The BTC bull cycle might have already started. This is attributed to the increasing age of BTC holdings reaching new highs, with BTC addresses showing reluctance to sell. Furthermore, the available supply of BTC on exchanges is consistently diminishing and is currently slightly above 2 million BTC. The combination of these factors may lead to a supply shock in the near future.
Several catalysts contribute to this potential shock, including the anticipated launch of the BTC ETFs, likely to bring about inflows amounting to billions of dollars, and the upcoming halving of BTC mining production in April 2024.
In the short term, it is likely that BTC will continue its upward trajectory close to 60% in dominance, or a 20% to 30% increase in price before the ETF approval. Expected institution funds will continue to flow into the BTC spot market even after the ETF approval. Based on the historical halving cycle, BTC price would start to commence its ascent now and gain even more momentum after halving, it is approximately 183 days until the upcoming halving.
The inflated token value will drive more on-chain activities in Defi and leverage activities. Amongst them WBTC has contributed an additional $1.2B to Defi TVL since mid-October, resulting in a beneficial increase in gas contribution and protocol revenue.
SEC has approved the ETH Future ETF and accepted the Grayscale Spot ETF conversion application. If the market anticipated BTC Spot ETF potentially introduces a conservative estimate of $24 billion inflows into BTC, take this as a proxy, one-third of the amount would be expected to flow into ETH if ETH Spot ETF is approved. The ratio assumption is made conservatively from the current BTCETH market cap ratio, on the other side, Grayscale indicates current participants have higher exposure to BTCETH Trust Funds which are 2:1.
The estimated $8 billion inflow is equivalent to 30% of the total exchanges’ ETH reserve, without taking into account that the ETH supply in exchanges drops 21% in 2023 alone. ETH price would rise drastically different from BTC, as 23% ETH is staked, 10.5% in the smart contract, and potentially deflationary burn model when the gas fees pick up, ETH has significantly lower circulating supply than BTC. Potentially narrow the BTCETH market cap ratio to 2, or $4,500 in price.
The information provided here is for informational purposes only. We encourage readers to conduct their research and consult a financial advisor before making any investment decisions.
