Bitcoin Spot ETF approval imminent, BTC to jump to $50,000

- by Markus Thielen

An ‘Explosive Bitcoin Surge to $50,000 Looms Large in January’ – Matrix on Target wrote on December 21, 2023. After the typical mid-to-end December consolidation, Bitcoin is poised to break out on a robust beginning-of-the-year buying flow.

A year ago, most market participants were bearish and therefore under-positioned. However, things turned out differently, with stocks and cryptocurrencies rising significantly. Institutional investors cannot afford to miss out on any potential rally again and, therefore, have to buy immediately when the markets open for trading in 2024. We expect an immediate rally that once again catches investors off-guard.

A potential Bitcoin Spot ETF approval could be announced today or tomorrow, ahead of most traders' expectations for approval on January 8, 9, or 10. If this occurs, we expect Bitcoin prices to rise significantly. Unlikely, this will be a ‘sell-the-news’ event as approval would legitimize Bitcoin as an asset class for institutional portfolios that could be used as collateral to buy other assets. Re-read our report from July 2023, ‘Unlocking the Superpower of Bitcoin in Asset Allocation’.

Instead, the risk might be on the upside as $5-10 billion dollars in fiat money might not find enough Bitcoin on exchanges to gain exposure for Bitcoin ETFs. After the 2022 bankruptcies and the FTX crypto exchange implosions, many Bitcoin holders have moved their BTC off exchanges, and familiarity with cold-storage options has increased. The result is that 70% of the outstanding Bitcoins have remained ‘unmoved’ during the last twelve months.

In October 2023, we estimated that a US-listed Bitcoin Spot ETF could see $24-50 billion dollars of inflows. We also estimated the potential Bitcoin price increase based on its relationship with Tether’s market cap change. This has kept us bullish throughout the end of the year, especially after Fed Chair Powell appeared to have turned dovish in October 2023.

Bitcoin mining companies tend to limit the supply around the halving cycles - expected for April 2024; this could be another reason for a supply shortage. Occasionally, this is a price development we have seen in the commodity market when a market participant is forced to buy. Still, the sellers refuse to sell at those price levels. The result is a massive spike in prices. The Bitcoin price move this year could surprise everybody.

As we have pointed out, Bitcoin tends to rally strongly during the halving cycles, which coincide with the US election cycle. The average return for Bitcoin during the 2020, 2016, and 2012 years was +192%. This could lift Bitcoin into our $125,000 target, which we set in July 2023 based on our ‘one-year-new-high’ indicator. Similarly, US stocks tend to perform strongly during US election years, with the only two down years being 2008 (-37%) and 2000 (-9.1%) since 1960 – or 60 years.

Surprisingly, the Bitcoin funding rate has remained elevated during the holiday period, indicating that crypto traders have stayed very bullish and expect an imminent Bitcoin ETF approval. As the Bitcoin dominance indicator has declined to 50.3%, we are near calling for the altcoin season, where the crypto market moves into the beta rocket upside.

Although we are not seeing minting activities at Tether increasing, which would signal fiat into crypto inflows, the fact that prices are rallying might be a sign that there are no sellers in the market and prices are squeezing higher. This morning, the funding rate is reaching a new high at +66%. This means longs pay shorts 66% per year to stay long.

This is how the futures market is squeezing the spot market and will likely lift Bitcoin above our $50,000 target level for January 2024, which appears reasonably achievable. We could trade above $50,000 by the end of this week.

Written by Markus Thielen, Head of Research & Strategy at Matrixport. Author of Crypto Titans.

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Industry views and information shared do not represent Matrixport's position and do not constitute any investment advice.