Research Summary

The report discusses the current positive demand shock in Bitcoin, driven by the SEC’s approval of a spot-based ETF, which has led to significant inflows and price increases. It also highlights the reduction in Bitcoin held by exchanges and the impact of the upcoming halving event on Bitcoin’s price.

Key Takeaways

Bitcoin’s Positive Demand Shock

  • SEC’s ETF Approval: The SEC’s approval of a spot-based ETF has given access to over US$14 trillion of assets, leading to an average daily demand of 4500 bitcoins, while only an average of 921 new bitcoins were minted per day. This has resulted in significant price increases.
  • Record-Breaking ETF Inflows: US ETFs have seen record-breaking inflows of US$10bn in the first two months, dwarfing the launch of the first Gold ETF by iShares in 2005 of US$288m over its first two months.

Reduction in Bitcoin Held by Exchanges

  • Investors Utilizing ETPs: There has been a significant reduction in Bitcoin held by exchanges, which have fallen 29% since 2020 as investors utilize ETPs more and self-custody their Bitcoin as they increasingly see it as a store of value.

Bitcoin’s Upcoming Halving Event

  • Halving’s Impact on Price: The upcoming halving event, which is designed to halve the newly issued supply every 210,000 blocks, or roughly every 4 years, is expected to exacerbate the issue of price increases.

Price Supportive Factors for Bitcoin

  • Platforms Enabling RIAs: Among the most significant developments are the platforms in the US that enable Registered Investment Advisors (RIAs) to include Bitcoin ETFs in client portfolios. However, a reduction in these inflows is expected, which will likely diminish their impact on prices.

Actionable Insights

  • Monitor Bitcoin Demand: Given the current positive demand shock, it would be beneficial to closely monitor the demand for Bitcoin, particularly in relation to the SEC’s ETF approval and the resulting inflows.
  • Assess Impact of Halving Event: With the upcoming halving event, it’s crucial to assess its potential impact on Bitcoin’s price and supply.
  • Consider Role of RIAs: The role of Registered Investment Advisors (RIAs) in including Bitcoin ETFs in client portfolios is a significant development. Understanding this trend could provide insights into future price movements.

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