"There won't be a large influx of funds in the short term, and the market needs some time to slowly plan and digest the existing funds."
Original | Odaily Planet Daily
Compiled by | Yutian Lei
With the advent of BTC spot ETF, how much incremental funds can institutional entry bring?
Recently, the spot Bitcoin ETF was officially approved, and the market sentiment was high. However, the price of Bitcoin did not break through the $50,000 mark as expected. Instead, the price of ETH broke through $2,600, and the Ethereum ecosystem once again received frequent attention.
On January 11, Odaily Planet Daily held a Space event and invited 8 guests to discuss in depth the issue of whether the entry of institutions into the BTC spot ETF will become a new starting point for a long bull market. The guest lineup is as follows: dforce founder Mindao, OKX Venture researcher Kiwi, Gate Venture managing partner Kevin, PFR Capital Jason, crypto KOL "Auntie", crypto trader Paulwei, unicorns, and "Little Fisherman".
The following is a condensed version of the story. For more details, please listen to space review
Odaily Planet Daily: On January 11, the US SEC approved 11 spot Bitcoin ETF products, including the highly-watched BlackRock, Ark, and Grayscale. What do you think of this approval, what does it mean for the crypto market, and does it represent a loosening of regulatory policies?
Mindao: The application for ETF started in 2013. It is a good thing for retail investors that it is 10 years late. In the past three to five years, the stigmatization in the US Congress was very serious. The passage of ETF marks the beginning of the destigmatization of Bitcoin, which is a milestone event.
Kiwi: Although the SEC has approved the Bitcoin ETF, its recognition of Bitcoin is still relatively low. From a long-term perspective, the approval of the Bitcoin ETF has enhanced market confidence.
Kevin: From an insider's perspective, the approval process is proceeding step by step. Grayscale's lawsuit against the SEC has promoted the application for a Bitcoin ETF. It is a long-term positive for the crypto market and can bring more Web3 users. It has achieved the connection between the crypto field and the traditional field, and all capital can participate in Bitcoin investment legally and compliantly. However, the volatility of Bitcoin will become smaller in the future, as a target for macro hedge funds. The SEC is relatively exclusive of cryptocurrencies, and it is difficult to pass a second crypto ETF. The Hong Kong Securities and Futures Commission will also accelerate the promotion of spot Bitcoin and support spot delivery.
Jason: It is undoubtedly beneficial both in terms of funding and talent. The crypto market has caused great difficulties for various countries, causing each country to take certain measures against cryptocurrencies. With the passage of the Bitcoin ETF, the regulatory level will gradually relax the regulation of cryptocurrencies.
Auntie: From the FTX crash last year to now, the industry has been in a trough. The collapse of the bubble has deepened the negative views of outsiders on us. The approval of the Bitcoin ETF is like a shot of reassurance.
Unicorn: Regulation is a fraud to retail investors to a certain extent, and it is a kind of jungle operation. The passage of ETF will expand the Bitcoin liquidity pool, and the Bitcoin price will become stable. It is difficult to see a sharp drop like the 312 crash. Some speculative risk investors will switch their Bitcoin positions to more volatile cryptocurrencies such as Ethereum.
Paulwei: From a bottom-up perspective, the origin of Bitcoin is anti-authoritarian. The introduction of ETFs will make Bitcoin authoritative and attract more retail investors to enter the crypto market while attracting big funds.
Little Fisherman: After the Bitcoin ETF was approved, it did not achieve the surge we imagined. My view on ETF is that it is not crazy at the moment, but it is indeed the new origin of cryptocurrency in the future. The impact on the crypto market is analyzed from two points. The first point is that the destigmatization of Bitcoin has expanded investment channels and institutional funds have flowed into Web2. The other point is the value of the times. Against the backdrop of the return of the US dollar, spot Bitcoin is undoubtedly a major positive.
Odaily Planet Daily: After the spot ETF was approved, some people believed that there would be an additional $4 billion in funds entering the market after the first day of spot ETF trading. Of course, there are also those who refute this view. In your opinion, how much incremental funds can the advent of spot ETF bring to the crypto market?
