Demand for the Bitcoin spot ETFs now officially approved in the USA is enormous. Nevertheless, the price of the largest cryptocurrency has fallen. Despite this, investors continue to bet on rising prices.
8 February 2024. FRANKFURT (Börse Frankfurt). The new stock market year began with a real highlight for cryptocurrencies. Jan Altmann from the ETC Group describes the approval of the first eleven Bitcoin spot ETFs by the US Securities and Exchange Commission (SEC) on January 11 as an "accolade for cryptos as an asset class". The volume traded in the new products amounted to USD 4.6 billion on the first day of trading alone.
"Sell the news" weighs on Bitcoin
However, the Bitcoin rally expected by many investors failed to materialize. After a brief high of around 49,000 dollars on the day of approval, the price fell by more than 20 percent in less than two weeks. "As so often in such cases, there was a 'sell the news' development," reports Jan Duisberg, who trades crypto ETNs for ICF Bank, among others. However, the extent of the countermovement was already "unusually strong".
Duisberg
Bitcoin has been able to recover somewhat in recent days. Altmann expects a "powerful tailwind for the Bitcoin price" this year, regardless of the ETFs. In his opinion, the most important factor for this, and one that has received a lot of attention in the crypto scene so far, is the Bitcoin Halving, which is expected to take place at the end of April. This is a regular halving of the reward for so-called Bitcoin miners. The fourth halving in total since the creation of Bitcoin is expected to take place on April 21. In the past, the price has usually risen in the run-up.
Vontobel's clients may also be betting on a repeat of this scenario. David Hartmann reports brisk demand for leverage products that benefit from rising prices of the underlying asset. "The number of executed orders in January doubled compared to December," summarizes the derivatives expert. The increase in demand was exclusively due to the cryptocurrency Bitcoin. Two mini long futures on the Bitcoin future (DE000VM4SU48 and DE000VM47B60), which are currently around four times leveraged, were traded the most.
Ethereum with ETF fantasy too
In ICF Bank trading, speculation is also heading in the direction of rising prices in anticipation of increasing acceptance of crypto-assets. According to Duisberg, turnover remains "very high". In addition to the WisdomTree Physical Bitcoin (GB00BJYDH287) and the 21Shares Solana (CH1114873776), which is also frequently bought, the 21Shares Ethereum (CH0454664027) is also in high demand as a "perennial favorite". Ethereum was a clear underperformer compared to Bitcoin in 2023. Will the trend reverse this year?
Benjamin Dean of WisdomTree can well imagine a change in favorites: "With spot Bitcoin ETFs now approved in the US and a number of similar spot Ether products going through the approval process, some are questioning if and when the approvals will be granted and what this could mean for the Ether price."
Capital shifts in Bitcoin products
In addition, Bernhard Wenger from 21Shares reports "greater diversification among the most popular crypto ETNs". Cardano, Ripple and Arbitrum were the "top 3 altcoins" in January. The ETC Group Physical Cardano (DE000A3GVKY4), for example, recorded notable inflows in recent weeks.
by Thomas Koch, 8 February 2024 © Deutsche Börse AG
Thomas Koch is a CEFA investment analyst, investment specialist for structured products and a certified certificate consultant. He has been a freelance journalist covering events on the capital markets since the beginning of 2006.
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