Bitcoin Hitting $100,000 in the Next Market Cycle? Don’t Underestimate the Impact of Bitcoin ETFs

The COVID-19 pandemic, rampant inflation, and geopolitical conflicts have directly impacted Bitcoin’s (BTC) price decline over the past 2 years. However, Blockstream CEO Adam Back says 2024 is expected to be a period of recovery.

The crypto industry expert, who pioneered the proof-of-work algorithm applied in the Bitcoin protocol, said that Bitcoin is currently lagging behind the historical price trendline of previous mining reward halving events. BTC Asic Miner

Bitcoin’s potential price trend is affected as the next halving approaches, with the block reward for Bitcoin miners decreasing from 6.25 BTC to 3.125 BTC. block reward halving is programmatically hardwired into the Bitcoin code and occurs after every 210,000 blocks.

Adam Back says the overlapping averages of previous market cycles and halving suggest that Bitcoin’s relative value is lagging behind widely accepted forecasts. Multiple events have played a role in driving BTC’s price down, which is reflected in traditional financial markets: “The last few years have been like a biblical plague, with COVID-19, quantitative easing, and wars, among other things.”

Adam Back says that this impact has greatly affected markets and portfolio management. Over the past few years, investment managers have had to manage risk and losses and therefore have had to sell more liquid assets.

“They have to come up with cash and sometimes they sell the good stuff because it’s liquid and Bitcoin is super liquid. That’s happened before with gold, and I think that’s probably a factor in the price of bitcoin not performing as well as expected over the last couple years.”

Bitcoin Will Reach $100,000

As 2023 draws to a close, many of the macro events Adam Back mentioned have come to an end, while more industry-specific failures have been resolved. This has been reflected in Bitcoin’s recent price spike since November 2023

“The wave of the epidemic has largely wrapped up for those companies that went bankrupt as a result of being impacted by Three Arrows Capital, Celsius, BlockFi, and FTX. We don’t think there will be any more bigger surprises.”  Whatsminer

The Blockstream CEO previously predicted that Bitcoin would reach $100,000 in the next market cycle and recalled this. He argued that without the macro factors previously highlighted, Bitcoin would have reached that level long ago.

Adam Back also mentioned the Bitcoin “stock-to-flow” model created by former institutional investor PlanB as a reference point for a potential rise in Bitcoin in 2024.

Adam Back explained that PlanB’s modeling suggests that savvy Bitcoin investors have historically purchased BTC six months prior to a halving event and sold when the price rises sharply in the 18 months following a decline in mining incentives.

He added that Bitcoin’s price touched $44,000 several times in Dec. 2023 suggesting that his previous prediction may not be so far-fetched.

The Bitcoin Spot ETF Effect

Leading investors and market analysts also emphasized the impact of the possible approval of multiple spot bitcoin exchange-traded fund (ETF) applications by the U.S. Securities and Exchange Commission (SEC).

Senior ETF analysts Eric Balchunas and James Seyffart claimed that these apps will be approved by early 2024.Galaxy Digital co-founder Michael Novogratz also predicted a significant inflow of institutional investment into BTC-backed products, a point echoed by Adam Back.

One of the key reasons cited by Bitcoin advocates is that the entire traditional market sector, including major fund managers such as BlackRock and Fidelity, are simply not allowed to invest directly in assets such as Bitcoin.

Adam Back said “If they manage a mutual fund, they have rules, either externally mandated or as part of the fund, that they can only buy public stocks and ETFs and other underlying investments. They can’t buy stock in startups or buy physical precious metals. They’re very limited.”

This remains a relevant reason why spot bitcoin ETFs have been able to drive significant capital inflows into the space, Adam Back added, adding that the investment vehicle opens the door to bitcoin exposure for many types of funds, especially in the U.S., which prefer to invest through Fidelity or BlackRock rather than cryptocurrency exchanges.