|Get all the essential market news and expert opinions in one place with our daily newsletter. Get a full recap of the day’s top stories straight to your inbox. Register here !|
(Kitco News) – Speculation around the approval of a Bitcoin spot (BTC) Exchange-traded funds (ETFs) have been a major driver of the cryptocurrency market’s gains in 2023, particularly after BlackRock filed with the Securities and Exchange Commission in June.
Last week, BTC bulls challenged resistance at $38,000, supported by rumors that the SEC could potentially approve all applications currently on its docket, but Friday came and went without any approval, much to the dismay of the supporters of cryptography.
According to Martin Leinweber, digital asset product strategist at MarketVector Indexes, the delays were anticipated and he does not expect any of the applications to be approved in 2023.
But crypto traders won’t have to wait too long, he said, since the last day to decide on the ARK 21Shares application is January 10, 2024, and he is “not at all worried about the delays.”
“I still think it’s the main driver of crypto right now,” Leinweber said. “If you look at global flows into exchange-traded products like ETFs and ETNs, we’ve had over $1 billion in flows into Bitcoin products this year, with 80% of that coming in the last four weeks. “
“Investors are positioning themselves for the possible approval of a Bitcoin ETF filing,” he said. “And I think with the arrival of these huge distribution arms of BlackRock, Fidelity and Franklin Templeton, we will see additional flows. I don’t think this is a “buy the rumor, sell the fact” event like we saw with the Coinbase IPO or with Bitcoin Futures. I definitely think we’ll see additional streams coming into space.
Although he sees the long-term outlook for BTC as very positive, he warned that “we may see a slight sell-off in Bitcoin, as well as Ethereum,” as traders take profits following the recent ETF-inspired run. UPS.
“The Ethereum/Bitcoin pair is quite weak at the moment, so Ethereum is underperforming,” he said. “Next year, people will play with the Spot BTC ETF first, then the Ethereum ETF later.”
Asked about the source of Bitcoin’s momentum in early 2023, before the ETF filing frenzy, Leinweber said, “There’s still some advance going on,” whether it’s related to ETF applications or simply to more experienced crypto traders who are familiar with when the BTC market will bottom before its next halving.
In addition to the positivity generated by spot speculation on BTC ETFs, Leinweber highlighted the macroeconomic backdrop and an increase in global liquidity.
“If you think about global liquidity, it’s just the expectation that liquidity will increase,” he said. “And we had this very bearish stance last year with a weak stock market and a weak crypto market.”
“If you look at what fiscal dominance is globally, you also have to look at what the Fed, the ECB and other fiscal authorities are doing,” he said. “The United States is very in debt and the money is coming back. And so what you see now, especially with the anticipation of greater liquidity, is that crypto remains the highest beta asset when it comes to liquidity, followed by tech stocks.
Leinweber called the Bitcoin halving cycle “interesting” because it coincides with the global liquidity cycle.
“You did a reset in 2009 after the banking crisis. A reset of interest rates. And also the US dollar cycle, which is perfectly aligned with the halving cycle,” he said. “So maybe it’s the halving cycle.” I think it’s more about the macro cycle, which coincides with the halving cycle, but nonetheless, I think people will play on this, and it’s the perfect cocktail for another bull run l ‘next year.
“So you have the spot Bitcoin ETF. It’s possible the Fed will cut rates – at least that’s the market assumption, I think we priced in the first cut in May. And then there is the halving cycle,” he said. “It should be a great year in 2024 for crypto. At least that’s my hope.
Global debt problem
On the subject of rapidly increasing U.S. debt and whether debt levels are becoming a major factor in how countries around the world view the U.S. dollar, Leinweber noted that the debt issue ” is a global phenomenon.
“We have global debt. It’s in Japan, Europe and the United States,” he said. “In the United States, you have the advantage of having the world’s reserve currency. And so, as a currency issuer, technically you can’t default. You can just print more, but you already see it in the value of the dollar. I’m currently in New York and over time I’ve noticed that things are getting more and more expensive. The coffee is more expensive, but the coffee doesn’t get any better. It’s the same coffee, so the difference is a reflection of the fall in the value of the currency.
He pointed out that the United States has a debt-to-GDP ratio of 130%, the level Italy had at the time of the European debt crisis.
“Now Italy is much higher and no one cares about Greece anymore, so the debt issue is a global phenomenon, it’s just a relative approach,” he said. “People still feel safe with the dollar, but I think this is also one of the reasons why Bitcoin is gradually increasing.”
He pointed out that Bitcoin has seen a sharp rise since the Silicon Valley Bank crisis in early 2023, and said: “People are afraid of that, and to be honest, no one can tell you where the point is of seesaw.
“Japan has a debt of 250% to GDP and the interest rate is still less than 1%. They control the yield curve, but we see that their currency is devaluing a lot against the dollar,” he said. “It’s like the Ernest Hemingway quote: ‘How did you go bankrupt?’ Little by little, then suddenly. It’s a hockey stick. Nothing happens, and then suddenly you reach the tipping point. You have a triggering event, whatever it is.
He said it’s hard to know what that triggering event was, “but it’s the reason you should have gold and crypto.” These are bearer goods. I like analog and digital gold.
When asked about the price outlook for Bitcoin during the current bull cycle, Leinweber said he was unsure of the price BTC would reach and preferred to comment on the total market capitalization.
“So the last peak was three trillion,” he said. “I imagine we will see a total market cap of $10 trillion in the next cycle.”
When informed that several analysts, including Jamie Coutts of Bloomberg Intelligence, had also given a projection of $8-10 trillion for total market capitalization, Leinweber laughed and said: “Forget that number, it It’s already a consensus, so it will be different.
“It really depends on the success of the ETFs and the macroeconomic environment,” he said. “I think in terms of liquidity, let’s say the Fed cuts rates and renews QE. Who buys American debt? China no longer buys it. The Russians no longer believe it. The Japanese no longer buy them. Europe is issuing more debt. Everyone is issuing more debt.
“Central banks must therefore intervene,” he concluded. “And here we are. More liquidity, which is good for stocks and good for crypto. It’s beneficial to have access to the highest beta asset, which is crypto.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided. however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade any commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for loss and/or damage arising from the use of this publication.