Bitcoin Soars 67% in Q1, Reaches All-Time High
Bitcoin experienced an astonishing 67% surge in the first quarter, reaching a new all-time high. This increase was mainly driven by the unprecedented demand for spot ETFs. Investors are now looking for the next catalyst, which could come through other channels to obtain ETFs. The upcoming halving event will also have a significant impact on the price. Despite a slow start, ETFs have ultimately been a huge success this quarter. Canadian spot ETF outflows of $420 million may flow back into US ETFs. Bitcoin has reached a new all-time high, with hash rate and transaction fees also rising. The halving event on April 20th will reduce the daily supply by half, which will have a significant impact on miners but limited effects on traders and investors. Demand is increasingly impacting the value of Bitcoin, and historical data shows that halving events play a crucial role in shaping the Bitcoin price cycle. Join our webinar to delve into these events and gain expert insights.
Original Title: Research Weekly – 1Q24 Review and Look Ahead
Original Author: Greg Cipolaro
Original Source: NYDIG
Translation: Lynn, Huoxing Finance
In today’s edition:
Bitcoin soared 67.0% in the first quarter, driven by unprecedented demand for spot ETFs.
Bitcoin hit a new all-time high amid explosive growth in ETF demand, recovering from the drop since November 2021 faster than previous cycles.
Although these ETFs had a bumpy road, their total AUM has accumulated to $12.1B, making overall and individual issuances of IBIT the best-performing in ETF history.
As of the end of this quarter, the AUM of US spot Bitcoin ETFs reached $59.1B. In comparison, the AUM of US spot gold ETFs at the end of this quarter was $98.2B.
US spot Bitcoin ETFs created a ripple effect. Canadian spot Bitcoin ETFs lost $424 million in assets, while leveraged futures funds accumulated $1.0B in assets during the price surge.
Surprisingly, US Bitcoin futures ETFs held their ground, losing only $55.2 million in assets, including the liquidation of one fund.
GBTC investors redeemed $14.8B in this quarter, and while daily outflows have slowed down, strategic questions remain about what Grayscale will do next.
Investors are looking for the next catalyst, which may include increasing opportunities to obtain ETFs through various investment channels, such as wirehouses.
With the halving just weeks away, this event is more important for miners than the price, as the reduction in supply is relatively small in terms of trading volume.
However, the halving has always been a significant marker in the Bitcoin price cycle, and if history repeats, it suggests investors can still expect some attractive returns.
Strong start to the year driven by ETF inflows
Bitcoin experienced an impressive 67.0% surge this quarter, making it one of the most impressive first quarters to date. This surge was primarily driven by the huge demand for recently launched spot Bitcoin ETFs. Despite a slow start and then a turnaround of outflows, spot ETFs, particularly IBIT, have been the best-performing ETFs in history. Retail and advisor interest poured in, previously hesitant to invest in spot Bitcoin through other channels but now driven by the surge in demand.
Most other asset classes performed well this quarter, supported by a backdrop of low unemployment, strong economy, and inflation that, while not eliminated, is far below its peak. The market has yet to deliver on its anticipated rate cuts, as the market has been expecting the FOMC to cut rates “6 months from now” for over a year. Given the inflation data, we do not believe the Federal Open Market Committee will deliver on this expectation, but considering the performance of risk assets over the past year, it doesn’t seem necessary for the strong performance of Bitcoin, stocks, gold, and real estate.
Seasonal delivery in the first quarter
Historically, Bitcoin has performed well in the first quarter, and this trend continues this year. The first quarter of 2024 is the fourth-best first quarter in Bitcoin’s history and the second-best since 2013, setting a positive tone for the year ahead. While the launch of ETFs has brought significant boosts, the upcoming halving will also play a crucial role in the price cycle. Although the reduction in supply from the halving is substantial (equivalent to 450 Bitcoin per day or $31.5 million per day at $70,000 per BTC), its impact may not be as significant as the surge in demand brought about by the introduction of ETFs.
Increasing correlation, but still at a low level
Bitcoin’s correlation with other major asset classes, such as stocks and the US dollar index, has increased from near-zero levels at the end of 2023 (in absolute terms), but has decreased compared to gold. However, we believe this shift is not of great significance, as the 90-day rolling correlation of Bitcoin has historically fluctuated between +0.3 and -0.3. The monetary and fiscal interventions taken to address the Covid-19 crisis have altered the relationship between Bitcoin and other assets, but this change appears to be temporary. With the era of money printing and rate hikes to combat inflation behind us, Bitcoin’s long-term correlation is showing signs of returning to historical average levels.
