Bitcoin ETFs Fuel Price Rally Towards $80,000, Says Bitwise CIO

The launch of Bitcoin exchange-traded funds (ETFs) in the U.S. has sparked a surge of interest and investment in the cryptocurrency, pushing its price towards new highs. Bitwise Chief Investment Officer Matt Hougan expects Bitcoin to trade above $80,000 this year, citing the success of ETFs and the upcoming halving event as the main drivers.

ETFs Attract New Capital and Demand for Bitcoin

Bitcoin ETFs are investment products that track the price of Bitcoin and trade on stock exchanges, allowing investors to gain exposure to the cryptocurrency without having to buy or store it directly. The U.S. Securities and Exchange Commission (SEC) has recently approved several Bitcoin ETFs, breaking a long-standing barrier for the crypto industry.

According to Hougan, the approval of Bitcoin ETFs has shattered records and triggered an influx of funds into the cryptocurrency since mid-January. He said that this wave of interest from traditional finance, akin to Bitcoin’s IPO in the U.S. market, will lead to further institutional investment and drive up prices.

Bitwise, in particular, has experienced significant success in the ETF market. In just one day, the company received approximately $126.5 million in inflows, marking its second-largest intake since its launch. It has also surpassed $1 billion in assets under management, placing it alongside industry giants such as BlackRock, Fidelity, and Ark Invest’s 21Shares.

Halving Event to Reduce Bitcoin Supply and Boost Price

Another factor that Hougan believes will propel Bitcoin’s price above $80,000 is the upcoming halving event, which is expected to occur in April or May 2024. The halving, which occurs approximately every four years, will reduce the rewards for Bitcoin miners, thereby limiting the supply of new Bitcoin entering the market.

While the positive outlook for Bitcoin’s price is based on sustained institutional demand, there are potential obstacles to consider. Regulatory uncertainties surrounding cryptocurrencies, particularly in the context of the forthcoming U.S. presidential election, create an air of unpredictability. Additionally, the existence of untapped pools of Bitcoin, held by governments or tied up in litigation, could introduce supply pressures that may temporarily hinder price growth.

Bitcoin ETFs: The Most Successful ETF Launch Ever?

Bitwise’s research predicts that Bitcoin ETFs will be the most successful ETF launch ever, attracting substantial assets from both retail and institutional investors. They estimate that Bitcoin ETFs could capture 1% of the $7.2 trillion U.S. ETF market, amounting to $72 billion within five years.

However, despite the availability of ETFs, not all financial institutions have gained access to them. Retail investors have been the primary participants in trading thus far, while banks and wirehouses are still conducting extensive due diligence before offering ETFs to clients. Nevertheless, analysts believe that the increased demand from institutions will contribute to a supply crunch and subsequent price surge.

Bitcoin was trading at $43,030.06 as of 3:50 p.m. ET on Thursday with a 24-hour trading volume up by 18.61% at $28,530,801,770. Bitcoin’s recent price action represents a 0.78% spike in its value in the past 24 hours and a 0.8% gain over the last seven days.