Is The Bitcoin Bottom In?
In his in-depth analysis, Duncan pointed out that the crypto market has been underperforming relative to equities over the past few weeks. This trend was a concern until a pivotal development emerged concerning Mt. Gox. Duncan noted, “Yesterday’s Mt. Gox headline provided a reasonable explanation for the recent market behavior.” The expectation of billions of Bitcoin being distributed to creditors had been anticipated by insiders, leading to a temporary market dip.
The situation was analyzed in depth by Alex Thorn, Galaxy Digital’s Head of Research, who that the selling pressure from this event might be less severe than initially feared. As Duncan explained, “We’ve swept the range lows, leading to about $300M in long liquidations.” While these figures are significant, they are modest compared to the liquidation events in March and April, where more than $750M was liquidated in three different 24-hour periods. This suggests a cooling market, which is also evidenced by reduced altcoin open interest, lower funding rates, and a less bullish options skew. Duncan observed that the sentiment on Crypto Twitter is “literally the worst I’ve ever seen it,” despite Bitcoin being less than 20% off its all-time highs. This sentiment is rooted in the traumatic experiences of crypto natives who, having witnessed the altcoin boom outperforming Bitcoin and Ethereum in 2021, tried to anticipate a similar pattern this year but were met with a drastically different market structure.The influx of capital into Bitcoin has been significantly influenced by the ETF developments, with Blackrock applying for an ETF in June 2023 when Bitcoin was priced at $26,000. The approval and subsequent inflow of $14.3 billion into the ETF marked a stark contrast to previous years dominated by decentralized finance (DeFi) and high consumer interest in altcoins. “This year, the capital is heavily skewed towards Bitcoin, influenced by its perceived stability and the formal financial product structure of ETFs,” Duncan elaborated.
On the fundamental side, Duncan highlighted Blackrock’s strategic movements within the crypto space. “With $17 billion in IBIT and at a 25bps fee, Blackrock is poised to generate approximately $45 million annually from this ETF, indefinitely,” he stated. This steady revenue stream could be a precursor to more institutional products and greater acceptance of Bitcoin as a legitimate asset class. Duncan also discussed the potential normalization of a 1% Bitcoin allocation in major investment portfolios, which he believes could drive significant future inflows. “If 1% becomes the global standard allocation to Bitcoin, we have a lot of inflows to go,” he noted, suggesting that not having such an allocation might soon be viewed as a strategic oversight. He added, “A great selling point from these firms is if you don’t have 1% in BTC your essentially short / underweight BTC. This begins to flip the career risk from owning BTC to not owning BTC, a massive paradigm shift.”Ethereum And The Future Of Altcoins
Turning to Ethereum, Duncan expressed optimism about the upcoming US spot Ethereum ETF, which he believes could outperform the Bitcoin ETF in profitability due to higher fees and potential revenue from staking. “Blackrock’s most successful product launch ever is likely to have a sequel with the Ethereum ETF, which could be even more profitable,” he predicted.
He criticized the current low expectations surrounding the Ethereum ETF, which he attributes to widespread misinformation and underestimation of its potential impact. “The ETH ETF is likely a higher margin product for Blackrock, and adding staking could boost its profitability even further,” Duncan explained, suggesting that the integration of real-world assets (RWA) on-chain could enhance its appeal.
At press time, BTC traded at $61,764.