In recent years, Bitcoin has undergone a tectonic shift in its reputation as an investment asset. Once infamous for its extreme price swings and high volatility, the cryptocurrency has shown signs of stability, with volatility subsiding over the past decade.
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, attributes this shift to a fundamental imbalance between demand and supply. As institutional interest grows, fueled by the introduction of Bitcoin exchange-traded funds (ETFs), the cryptocurrency market has experienced a surge in demand, while its supply remains relatively fixed, as quoted on CNBC.
Arrival of Bitcoin ETFs Add to Cryptocurrencies’ Stability
Since the launch of the first Bitcoin ETFs on January 11, the asset has surged more than 50%, even hitting a record high of just under $74,000. The ETFs represent a landmark in Bitcoin’s journey, offering both retail and institutional investors a regulated and accessible means to invest in the cryptocurrency. This development not only enhances liquidity but also contributes to price stability.
In an unparalleled surge of investor interest, spot bitcoin Exchange-Traded Funds (ETFs) recently witnessed record inflows topping $1 billion in a single day, with the iShares Bitcoin Trust IBIT by BlackRock Inc. at the forefront, attracting nearly $850 million of this amount. This event, reported by BitMex’s research division, underscores the rapidly growing enthusiasm for cryptocurrency (read: Spot Bitcoin ETFs Smash Records With $1B Inflows).
ETFs likeGrayscale Bitcoin Trust GBTC, IBIT, Fidelity Wise Origin Bitcoin Fund FBTC, ProShares Bitcoin Strategy ETF BITO, ARK 21Shares Bitcoin ETF ARKB and Bitwise Bitcoin ETF Trust BITB – gained about 40% past month.
Growing Corporate and Institutional Engagement
Since its launch on January 11, 2024, IBIT has remarkably amassed over $11 billion in inflows, dwarfing the combined inflows of nine other issuers who received approval from the Securities and Exchange Commission (SEC) to launch bitcoin spot price-based ETFs. The success of IBIT reflects a substantial shift in investment trends towards digital assets, especially bitcoin, which remains the most significant cryptocurrency by market capitalization.
An SEC filing issued last-to-last week revealed that IBIT held nearly 196,000 bitcoins, momentarily surpassing the holdings of MicroStrategy. However, a subsequent purchase by the software firm MicroStrategy again reestablished its lead in bitcoin holdings.
News released last week confirmed that MicroStrategy plans to raise capital through convertible bonds offering for the second time in less than 10 days to further boost its exposure to bitcoin.
The software firm said on Wednesday that it was offering $500 million in convertible notes due in 2031 to institutional investors. The company intends to use the proceeds from the sale of the notes to acquire additional Bitcoin and for general corporate purposes.
Diversification and Long-term Strategy
Hyman also pointed out that Bitcoin’s resilience precedes the introduction of spot Bitcoin ETFs, citing historical instances of market downturns and subsequent recoveries.
He suggests that a growing number of long-term investors are entering the market for asset allocation and diversification purposes, recognizing Bitcoin’s potential as a store of value and hedge against traditional financial assets (read: Bitcoin Bulls Racing for $450K? Zooming in on Crypto ETFs).
According to Standard Chartered, as quoted on Yahoo Finance, the cryptocurrency is expected to breach the $100,000 mark by the end of the current year. Research firm Fundstrat estimates Bitcoin to settle around $116,000-$137,000, while hedge fund SkyBridge foresees the asset hitting $170,000 by April 2025.
Safety vs. Volatility
Despite its recent gains and increasing mainstream acceptance, Bitcoin remains a complex asset that can register acute price swings. While the introduction of ETFs and growing investor interest have contributed to its stabilization, potential investors should remain cautious and informed.
Bitcoin’s historical volatility cannot be overlooked. In fact, U.S. investment advisor Vanguard still chose not to offer spot bitcoin ETFs. Its CEO Tim Buckley, in a recent discussion, described bitcoin as a speculative asset, not suitable for inclusion in long-term investment portfolios.
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Grayscale Bitcoin Trust ETF (GBTC): ETF Research Reports
ProShares Bitcoin Strategy ETF (BITO): ETF Research Reports
iShares Bitcoin Trust (IBIT): ETF Research Reports
Fidelity Wise Origin Bitcoin Fund (FBTC): ETF Research Reports
ARK 21Shares Bitcoin ETF (ARKB): ETF Research Reports
Bitwise Bitcoin ETF (BITB): ETF Research Reports