By Kyle Torpey
Compiled by: Vernacular Blockchain
Key Takeaways
Crypto bulls say Bitcoin may have room to rise as demand for spot Bitcoin ETFs and the halving effect may not have fully materialized yet.
Some industry observers believe that while a spot Ethereum ETF would certainly see demand when it launches, it is unlikely to achieve the same level of success as the Bitcoin version.
Regulatory clarity remains a key hurdle, and investors are closely watching statements from presidential candidates and recent developments for clues.
Bitcoin has climbed more than 30% this year, with demand for ETFs that hold the leading cryptocurrency helping to propel its price higher. But bitcoin prices have cooled recently, retreating from record highs hit earlier this year.
The trend continued in the previous day, with Bitcoin trading below $57,000, having traded above $73,000 in March.So what does the outlook look like for the rest of 2024?Bullish investors say further demand for crypto-focused exchange-traded funds could push prices higher.But other problems are lurking.
1. Demand for Bitcoin and Ethereum ETFs could boost cryptocurrencies
Demand for spot bitcoin (BTC) exchange-traded funds, which began trading in January, has supported the cryptocurrency this year. Bulls believe the effect has yet to fully materialize.
According to Farside Investors, these new ETFs have seen net inflows of more than $14.4 billion. Currently, most of the money flowing into Bitcoin ETFs is coming from self-directed investors, and market observers believe that as financial advisors become less apprehensive about recommending crypto products, further demand could arrive, boosting Bitcoin itself.
“We haven’t seen a lot of institutions, like pension funds or endowments, participate in these ETFs,” said James Seyffart, an analyst at Bloomberg Intelligence. “To me, that suggests there is a real potential area for demand growth.”
Investors widely expect an Ethereum (ETH)-based ETF to come to market this year: The Securities and Exchange Commission is expected to approve a single ETF application by the end of the summer. This could increase demand for the cryptocurrency.
Bitwise CIO Matt Hougan estimates that Ethereum ETFs will see $15 billion in inflows in their first 18 months. Meanwhile, Seyffart expects them to attract 20% to 25% of the volume that Bitcoin funds attract in their first few months.
“We don’t think an Ethereum ETF is going to be as big of a splash as the Bitcoin ETF, which broke a lot of different records in terms of inflows, assets, and volume,” Seyffart told Investopedia.
Growing demand for ETFs and Bitcoin itself could mean higher prices, especially as the cryptocurrency’s supply approaches its 21 million cap.
2. Elections and other issues of concern
Other topics worth watching in the cryptocurrency space this year include:
1) Presidential Election
Donald Trump’s presidency has been more explicit in his support for cryptocurrencies than before. President Joe Biden’s administration is seen as supporting stricter regulation, though some industry observers interpret the recent decision not to file a lawsuit against Ethereum 2.0 as a sign that opinions are evolving.
“I give a 0% chance of ‘clarity’ before the election, and if there is a legislative framework it will be next year at the earliest,” said Sarah Brennan, general counsel at Delphi Ventures.
2) The aftereffects of Bitcoin halving
Bitcoin halvings — when the number of new bitcoins generated is cut in half every about 10 minutes — have historically had a positive impact on its price, lasting anywhere from about 370 days to 550 days, according to analytics firm CCData.
The last halving took place about six months ago, but it was different from previous events because Bitcoin had already risen sharply before it. Analysts at Deutsche Bank and JPMorgan said much of the expected price gains had already been priced in ahead of the latest halving.
While recent volatility may support this theory, Bitcoin bulls believe this downtrend is temporary.
“It’s normal for such a price drop to happen after the halving — the halving is very bullish, but the bull run usually starts a few months later and is dictated by fundamentals,” Caitlin Long, founder and CEO of CustodiaBank, said in a Platform X post in late June.
3) Mt. Gox Allocation
This week, defunct bitcoin exchange Mt. Gox began distributing billions of dollars in bitcoin to former customers. The ultimate impact of this increased supply, which began hitting the market on Friday, is uncertain, with some seeing it as bearish and others believing the problem is overblown.
