Key Takeaways
- Crypto bulls say Bitcoin may have more upside potential due to demand for physical Bitcoin ETFs and the effects of the halving yet to be felt.
- Some industry observers say that while there will undoubtedly be demand for a spot Ethereum ETF when it launches, it is unlikely to see the same level of success as its Bitcoin counterpart.
- Regulatory clarity remains a major hurdle, and investors are looking to presidential candidates' comments and recent developments for cues.
Bitcoin is up more than 30% this year, fueled by demand from ETFs that hold the leading cryptocurrency, but the price has cooled recently and is back down from the all-time highs it hit earlier this year.
The trend continued on Friday, with Bitcoin dropping below $57,000 in late afternoon trading after climbing above $73,000 in March.So what does the outlook for the rest of 2024 look like? Bullish investors say more demand for crypto-focused exchange-traded funds could drive prices higher.But other issues loom.
Demand for Bitcoin, Ethereum ETFs Could Boost Cryptocurrencies
Demand tied to a Bitcoin (BTC) spot exchange-traded fund that began trading in January has supported the cryptocurrency this year, but bulls say the payoff is yet to be seen.
The new ETF saw net inflows of more than $14.4 billion, according to Far Side Investors. Most of the inflows into the Bitcoin ETF are currently coming from self-managed investors, and market participants believe that further demand will be generated as financial advisors become more comfortable recommending crypto products to their clients and as Bitcoin itself rises.
“We haven't seen pensions, endowments and other institutions get involved in ETFs yet,” said Bloomberg Intelligence analyst James Seifert. “To me, that means there's definitely an area where demand could grow.”
Investors are widely expecting an Ethereum (ETH)-based ETF to hit the market sometime this year, with the Securities and Exchange Commission expected to approve individual ETF applications by the end of the summer, which could boost demand for the cryptocurrency.
Bitwise Chief Investment Officer Matt Hogan estimates inflows into the Ethereum ETF at $15 billion in the first 18 months, while Seifert expects the ETF to capture 20-25% of the capital raised by the Bitcoin fund in its first few months.
“I don't expect an Ethereum ETF to have the same impact as a Bitcoin ETF, which has broken a lot of records in terms of fund flows, assets and trading volume,” Seifert told Investopedia.
Rising demand for the ETF and its underlying Bitcoin could mean higher prices, especially as the cryptocurrency's supply approaches its cap of 21 million.
Elections and other hot issues
Other crypto-related topics to watch this year include:
Presidential ElectionDonald Trump has voiced a more supportive stance towards cryptocurrencies than he did during his presidency, and President Joe Biden's administration is seen as more supportive of stricter regulation, with some industry watchers interpreting a recent decision not to pursue a lawsuit related to Ethereum 2.0 as a sign of a changing outlook.
“I don't see any chance of clarity before the election,” said Sarah Brennan, general counsel at Delphi Ventures. “If there's a legislative framework in place, I don't think it will be until next year at the earliest.”
Impact of Bitcoin HalvingBitcoin halvings (when the amount of new bitcoin created is halved roughly every 10 minutes) have historically had a positive impact on bitcoin prices for periods ranging from about 370 days to almost 550 days, according to analytics firm CCData.
The last halving took place about six months ago, but it was different because Bitcoin had risen significantly in value prior to it. Analysts at Deutsche Bank and JP Morgan said much of the expected price growth had already been priced in ahead of the latest halving.
While recent volatility may support this theory, Bitcoin bulls believe the downtrend is temporary.
“It's normal to see a price drop like this following a halving. While the halving is very bullish, the bull market doesn't usually start until a few months later for fundamental reasons,” Custody Bank founder and CEO Caitlin Long said in an X post in late June.
Mt. Gox distribution: The collapsed bitcoin exchange Mt. Gox this week began distributing billions of dollars' worth of bitcoin to former customers this month. It's unclear what the ultimate impact of the increased supply that began hitting the market on Friday will be, with some seeing it as bearish and others saying the problem is overblown.