Events impacting this quarter
ETFs dominate the first quarter
Undoubtedly, the most notable moment of this quarter was the approval and launch of spot ETFs in the US. It was an event full of unexpected twists and turns:
SEC’s Twitter account was hacked, prematurely announcing approval, then getting approved before the final decision deadline, initially seeing lower-than-expected inflows, leading to outflows, and then a significant turnaround. It was the strongest inflow since the launch of ETFs. As we end the first quarter, it is clear that ETFs, both overall and individually, have been a tremendous success.
With that in mind, we would like to share the end-of-quarter results regarding ETF performance overall and individually. At first glance, all ETFs experienced inflows, except for GBTC showing only outflows, and BTCO having redemptions on certain days, which may be related to Galaxy’s selling activity. ARKB had a single-day outflow on April 2nd (Tuesday), marking the first true outflow among non-GBTC and BTCO ETFs.
BlackRock and Fidelity lead the challengers
The net inflow total for the ETF industry this quarter reached a staggering $12.1B. Interestingly, while GBTC faced $14.8B in outflows, nine “challenger” ETFs attracted a massive net inflow of $26.9B. GBTC continues to maintain its leading position in terms of AUM, followed closely by BlackRock’s iShares fund (IBIT) ranking second, and Fidelity (FBTC) ranking third. Notably, crypto-native firms ARK, 21Shares, and Bitwise occupy the fourth and fifth spots, showcasing impressive marketing capabilities. This success has put them ahead of well-known firms such as VanEck, Invesco, and Franklin Templeton.
BITO and futures funds perform well
Following the launch of spot ETFs, BITO and other Bitcoin futures-based ETFs have shown surprising resilience. Despite having a higher expense ratio (0.95%) compared to spot ETFs (excluding GBTC), along with carrying costs and spot tracking errors, investors only redeemed $55.2 million from futures funds. The recently closed VanEck Bitcoin Strategy ETF (XBTF) is a casualty in the competitive ETF landscape, but the AUM for Bitcoin futures ETFs remains as high as $3.1B. This highlights investors’ recognition of the value of being a first-mover and the potential importance of the derivatives market, particularly as spot ETFs are still awaiting options trading approval.
Leveraged futures funds rise from obscurity
Before the launch of spot ETFs, Volatility Shares’ 2x Bitcoin Strategy ETF (BITX) managed assets of $222.5 million. In comparison, BITO had $2.2B in AUM at that time. This quarter, leveraged futures funds (such as BitX and the newly launched BFTX in February) accumulated over $1.0B in assets. As of the end of this quarter, these leveraged futures funds, with a leverage ratio of 2x, currently hold more CME-traded Bitcoin futures than BITO. It is evident that investors are inclined to choose funds like BitX to capitalize on market trends, considering the fund’s expense ratio of 1.85%, which is especially notable.
Investors exit Canadian ETFs
Fascinatingly, US investors found refuge in Canadian spot ETFs, which emerged in February 2021 as viable alternatives to US options like GBTC. Recent quarterly data shows that these funds saw outflows of $423.6 million, reflecting the interest of US investors. Our speculation is that a significant portion of these funds may have flowed back into US ETFs.
The Grayscale puzzle
As one of the most closely monitored funds in the market, GBTC has drawn widespread attention due to its product-related outflows. When ETF trading began, GBTC had a significant advantage with an AUM of $28.6B. However, it did have a clear disadvantage with a 1.5% expense ratio, five times higher than its closest competitor. By the end of this quarter, after dealing with $14.8B in redemptions, GBTC’s lead in AUM has significantly narrowed to $23.6B, with IBIT at $17.8B. We estimate that $4.8B of the redemptions are related to the settlement of Genesis bankruptcy, the Gemini Earn program, and FTX bankruptcy, while the remaining $10.1B comes from redemptions by other GBTC holders. The pressing question is when these redemptions will stop and what strategy Grayscale should take to address this effectively.
It is worth noting that redemptions seem to have slowed down recently, with daily outflows ranging from $75 million to $82 million over the past three days. This is a significant decrease compared to the average daily outflows of $318.1 million in March. Although the growth rate has significantly slowed, accurately predicting the total outflow from an external perspective remains a challenging task, which is why we have not made specific predictions.
