive investments will unintentionally increase their Bitcoin holdings, impacting its price. #BTC $BTC