This BTC bull run is different and promises to unfold on an entirely new scale. A look at Bitcoin supply shock, institutional interest, rates, and more…

Happy Bitcoin all-time high in euros, dear readers! 🎉🚀

Yes, Bitcoin has passed the €60,000 mark, also hitting an all-time high in most other currencies. It looks like reaching its highest point in dollars – the $69k – is just around the corner.

In this newsletter, we’ll speak about the factors affecting BTC price and how they could affect it in the future. But before that, let’s spare a thought for the ECB who just 10 days ago reiterated that Bitcoin was “failing as an investment” 😭

Not enough Bitcoin for everyone

Bitcoin rally is underway, but there’s still oddly little buzz in media and social networks, and Google searches for “Bitcoin” are nothing like the crazy interest we saw during the previous bull market of 2021-22.

This leads us to believe that this rally is mostly stimulated by the US institutional investors, massively buying the newly launched spot Bitcoin ETFs. Indeed, the year-to-date flows for spot BTC ETFs have exceeded $5.7 billion (cf CoinShares), bringing bitcoin demand to a whole new scale.

However, with the halving scheduled for next month, bitcoin will become even scarcer, reducing its issuance from the current 900 BTC/day to only 450. This will make it even more difficult to satisfy the growing demand.

Let’s put things in perspective: out of 19.66 million mined bitcoin, almost 70% haven’t moved in a year, 29% haven’t moved in 5 years, and 14% haven’t moved in 10 years (source: Glassnode). This means that 5.7 million BTC are de facto out of the market, 8 million BTC will not be sold until the price reaches substantially higher grounds (three figures at least), and only 5.9 million are truly liquid.

Now imagine that institutional investors keep their appetite at the current levels (i.e. approximately 1.1 million BTC bought per year), this will mean that the liquid BTC supply would be exhausted in 5.5 years. Or 6.3 years if we assume that all newly issued coins are immediately sold.

Of course, this is an extremely approximate calculation (not even counting retail and corporate treasuries), but it does give an idea of just how scarce bitcoin is. And scarcity = rising prices 😉

Will the institutional interest persist?

Nothing is written in stone, of course, but so far, Bitcoin spot ETFs have broken so many records in the traditional finance’s world that make it difficult to ignore their significance.

For example, BlackRock’s $IBIT has already reached $10 billion in AUM – the fastest fund ever to reach this club of 152. It also recently registered a trading volume of over $3.3 billion in one day, surpassing even the behemoth $QQQ, Invesco’s fund tracking Nasdaq-100. Such performance is truly unprecedented for a young two-month-old fund.

Overall, the trading volume (which Bloomberg analyst Eric Balchunas calls “largely function of natural demand”) of the 9 newly registered spot Bitcoin ETFs hit an astounding $6 billion traded in one day.

This success does not mean that the asset managers are resting on their laurels, relying on the buss. They are actively proposing Bitcoin funds to retail clients, releasing “Boomer-style” educational videos like BlackRock, or putting 1-3% “crypto” part in their popular all-in-one funds, like Fidelity.
Furthermore, institutional interest is not limited to the US alone. Japan’s government has recently approved a bill allowing VCs and investment funds to hold cryptocurrencies. At the end of January, Hong Kong’s financial regulator accepted the first-ever spot Bitcoin ETF application.

What impact on BTC price?

The massive “God candle” of Bitcoin weekly price has already given us an idea of this rally’s scale. Bitcoin has never before attained an all-time high before the halving, suggesting that there’s more to come. Much more, in fact: statistically, it took the coin over 500 days from the halving to reach the cycle’s peak.

History is not condemned to repeat itself, but it certainly looks as if it will this time. Bitcoin is playing an increasingly important role as an investment alternative in this increasingly unstable world, and this time the big finance is in.

This also means that interest rates can play an even bigger role in Bitcoin price formation, and from this point, our current situation looks even brighter. The last time BTC hit $66k, the Fed funds rate was 0.08%, prompting some to explain Bitcoin’s previous rally by cheap money. Today it’s 5.33%, and the impact that the Fed’s future rate-cutting might have could be tremendous.

Some might say that so much institutional interest may be contrary to some bitcoiners’ ideology. However, bitcoin was created to be accessible to all, and this includes guys on Wall Street 🤷‍♀️

Also, big money coming to the bitcoin market may actually be good for its (relative) stability. Institutions tend to have a long investment horizon, which decreases the risk of dramatic drops, so familiar to all Bitcoin holders. After this rally is over, we will likely be seeing day traders progressively outnumbered by long-term investors, which could reduce sudden downward movements and spare us all some early grey hair  😅

Finally, let’s not forget about the retail interest, which is poised to grow as Bitcoin’s rally gains coverage in major media. The retail FOMO will give the price another push… but beware of its dangers.

Have fun running with the bulls, but try to avoid hoofs and horns 🐂