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The bulls are back in town

Notes from the CIO

The Bitcoin whitepaper turns 15 today, and what better way to celebrate than closing out another “Uptober” with BTC rising over 25% for the month. Year to date, BTC has returned over 107%, far exceeding major equity indices.

Performance of bitcoin vs traditional asset classes in 2023

Source: Hashdex Research with data from CF Benchmarks and Bloomberg (December 31, 2022 to October 24, 2023)


Bitcoin pushed its way into major news stories this month as a couple events drew attention around the potential for a spot ETF in the US. The rally began on the back of a false rumor circulating about the SEC approving a spot ETF but sustained itself through the second half of the month. Let’s take a deeper look at what transpired.  


Spot ETF developments dominated headlines

There were signs this month that the spot bitcoin ETF race might be reaching a head. The SEC chose not to appeal the US court’s decision regarding Grayscale’s conversion of GBTC to a spot bitcoin ETF and the Commission has been engaging with issuers on their applications.

Hashdex met with the SEC on October 13 to present our findings regarding mechanisms to allow spot bitcoin to be traded on a regulated market (the full presentation can be found here). This conversation is part of the SEC’s important work to understand the impact of a spot ETF. However, it remains unclear exactly when the Commission will approve spot ETFs or what products they will approve. 

If a spot ETF is indeed forthcoming, this will be an undeniably significant development for US investors. But as BlackRock’s CEO Larry Fink observed when asked about the false news about approval of a spot ETF, BTC’s current price appreciation is about much more than rumors of a spot ETF.


Bitcoin’s favorable outlook goes beyond ETF speculation 

In response to a question about the false spot ETF story, Fink called the recent price move a “flight to quality,” a very notable shift from his perspective on bitcoin just a few years earlier. 

We think this is a clear sign that more investors are appreciating the benefits of bitcoin as a form of digital gold. Yields on US Treasuries are reaching pre-global financial crisis highs—pressuring bond markets, equities, and currencies—as geopolitical uncertainty and fear has accelerated in recent months. And, of course, inflation hangs over many developed economies as debt burdens reach unprecedented levels. This is an environment where bitcoin—launched in the midst of the global financial crisis 15 years ago—can thrive. 

Bitcoin is a risk asset, and as such was negatively impacted by the risk-off environment last year. But these most recent events, backdropped with war and uncertainty, are positively impacting bitcoin. In Fink’s words, this is leading to BTC benefiting from a flight to quality. 


Bitcoin’s performance this year as a flight-to-quality asset


Source: Bloomberg (accessed October 30, 2023)

In addition to the potential for a spot ETF and a recently favorable macro landscape, bitcoin has a forthcoming “supply shock” that will likely influence prices. The next Bitcoin halving will take place in April of next year, and if history once again rhymes, BTC's price will react positively to the reduction in supply. And this halving is coming as the number of long-term holders of BTC is at an all-time high, further reinforcing this supply/demand dynamic.  


500 days before and after Bitcoin’s halving events 


Is this the beginning of the next bull market? 

We believe bitcoin’s next bull run has begun. There are certainly unanswered questions that may impact price volatility, including the potential for recession in the US and other developed markets, but the investment case for BTC is undoubtedly strengthening

The combination of a spike in demand (ETF approval) and constrained supply (the halving event and long-term holders not selling)—alongside macro conditions that may benefit bitcoin—is unquestionably creating a generational opportunity for investors seeking to diversify their long-term portfolios. Regardless of the timing of a spot ETF in the US, Bitcoin’s 15th year is shaping up to be a memorable one for investors. 




This material expresses Hashdex Asset Management Ltd. and its subsidiaries and affiliates (“Hashdex”)'s opinion for informational purposes only and does not consider the investment objectives, financial situation or individual needs of one or a particular group of investors. We recommend consulting specialized professionals for investment decisions. Investors are advised to carefully read the prospectus or regulations before investing their funds. The information and conclusions contained in this material may be changed at any time, without prior notice. Nothing contained herein constitutes an offer, solicitation or recommendation regarding any investment management product or service. This information is not directed at or intended for distribution to or use by any person or entity located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Hashdex to any registration or licensing requirements within such jurisdiction. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Hashdex. By receiving or reviewing this material, you agree that this material is confidential intellectual property of Hashdex and that you will not directly or indirectly copy, modify, recast, publish or redistribute this material and the information therein, in whole or in part, or otherwise make any commercial use of this material without Hashdex’s prior written consent. 

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