In 2023, things went really well again for crypto investments. How things will continue in 2024 could be decided in the next few days. Because the approval of a Bitcoin spot ETF in the USA would be an accolade for cryptos.
4 January 2024. FRANKFURT (Börse Frankfurt). Hardly anyone expected this: Bitcoin, which was declared dead by many after the scandal and crisis year of 2022, is back. In 2023, the price of Bitcoin rose from USD 16,500 to over USD 42,000. In the first week of the new year, it even briefly exceeded USD 45,000. The driver: the hope for the approval of a Bitcoin spot ETF in the USA. The decision by the US Securities and Exchange Commission is now expected any day now and is due to be made on January 10 at the latest. Recently, the signals for a positive decision have intensified.
"Above all, the application for a Bitcoin ETF by BlackRock in June 2023 has created the conditions for increasing acceptance of this still young asset class," says André Dragosch, Head of Research at issuer ETC Group. Bitcoin is not alone in soaring: Solana has performed even better in 2023, with the price increasing more than sevenfold to its current level of USD 99. The price of Bitcoin's rival Ethereum has also risen, albeit not as significantly. The currency currently costs USD 2,228, which represents an increase of around 90% for 2023.
"Transformative year"
For Menno Martens, crypto specialist at issuer VanEck, 2023 was therefore a "transformative year". Just over a year ago, cryptocurrencies were still at rock bottom, with numerous scandals including the collapse of the FTX crypto exchange destroying a lot of trust. In addition, the sharp rise in interest rates weighed on cryptocurrencies, which do not pay interest or dividends. Bitcoin, which had cost USD 69,000 at its high, plummeted to USD 15,800 in November 2022.
It was not only the potential approval of the spot ETF, which is seen as a "game changer", that drove prices up. In addition, interest rates have recently fallen again and Bitcoin is expected to halve in mid-April 2024. "Digital assets have gone through a maturing process," says Martijn Rozemuller, CEO of VanEck Europe. Many investors see the long-term potential uses and opportunities offered by cryptocurrencies and blockchain-based applications. "After all, digital assets are much more than just digital means of payment today."
Milestone EU regulation
Regulation is seen as a plus point in Europe. "The completion of the MiCA (Markets in Crypto Assets Regulation) cemented Europe's position as a global pioneer in the comprehensive regulation of cryptocurrencies," notes Martens from VanEck. The aim of the regulation: to standardize the framework for crypto-assets across the EU. "MiCA promises legal clarity for issuers, service providers and users and strengthens consumer protection and market integrity."
There are now 83 crypto ETNs traded on Xetra. The ETC Group Physical Bitcoin (DE000A27Z304) has accumulated by far the most funds, namely EUR 937 million. The CoinShares Physical Bitcoin (GB00BLD4ZL17), the 21Shares Bitcoin (CH0454664001), the WisdomTree Physical Bitcoin (GB00BJYDH287) and the VanEck Bitcoin (DE000A28M8D0) also have high assets under management. The largest tracker of another currency is 21Shares Solana Staking (CH1114873776) and 21Shares Ethereum Staking (CH0454664027). All crypto ETNs tradable on Xetra are physically collateralized and listed on the Regulated Market of the Frankfurt Stock Exchange. They are also centrally cleared by Eurex Clearing AG as the central counterparty (CCP) of Deutsche Börse Group.
Bubble or "harbinger of a new financial era"?
However, predictions about the future development of Bitcoin & Co still differ widely. While some speak of a bubble or see the previous record high of just over 69,000 US dollars as a ceiling, others believe that price targets of several hundred thousand US dollars and more are possible. US star investor Cathie Wood, for example, is a big fan. She compares the current phase with the beginnings of the internet and sees cryptos as the "harbingers of a new financial era". Specifically, she names price targets of USD 1 million for Bitcoin and USD 166,000 for Ethereum by 2030.
The ETC Group forecasts a continuous growth path for Bitcoin with a potential all-time high of over USD 100,000 by the end of 2024. "This optimism is fueled by factors such as the Bitcoin halving event, the increasing scarcity of Bitcoin supply and growing mainstream interest," it says in its 2024 outlook. The ETC Group also believes that a reversal of Ethereum's relative underperformance is possible - due to technological advances and its "unique position as the leading smart contract platform".
"Approval not set in stone"
Jan Duisberg from ICF Bank describes cryptocurrencies as "young people's gold". In his opinion, speculation will continue. "It's a traders' market, so we are likely to see price setbacks again and again." Leo Puschmann from Lang & Schwarz expects trading in crypto ETNs to remain lively. In addition to Bitcoin, attention will also be focused on Solana trackers, such as 21Shares Solana Staking (CH1114873776) and the ETC Group Physical Solana (DE000A3GVKZ1).
However, there are also more skeptical voices regarding the price trend. Some believe that the approval of the Bitcoin ETF is already included in the prices. Others are clear in their warnings, such as crypto expert Timo Emden: "Investors are obviously giving little or no thought to the risks and side effects of a Bitcoin investment at the moment," he writes for the broker IG. The potential for disappointment in this context is huge. At the end of the day, the advance praise that has already been given must also come true. "The SEC giving its 'go' for a Bitcoin spot ETF is anything but set in stone."
By Anna-Maria Borse, 4 January 2024 © Deutsche Börse AG
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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