ETFs
4 reasons to bet on Bitcoin ETFs for the rest of 2024 – May 10, 2024
The cryptocurrency market had a lackluster April after a strong first-quarter rally that drove Bitcoin (BTC) to a new all-time high of $73,750. Over the past month (as of May 9, 2024), Bitcoin has fallen by approximately 11%. The rise of the geopolitical crisis can also be held responsible for this crash. The decentralized nature of cryptocurrencies makes it possible to react quickly to geopolitical events, even faster than stocks.
The April crisis may be temporary. Investor interest in Bitcoin is unlikely to wane. iShares Bitcoin Trust (I BITE – Free report) raised around $1.62 billion in April, despite the fall in bitcoin’s price. IBIT’s streak of 71 consecutive days of entries ended in April, but it is still on track to become the largest spot Bitcoin ETF. Currently, IBIT has an asset base of over $17 billion.
In this context, below we highlight some factors that could favor investment in bitcoin or crypto ETFs.
Bitcoin must increase prices
One of the main reasons for the volatility and decline in the price of Bitcoin was the recent halving, which took place last month. The Bitcoin halving event occurs once every four years. Following the recent Bitcoin halving in April, there is widespread speculation that the decreasing supply of Bitcoin could cause the price of the cryptocurrency to increase in the coming months due to increased scarcity.
Bitcoin has a fixed supply (21 million). Therefore, the demand for new Bitcoins increases, which drives up prices. However, analysts say that because the timing of the halving is anticipated, its effects are already taken into account and are not disruptive.
The arrival of Bitcoin ETFs contributes to the stability of cryptocurrencies
Since the launch of the first Bitcoin ETFs on January 11, the asset has surged more than 50%, even reaching an all-time high of just under $74,000. ETFs represent an important step in the Bitcoin journey, providing retail and institutional investors with a regulated and accessible way to invest in the cryptocurrency. This development not only improves liquidity, but also contributes to price stability.
Does Bitcoin perform well amid inflation?
Bitcoin is often presented as a hedge against inflation. Bitcoin has a fixed supply. The move contrasts with traditional fiat currencies, which central banks can issue in unlimited quantities. Thus, in times of inflation, the value of fiat currencies tends to fall. Meanwhile, some market observers view Bitcoin as a store of value due to its limited supply, which can preserve wealth amid high inflation. That said, we would like to point out that the crypto space is extremely volatile.
Crypto creates a wealth effect?
Cryptocurrencies have been making headlines lately as early investors cash in on new wealth. Investors should note that early crypto investors saw life-changing wealth, but its impact on spending – known as the wealth effect – was not as generous as lottery winnings .
But over a decade, crypto windfalls increased household consumption by $30 billion according to one study, with every unrealized dollar leading to nine cents in spending. This figure is almost double the marginal propensity to consume in terms of stock market returns. It has also been noticed that some of the sudden wealth creation through crypto is being invested in real estate, thereby boosting markets in crypto-friendly areas, according to Bloomberg, as quoted in Economic Times.
Focus on ETFs
In this context, investors can follow ETFs like Grayscale Bitcoin Trust (GBTC – Free report) , I BITE, Fidelity Wise Origin Bitcoin Fund (FBTC – Free report) , ARK 21Shares Bitcoin ETF (ARKB – Free report) And Bitwise Bitcoin ETF Trust (BITB – Free report) .
Want key ETF news sent straight to your inbox?
The free Zacks Funds Newsletter will bring you top news, analysis, and top-performing ETFs every week.