Good Morning. Yesterday, markets in the US were mixed as investors are cautious before the latest inflation data is set to come out later today. A poor inflation report will kill off investors' hopes for a rate cut by the Fed coming anytime soon.
Bitcoin continues its rally and got dangerously close to $64,000 yesterday. While the price cooled, trading volumes haven’t, especially for the ETFs. Read more on that below as well as a bitcoin price prediction update from editor Tom Grant.
And what else is spiking in trading volumes? Stablecoins. Stablecoins have become what bitcoin set out to be, and many emerging market economies are taking advantage of it. Take a deeper look at the numbers below.
Crypto News You Can’t Miss: Stablecoins Growth in 2024
Picture this: you live in a country where inflation is rampant. You are desperate to trade your hard earned income for something that will hold its value the next day (dollars, euros, etc.) but you cannot get it from your local bank. The cash you have, you keep in your sock drawer. A new technology called crypto emerges. You’re skeptical, but anyone can buy it. Other people are using it successfully so you decide to go for it.
What do you purchase: Bitcoin or stablecoins?
If you chose stablecoins, you’d be in the majority. Bitcoin’s original purpose was that of a digital currency without any intermediaries that would one day eliminate fiat. That has failed. It has been accepted, however, as a store of value.
Stablecoins, on the other hand, have prevailed to achieve Satoshi’s vision of a digital currency. In 2023, they represented 76% of all crypto trading volume.
Even with all of the spiking trade volumes of bitcoin this week and since the ETFs have launched (see next article for more details here), stablecoins still represent over 60% of all crypto trading volumes.
On Monday alone, Tether, First Digital USD, and USDC each traded around $58 billion, $7.5 billion and $7.1 billion, respectively, according to CoinGecko data. Bitcoin reached about $34 billion, while Ethereum saw $20 billion.
In January, trade volumes of stablecoins on centralized exchanges surpassed $1 trillion and stablecoins have have hit $138 billion in market cap so far in February.
And much of this is due to high inflation and emerging market economies who would simply rather transact in a virtual dollar that try to deal with their own currencies or even bet on bitcoin. It’s not practical for them in terms of a currency, but stablecoins are. 24/7 open markets and cheap transaction costs are a no-brainer for millions of users.
In 2024, we will continue to see countries dabble with the idea of a central bank digital currency (CBDC), and we will also continue to the see growth of the stablecoin markets.
ETF Update: New Trading Highs as Bitcoin Price Spikes
The bitcoin spot ETFs have hit record high trading volumes this week as Bitcoin broke through $60,000. Specifically, BlackRock’s IBIT traded $1.35 billion on Tuesday alone. This translates to roughly 43 million shares. In fact, as one X user points out, the IBIT ETF was the 5th most traded ETF on Tuesday.
Then yesterday, the BlackRock ETF traded roughly 61 million shares by early afternoon, quickly breaking Tuesday’s record. Fidelity’s ETF also was having a strong day, trading 14 million shares by early afternoon, putting it on track to beat its Jan. 11 launch day trading high of 16 million shares traded.
Some analysts believe that this is the work of retail traders getting in on the latest bitcoin price action. As CNBC puts it, “while ETFs are used by all types of investors, the heavy intraday trading suggests that retail traders are a sizable group buying and selling the funds.”
There has also been a strong influx of capital into the ETFs. On Tuesday, the ETFs saw a total of $576.8 million enter the space, with BlackRock alone responsible for $520 million. Grayscale continues to lose market share. Check out the numbers as posted by BitMex.
Bitcoin Price Prediction Update
By Tom Grant
At the start of 2024, Bitcoin was sitting at $44,000 we wrote our prediction for the coming year:
The launch of a number of Bitcoin ETFs will lead to Bitcoin hitting a new all-time high as new fund holdings will scramble to acquire the Bitcoins investors will be looking to hold. As the ETFs are launched, we will see a global move from mainstream portfolios to include crypto as part of their portfolios. We would expect to see a Q1 surge followed by a less buoyant market as the excitement passes and investors taper their enthusiasm.
Here we are at the end of February and Bitcoin is now trading above $61,000, only 12% from its previous all time high.
We thought it would be helpful to take a step back and review our outlook. So what has changed? The Bitcoin ETFs were approved in January which lead to an initial jump, but that was followed by some consolidation as many of the speculative long investors took profit.
We also saw a number of Bitcoin investors who were holding their investment in an illiquid trust selling now that they could. Since then, there has been steady flow coming from both retail and professional investors pushing Bitcoin as well as the general crypto market higher. Bitcoin prices are difficult to predict given the speculative nature of the asset. Unlike gold, there is no industrial use, so prices reflect only what investors think it is worth. The next big event for Bitcoin is expected to be the ‘halving’ where miners see their rewards reduced. We believe the impact on price will happen well before the event (much like the price action we saw when the Bitcoin ETFs were issued). The term ‘buy the rumor, sell the fact’ is one we may hear again.
We continue to believe that Bitcoin demand will remain high going into the end of Q1 and we are likely to see new all-time highs in Bitcoin -- and we also expect for crypto prices generally to rally.
By the time the halving arrives in April, we think the buying frenzy is likely to be done and we will see more consolidation and range trading. We continue to believe that the long-term outlook for crypto remains very positive and over time, we could see smart contract-based coins like Ethereum become more mainstream.
For now, stay long and enjoy the ride….
Media of the Week: Total Inflows for Bitcoin Spot ETFs
As we posted above, the total amount of inflows has been remarkable for the bitcoin spot ETFs. We shared the first post in a thread by BitMex, but we feel that the next graph deserves its own highlight on post 3/4.
This is a great visualization of the money movement for the Bitcoin ETFs. While Grayscale continues to hemorrhage funds, it seems its finding homes elsewhere considering the total AUM continues to grow.