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Bitcoin is booming—but what’s next?

Notes from the CIO

Bitcoin’s bull market has officially arrived. 


A little over a year ago, I wrote about the recovery taking shape for crypto assets, but didn’t envision the recovery-to-bull market transition happening so quickly. 

Our team’s expectation at the time was that BTC would move sideways between $15,000 and $50,000 for several months until it gained enough momentum to reach a new all-time high (ATH) and trigger a new bull market. 

However, the landscape has shifted dramatically. Bitcoin is defying historical cycles, hitting another ATH well ahead of the upcoming halving event in April 2024. Unlike past cycles where bitcoin required at least six months after the halving to reach new highs, we are witnessing a pre-halving surge. 


 Bitcoin Cycles Have Tended to Rhyme

Source: Hashdex Research

This rapid ascent can be largely attributed to the long-awaited arrival of bitcoin ETFs in the US. These instruments have created a significant demand shock, injecting optimism into the market and triggering a bull run earlier than anticipated. But there are several factors converging to create a "perfect storm" for bitcoin. 

Firstly, global markets are experiencing positive macroeconomic tailwinds. The US and other developed economies are expected to loosen monetary policy in the coming months, a development historically favorable for risk assets, including bitcoin and other crypto assets. This dynamic has increased bitcoin’s correlation with other risk assets and gold as these assets collectively surf the positive macroeconomic wave.


Nasdaq Crypto Index (NCI) Performance YTD


Secondly, as noted above, the launch of bitcoin ETFs has caused a seismic shift in demand. These products provide a safe and regulated entry point for institutional investors who were previously hesitant to participate. The initial inflows into these ETFs have surpassed even the most optimistic expectations, and we believe this is just the beginning. Many financial advisors and institutions remain on the sidelines, poised to enter the market as confidence and regulatory clarity increase. 


Source: Hashdex Research, with data from Dune Analytics (from 03//07/2024).


Finally, the upcoming halving adds another layer of fuel to the fire. This event, occurring roughly every four years, cuts the block reward for miners in half, reducing the supply of new bitcoin entering the market. Historically, halving events have coincided with significant bitcoin price increases. When combined with the current macroeconomic tailwinds and the demand surge from ETFs, the April halving has the potential to exacerbate this bull run.

As these conditions converge in the coming months, the near-term outlook for bitcoin and other crypto assets remains very strong. We’ve now breached the $70,000 level and the next natural target is $100,000. If history once again rhymes, we could see bitcoin testing the $200,000 - $300,000 range throughout 2025.


The impact of current events 

Our investment thesis for bitcoin as an emerging digital store of value remains stronger than ever. Recent developments, particularly the launch of bitcoin ETFs, are accelerating this trend and we are witnessing growing interest from institutional investors as crypto increasingly becomes a part of long-term asset allocation strategies.

Meanwhile, the hashrate—which measures the computational power being used to mine bitcoin and process transactions on the blockchain—has more than tripled since the previous all time high in November 2021, making the network more secure, while the Lightning network’s capacity has doubled, which increases the scalability and the future possibility of using bitcoin for real time payments.

Beyond bitcoin, the broader crypto ecosystem is brimming with innovation. Smart contract platforms like Ethereum are witnessing the rise of Layer-2 solutions—scaling solutions that address the network's current limitations. The total value locked (TVL) in Layer-2 protocols has surpassed $36 billion, indicating the rapid growth of this sector. And the upcoming Ethereum Dencun upgrade promises further reductions in transaction fees and improved efficiency.

The combination of more scalable and efficient platforms, coupled with the potential for lower interest rates, is likely to accelerate experimentation with Decentralized Finance (DeFi), tokenization, Web3 applications, and the burgeoning Digital Culture segment (e.g., NFTs). We anticipate the emergence of the first mainstream Web3 "killer app" sometime in 2025, ushering in a new era of mass adoption for blockchain technology.

While the short-term price action is undoubtedly exciting, it is important to understand the long-term fundamentals driving the growth of bitcoin and other crypto assets. We always advise our investors to zoom out from near-term prices, whether positive or negative, and focus on the long-term investment thesis and a single-digit allocation size. We believe this long-term thesis is as strong as it’s ever been, and are excited to continue to help investors navigate this market in the coming months and years. 



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