Mindao: I don’t think there will be a large influx of funds in the short term. The market share of Bitcoin ETF has reached about 2%. The market needs some time to slowly lay out and digest the existing funds.
Kiwi: The approval of spot ETF will definitely bring a long-term bull market. In the long run, large funds can still be invested. In the short term, funds have been fully pressed in, there will be a negative decline and no large funds will enter. In the medium and long term, with the halving of Bitcoin, the Fed's interest rate cuts and a series of other measures. After the market bottoms out, large funds will enter
Kevin: I am firmly optimistic about the long-term value of Bitcoin. The four-year cycle of Bitcoin will be gradually smoothed out and gradually match the traditional financial cycle. As for the source of funds, the fastest source of funds is seed funding, and hedge funds may enter within a month. I think it will take at least three months. Larger funds such as public funds and private funds need investment consultants to communicate with their managers to purchase Bitcoin ETFs.
Jason: It seems that only a few billion have been approved. I think the significance of proving it to the cryptocurrency circle is more than how much capital it can actually drive inflow. There are many financial news reports in China, which brings more exposure.
Aunt: I look at it from the perspective of a retail investor. Some investors who have invested in stocks such as Coinbase will also come to buy Bitcoin spot. The specific amount of funds flowing in is difficult to estimate.
Paulwei: Don’t overestimate the short-term impact, and don’t underestimate the long-term impact. In the short term, due to the impact of selling, even if we know the volume of short-term buying, we can’t see the short-term direction. In the long term, the exchange rate of BTC/Tesla stock may have 2 to 4 times the space for covering.
Odaily Planet Daily: After the Bitcoin ETF was approved, the market now has higher expectations for the approval of the ETH spot ETF. What do you think of the subsequent approvals? Can you tell us about the key time points?
Mindao: After Ethereum switched to POS, it is more like a security in terms of design. I think the key time point is in May, when the SEC will review the Ethereum ETF, but the possibility of approval is not high.
Kiwi: I think Ethereum's ETF will definitely be approved. However, the overall scale of Ethereum is relatively small, so the approval time may be relatively long. During this period, it is better to pay attention to Cancun upgrades, Layer 2 tracks, Lido and other aspects.
Kevin: I analyze it from two perspectives. In the short term, the launch of the test network and the expectation of the Ethereum ETF in May may be too high, and it is highly likely that it will not pass in May. In the long term, I think it is possible to pass in the second half of this year or before the end of the year. I think there is a 60% chance that it will pass. Then we can look at the second time point, which is the US election. In the end, it will be the Democratic Party or the Republican Party. If the Republican Party comes to power, some SEC chairmen will most likely be replaced.
Jason: The priority is whether it can pass. I think Kenya can pass. But the possibility is much lower than Bitcoin, because after Ethereum switched to POS, I think it is becoming more and more securitized. In the long run, as time goes by, it is still unknown whether Ethereum's technology will be surpassed by POH chains like Solana.
Auntie: I think there are three factors. First, Ethereum founder Vitalik Buterin is still active in the crypto community. Second, it depends on whether institutions like BlackRock have any inclinations. Third, with the Fed’s rate cuts in the second half of the year, models like liquidity pledge in Ethereum will turn Ethereum into an interest-bearing asset in addition to the U.S. dollar.
Paulwei: I think it will take longer than expected. First, there are many factors behind Ethereum, including high scalability and programmability, which will bring security issues. Second, the price of Ethereum fluctuates greatly.
Little Fisherman: It depends on who is pushing for the Ethereum ETF. And with the Bitcoin ETF being approved, I am more inclined to approve it.
Odaily Planet Daily: Judging from the market trend, after the spot ETF was approved yesterday, Bitcoin did not rise as expected, but ETH rose head-on and broke through $2,600. What do you think of the changes in the market? What are your predictions for the subsequent market trends?
Little Fisherman: I personally tend to be more market-friendly. We expect to move more towards the Ethereum and BRC ecosystems.