In many ways, Grayscale holds the key to shaping its future. While it may lower fees to compete with industry giants like BlackRock and Fidelity, this move may not be financially optimal considering the widespread fee structure of competitors. Despite someAs a professional translator, I will translate this news article into English using a descriptive tone. I will ensure accuracy and fluency in the sentences, while also retaining proper nouns and all 
references. I guarantee that the meaning remains the same and there are no grammatical errors. Please note that I will not add a period at the end of the translation. Here is the translation:
Companies offer fee reductions or no fees at all, but their standardized fee ratios are still significantly lower than GBTC’s 1.5% fee. Grayscale plans to introduce a low-fee version of GBTC under the BTC code, similar to how GLD/GLDM and IAU/IAUM operate in the gold ETF market. This is a step in the right direction. However, the launch of this product may face delays as it requires approval from the SEC. Perhaps that is why recent comments from Grayscale’s CEO suggest that they may be considering lowering GBTC fees after initial resistance.
Solving the 2022 Problems
As we look back on the past quarter, it is clear that significant progress has been made in addressing the challenges that arose during the 2022 crash. From Sam Bankman-Fried’s ruling to Gemini’s commitment to fully reimburse Earn investors, and with CZ’s imminent ruling, the cryptocurrency landscape is undergoing a wave of closures and advancements. Additionally, companies like Genesis, Celsius, BlockFi, and FTX have demonstrated commendable dedication in successfully navigating bankruptcy proceedings. This period marks a turning point for the industry, showcasing resilience and determination in overcoming obstacles.
Bitcoin Sets New All-Time High
On Tuesday, March 5th, Bitcoin broke through the $69,000 mark and set a new all-time high, marking a historic achievement. This remarkable milestone signifies a recovery from the 846-day downtrend that began on November 10, 2021. Following the new high, Bitcoin continued to reach $73,835.57 (on Coinbase), indicating that it is not yet ready to slow down. Our analysis of blockchain data from previous cycles suggests that there may be more exciting things to come.
This recovery is far ahead of previous retracement recoveries. The recoveries from the previous two cycles occurred 778 days and 716 days after the bottom, respectively, while this cycle’s recovery occurred only 470 days after the bottom. In this sense, this recovery is “ahead of” the normal recovery we expected. Nevertheless, the previous two recoveries did not have the strong catalyst of a US spot ETF.
Hashrate Continues to Rise
Bitcoin’s hashrate, a measure of the collective computing power of miners, continued to rise by approximately 15% this quarter. This is due to the economic benefits for miners resulting from the price increase. Transaction fees have fallen from the highs driven by inscriptions/serial numbers that we saw last year.
Despite the continuous increase in hashrate, Bitcoin’s hashrate price (i.e., the reward miners receive for their hashing work) experienced a significant increase this quarter. This can be attributed to the 67.0% price increase this quarter, far surpassing the 15% growth in hashrate. As the inscription/serial number trend declined from its peak, the transaction fee hashrate price (the fee miners earn from transaction fees) has returned to more typical levels. Nevertheless, the hashrate price has remained stable at around $100/PH/s.
Inscription Frenzy Slows Down
As the digital asset world continues to evolve, Ordinals launched a groundbreaking experiment a year ago that completely changed the way data is encoded on the Bitcoin blockchain. Starting with primarily image-based NFTs, this innovative approach paved the way for the emergence of BRC-20 in the spring of 2022, introducing fungible assets on Bitcoin, particularly in the realm of limited utility memecoins. Undeniably, memecoins have been a popular trend in this cycle, although the popularity of BRC-20 has declined despite its initial attention.
Regulatory Updates
This quarter saw several significant regulatory updates, with the most prominent one being the approval of a US spot Bitcoin ETF. Two other important updates are related to ongoing court cases. In the SEC’s lawsuit against Coinbase, the judge denied Coinbase’s motion to dismiss most of the charges, including acting as a clearinghouse, broker, and exchange, as well as providing unregistered securities services under its custody. In the SEC’s Ripple case, the agency is seeking a $2 billion fine and penalties for violations related to the sale of unregistered securities. Lastly, many sponsors are hopeful for the approval of a spot ETH ETF and have submitted applications that will require a response from the SEC starting in May.
Cryptocurrency Company Stocks Soar, While Mining Stocks Decline
“Cryptocurrency companies,” especially Coinbase, MicroStrategy, and Galaxy Digital, experienced significant stock price increases in the first quarter, as the value of assets and operational business related to cryptocurrency prices may have improved during this period. On the other hand, stocks of Bitcoin mining companies continue to underperform. Our speculation is that some of this may be attributed to concerns about the upcoming halving, while others may be due to the dilutive effect of stock issuances in the industry.
