Looking ahead to the next week in the crypto market, we envision two potential scenarios. One possibility is that Bitcoin reaches a new all-time high, with Ethereum quickly on its heels. On the other end of the spectrum, the market could experience a minimum 10% decline as it sheds excess leverage. Intriguingly, it is possible that both events could unfold.
Only one has previously had more supremacy in Bitcoin than Michael Saylor of MicroStrategy, namely Satoshi Nakamoto. Saylor has emerged as a leading figure within the Bitcoin community, with his dominance appearing unending – a scenario Nakamoto aimed to avoid. We are concerned that Saylor’s influence may soon become undeniably irreversible.
Over the past week, Ethereum, the second-largest cryptocurrency, emerged as the top performer in an otherwise subdued crypto market. During this period, Bitcoin experienced a decrease in net inflow into exchange-traded products, including Bitcoin spot ETFs, compared to the previous week. On Friday, the Uniswap Foundation suggested a new fee mechanism, potentially enhancing its token significantly.
We are incredibly optimistic about the Ethereum Layer 2 space. We are backing this conviction up with a selection of rollup tokens in our portfolio. It appears the wider market has not yet caught on to the fact that rollups could soon render almost all other Layer 1 cryptocurrencies redundant, largely thanks to leveraging Ethereum’s unmatched network effect. These tokens also stand out as some of the rare cryptocurrencies that could genuinely become yield-generating in the not-so-distant future.
The Bitcoin spot ETFs are experiencing considerable net inflows, the market greatly anticipates Ethereum spot ETFs, and Coinbase reports that retail investors have returned to the market. All in all, the crypto market looks better than it has in ages, but it is not without increased leverage and early signs of euphoria.
We have a high level of confidence that the US will witness the launch of an Ethereum spot ETF within this year, assigning a 90% probability to this event. Our optimism is grounded in five key reasons. We have every reason to believe that an Ethereum spot ETF will be just as successful as the Bitcoin spot ETFs have already been.
The concept of crypto maximalism is illogical, as the crypto market lacks a definitive frontrunner to justify favoring one cryptocurrency exclusively. In shaping our crypto portfolio, we have steered clear of maximalist tendencies. Moreover, the value of our portfolio is determined not only by the cryptocurrencies we have selected but also by the prominent ones we have intentionally left out.
It seems that a significant portion of the crypto market turned bearish following Jerome Powell’s speech yesterday. However, we remain bullish. We believe the speech did not bring about significant changes; liquidity is still expected to increase, Bitcoin is experiencing substantial ETF inflows, and the crypto market is on the verge of embracing three powerful narratives.
Unlike many research firms, we are introducing a crypto portfolio designed to provide extensive exposure across the cryptocurrency market. Our goal is to identify and focus on the promising 1% of the crypto market, while actively avoiding the vast majority that do not show any potential for a bright future. The portfolio is based on four key fundamentals.
Everyone is looking forward to the Bitcoin halving, yet there is little focus on Ethereum’s equivalent of a triple halving. In our crypto portfolio, Ethereum takes the spotlight. We predict that Ethereum will evolve into a widely-utilized digital commodity, coupled with a decreasing supply and the ability to generate dividends – a truly unique asset, not just in crypto, but beyond.
In this issue, we explore the initial week of Bitcoin spot ETFs through various charts. For months, many claimed that the ETFs were not just a case of “buy the rumor, sell the news.” Now, these same voices argue that the net inflow will soon boost prices. Once again, we adopt a contrasting viewpoint to this popular opinion.
While the approval of the Bitcoin spot ETF did not spark a significant reaction in the market for Bitcoin, Ethereum emerged as the clear winner, securing a substantial 15% gain over Bitcoin post-ETF approval. Our expectation is that Ethereum stands to reap further rewards in the coming months, while Bitcoin experiences slow bleeding.
As we step into 2024, it seems like everyone is long crypto left, right, and center. This environment does not elicit much enthusiasm from us, as it brings back memories of the exact opposite situation just a year ago. We have identified five key factors that we believe will shape 2024. Among them, three are anticipated to pose potential downsides, one holds the potential for an upside surprise, and there is a joker that seems to be completely overlooked.
In a few decades, Bitcoin may face challenges in covering its own security and maintaining decentralization if no alterations are made, given the halving events occurring every fourth year. The fundamental question arises: Can Bitcoin truly serve as digital gold if the outlook suggests it struggles to fund its security within the next two decades?
Bitcoin is a pet rock. It will never achieve a transactional output much greater than its current maximum of 7 transactions per second. This falls short of what Satoshi Nakamoto envisioned for Bitcoin. That being said, Bitcoin has embraced other extremely powerful narratives that set it apart from the rest of the market, which arguably hold greater significance than what Satoshi Nakamoto envisioned 15 years ago.
The crypto industry can breathe a sigh of relief as institutions enter the crypto space, even as the industry continues to lick its wounds after last year’s contagion. The industry does not appreciate the European Union’s MiCA framework enough, if at all. Few seem to know what it is, yet it will be vital in shaping tomorrow’s crypto industry.
A bet on crypto right now is a bet on macroeconomics. For believers in a soft landing and imminent interest rate cuts, accumulating crypto could be advantageous. In this scenario, we believe Ethereum to outperform Bitcoin massively. Alternatively, those anticipating a hard landing may find it wise to stay on the sidelines for now. Delve deeper into our analysis for a comprehensive understanding of our view.
The systemic risks of crypto were substantially mitigated last week as Binance settled various charges with multiple US agencies. Despite this clearly positive news, the crypto market did not react, leading us to remain pessimistic in the short term until we observe renewed inflow and interest in crypto. Tether remains the largest risk to crypto.
We align with the market consensus that the approval of a Bitcoin spot ETF in the US is imminent. Given this widespread belief, we contend that this ETF might already be priced in, particularly considering the risk of Grayscale releasing billions of dollars’ worth of bitcoins into the market. Our assessment leans towards anticipating more downward selling pressure than the opposite, contrasting with the prevailing market sentiment.
There have been three Bitcoin halvings in total, and each time, Bitcoin has reached a new all-time high within a maximum of 1.5 years. Observing many of the same factors present in the three prior halvings, we argue that history is likely to repeat itself after the fourth halving in April 2024.
We launch our research offering on the crypto market amidst little interest from non-crypto advocates. We argue that this is historically the best time to add exposure to crypto.