Paulwei: I prefer to think that the rebound of Ethereum exchange rate is a short-term rebound. From the perspective of market rules, information is spreading very fast at present, and it is difficult for the market to go as expected. The flow of buying and selling orders and large funds is still full of uncertainty. My current position is in a state of advance or retreat, waiting for more signals to appear.
Auntie: I don’t see any major negative news. Judging from the on-chain indicators and profit taking, there may be a partial correction before the halving, but the extent of the correction is hard to say due to the existence of ETFs.
Kevin: I think in the next period, the consensus of the Ethereum ecosystem is the strongest. There are two positive factors. The first is the Cancun upgrade, and the second is the Ethereum ETF news. Some Layer 2 leaders have seen very high increases.
Mindao: Compared with the past two or three cycles, the bull market seemed to arrive earlier than I expected in the second half of 2023. I always thought that this round of bull market should come in the second half of 2024. However, this early bull market also brought some positive and negative factors.
First, from a negative perspective, some potential risks seem to have eased after consultations between Binance and the sixth administration of the United States. This has allowed the entire market to avoid some potential negatives and given people some peace of mind.
On the positive side, the Bitcoin and Ethereum ecosystems have shown amazing vitality over the past period of time. The Bitcoin and Ethereum ecosystems have developed rapidly, bringing new assets and gameplay, and even redefining the cryptocurrency landscape. Starting with the Bitcoin ecosystem, the market trend continues to develop upward, and there does not seem to be much negative news to reverse the market.
I am relatively optimistic about the outlook for 2024 and believe that the bull market trend will continue until 2025. This is mainly based on the superposition of three monetary policies. The first is Ethereum's recovery upgrade, which is a large-scale expansion. The second is Bitcoin's halving. Finally, traditional finance may feel the impact of digital currency's monetary policy on prices. In addition, the results of the US election may also have an impact on technology investment policies, especially if the Republican Party is established, which may have a more positive impact on the market.
Kiwi: In the short term, the market trend is difficult to predict and may be affected by some uncertain factors. But in the long term, I am very optimistic about the prospects of Bitcoin and Ethereum. I think the impact of Bitcoin halving on the market is minimal. I gradually realized that Bitcoin halving is not just a change in production, but also an impact of psychological expectations.
At the same time, I am optimistic about the future of Ethereum. Ethereum is doing some difficult but right things, such as introducing more user facilities and conducting some complex experiments. Despite some political controversy, these initiatives enable Ethereum to attract more users in the long run. Based on these considerations, I think the ecology and innovation of Bitcoin and Ethereum are expected to make great progress in 2024 and 2025.
Jason: I think most people did not expect the current market changes, especially the relatively strong performance of Ethereum, while Bitcoin did not rise as quickly as expected. In the short term, it is difficult to accurately judge the market trend because various factors may affect the market.
However, in the long run, I personally remain optimistic about Bitcoin and Ethereum. I think that although the impact of Bitcoin halving is minimal, the impact of psychological expectations and the development of the second layer and various applications will have a significant impact on the growth of Bitcoin and Ethereum.
Regarding the current market situation, I personally prefer to focus on some projects that have the potential to change the real society, although this may involve some risks. In addition, I will focus on some assets with strong chassis technology and stability. But I think the current development of Ethereum may fall into an endless loop, although we have adopted some solutions to solve previous problems. I think some new innovations may bring Ethereum back to the competition, but in the current situation, Ethereum has been tightly tied to big capital.
Unicorn: Looking at the current market situation, I have the following three views:
1. Consideration of the chip dimension: Emphasis is placed on observing the chip movements of project parties and large institutions. For example, if the founder has been selling chips, it may affect the long-term performance of the project. For unowned tokens, no one is responsible for maintenance, which may lead to project failure.
2. The relationship between market fluctuations and leverage: Various factors in the market and leverage of contracts may lead to short-term market fluctuations. Especially when the market is optimistic, short-term adjustments are inevitable in the market. The market adjustment is to digest leverage and other factors to maintain the healthy operation of the market.
3. Project quality and long-term trends: I think that in terms of long-term trends, everyone has a consistent view on the quality and development direction of the project. However, confidence in the long-term trend and vigilance against short-term fluctuations need to be balanced.