First Sign of Token Transfer by Long-Term Holders
One key metric we analyze is the ownership duration of Bitcoin and the percentage of Bitcoin held for a year or longer without being transferred. This data provides valuable insights for timing the market cycles. When prices rise, long-term holders tend to transfer their tokens, potentially selling them, while during price declines, long-term investors hold onto their tokens. In the last quarter, we observed a slight decrease in the percentage of Bitcoin held for over a year, indicating that long-term holders are starting to transfer their Bitcoin. This trend is a positive signal for the continuation of the cycle, as this ratio has not experienced a significant decline seen in the peaks of the previous three cycles.
Looking Ahead, the Fourth Halving is the Next Major Event
The upcoming Bitcoin halving event on April 20th marks an important milestone, as the block subsidy for miners will decrease from 6.25 Bitcoin to 3.125 Bitcoin. This adjustment will halve the daily production of Bitcoin, reducing it from 900 Bitcoin to 450 Bitcoin, which means the daily supply will decrease from $63 million to $31.5 million at a Bitcoin price of $70,000. While this reduction is more significant for miners who heavily rely on block subsidies, its impact on traders and investors is relatively limited. The daily addition to supply will decrease by $31.5 million, representing only a small fraction of the global spot trading volume, which reaches billions of dollars daily.
In terms of investor interest and price movements, the focus should be on the demand side. Recent trends such as net inflows into ETFs highlight the increasing importance of demand dynamics in influencing Bitcoin’s value.
While the halving event may not immediately serve as a price catalyst, historical data shows that it plays a crucial role in shaping Bitcoin’s price cycles. Typically, there is a preparatory phase before the halving, followed by substantial returns afterward. Given the positive price performance leading up to the current halving, investors have reason to be optimistic about Bitcoin’s future potential.
ETF Access Unlocked
The flow of funds into and out of the spot ETF complex will be closely monitored in the future. One of the most common inquiries we receive regarding ETFs is about the investors behind these funds. Based on our observations, retail investors seem to be the primary buyers, followed by registered investment advisors (RIAs), family offices, and hedge funds. While asset management firms are responsible for creating these ETFs, it is worth noting that they are typically not the ones purchasing these ETFs. Currently, brokers may or may not offer access to these ETFs to their brokerage clients. However, the potential for advisors to add them to their clients’ separately managed accounts presents incremental opportunities. Additionally, incorporating allocations into clients’ model portfolios can further enhance the appeal and utilization of these ETFs.
Ethereum ETF and Bitcoin ETF Options as Key Regulatory Events
With the approval of a Bitcoin spot ETF in January, there has been excitement about the potential for an Ethereum spot ETF. Essentially, all the same Bitcoin spot ETF sponsors have submitted applications to the SEC for Ethereum spot ETFs, including BlackRock, Fidelity, and Grayscale. Unfortunately, the likelihood of approval is not high, despite the existence of Ethereum futures trading on the CME. There are still six weeks remaining until the final deadline for SEC response to the earliest applications, and we see no meetings between the SEC and issuers on this matter. We saw at least two rounds of meetings between sponsors and institutions before the launch of the Bitcoin spot ETF.
Another regulatory item we have been monitoring is the approval or rejection of allowing options on spot ETFs. Many exchanges have submitted 19b-4s to list and trade options on various ETFs. If these filings follow the normal 240-day approval timeline for other 19b-4s, then September 21st will be the final deadline for the SEC to respond, potentially in coordination with the CFTC. We believe the approval of options will not have a significant impact on ETF flows or AUM, but it may alter trading volumes and potential intraday spreads with increased demand for Delta hedging.
Join Our Quarterly Webinar
Join us on Thursday, April 11th at 10:30 AM Eastern Time as we delve deeper into all these events and gain further insights from the subject matter experts at NYDIG. Engage in a content-rich discussion with Global Head of Business Development George Kirchner, Global Head of Sales and Trading Pete Janney, Global Head of Public Policy and Regulatory Affairs Ben Lawsky, and Global Head of Research Greg Cipolaro. Secure your spot by registering below.
Tags:
2023 Market Trend
BlockFi
BRC
Celsius
ETF
Genesis
NYDIG
SEC
Ethereum
Bitcoin
Bear Market
Bull Market
Market Trend
CZ
Source link:
https://news.marsbit.cc/20240409084734967860.html
Note: The views expressed in all BitPush articles are solely those of the author and do not constitute investment advice.
Original article link: https://www.bitpush.news/articles/6588043
Related News
Who is the leader, and what concept stands out? Quick analysis of the top ten popular rune data and stories
Rune frenzy begins, inventory of 8 potential runes
IMF Breakthrough: Bitcoin is a necessary financial tool
Galaxy Digital: Cryptocurrency Weekly Commentary – Halving, Stablecoin Regulation, Lido, and Data
Bitcoin fees soar after halving, understanding the game mechanics behind runes