BTC skyrocket, is it just because of ETF?

BTC's Dramatic Surge Is It Solely Attributed to ETF?

The price of Bitcoin has reached its highest point in 17 months, reaching the highest level since May 2022. This surge has caught many people off guard, and with the steady rise of this “cryptocurrency king,” it has brought a bullish atmosphere to the crypto market. So, what are the reasons behind this surge? And what is the future development of BTC?

Previously, veDAO Research Institute mentioned in their article that although fake news caused BTC’s price to experience a rollercoaster ride, the market sentiment is positive, and the future trend will be favorable. In this article, veDAO Research Institute will bring you the recent reasons for the BTC surge and analyze its future trend.

Reasons for the rise in BTC price

Considering that the crypto market is easily influenced by volatility, we cannot consider a single factor as the sole reason for the surge. In the past few days, BlackRock’s BTC spot ETF appeared on the DTCC website, was briefly removed, and then added back, which is also considered one of the reasons for this surge. In addition, there are other major influencing factors:

Upcoming BTC Halving

We are less than 6 months away from BTC halving. The crypto community expects this event to kickstart the next bull market cycle. According to analysts like Michaël van de Poppe, the current period (6 to 10 months before BTC halving) is the best time to invest in altcoins, and venture capitalists are eager to start receiving funding support.

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While investors are counting down the days for their investments to appreciate, BTC miners are concerned about this event. Miners’ concerns arise from the fact that this event will lead to a halving of mining rewards, reducing them from 6.25 BTC per block to 3.125 BTC. However, for investors, the halving event is valuable because it reduces the growth of newly mined BTC. Over time, mining operating costs are also increasing. Specifically, mining infrastructure is becoming more complex and expensive. Others complain about the increase in electricity bills, and US miners may face a 30% tax, which has caused even more unease. This is because BTC’s hash rate (the computing power required for computer or hardware operations when solving different hash algorithms) is primarily concentrated in the US.

US Banking Crisis and BTC

The US banking crisis that occurred in March this year has become a boon for BTC and the crypto market. One of the most important reasons is the lack of correlation between cryptocurrencies and the US stock market. Although the banking system has relatively stabilized since then, the current market situation implies that a similar scenario is forming again.

US banks hit once again

The four largest banks on Wall Street, Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS), and Bank of America (BAC), are currently at their lowest levels since the banking crisis. Their performance since the beginning of the year shows that their stock prices are currently the lowest, even lower than in March of this year. Citigroup’s stock price has fallen 14% since the beginning of the year, while Goldman Sachs has seen a nearly 13% decline. Morgan Stanley has suffered even more, with a 16% decline this year, while Bank of America leads with a 23% drop.

Cryptocurrencies and Bank of America show a negative correlation

Although the current state of the US economy does not support a bullish narrative for banks or the stock market, the situation in the crypto market is quite different. Currently, BTC shows a clear negative correlation with the S&P 500 and Nasdaq indices, -0.8 and -0.78 respectively.

In March, as banks faced immense pressure, BTC prices rose along with other cryptocurrencies. Coincidentally, BTC is now also rising. This has led to an increase in other alternative coins, pushing the total market value of the crypto market to $1.244 trillion.

From this perspective, the losses of US banking institutions are being converted into profits for cryptocurrency investors, indicating that the flow of funds into this field is not only influenced by the US. However, the ongoing losses of banking institutions may not be the sole reason for the rise in BTC.

Behind the Israeli-Palestinian conflict: US Treasury bonds and BTC

Arthur Hayes, co-founder of BitMEX, recently stated* that the current economy is being influenced by a “global war,” which has catalyzed the recent selling of US Treasury bonds. As Treasury bonds are no longer seen as safe, investors are choosing BTC and gold as alternative investment commodities.

Since mid-2022, the yield spread between 2-year and 30-year US Treasury bonds has turned positive for the first time.

Arthur Hayes explains the impact that the tense situation in the Middle East could have on the financial markets, pointing out that as the US government continues to provide military aid to Israel, this will result in the selling of US Treasury bonds. He explains, “If you are an investor holding US Treasury bonds in the long term, the most worrying thing is that the US government does not think it spends too much. If US defense spending enters a ridiculous mode, billions of dollars in loans will be used to support the war machine, and the government will need to sell more long-term bonds to absorb funds. This will further increase global distrust of US Treasury bonds. That is why bonds are being sold and yields are rising.”

As the “Israeli-Palestinian conflict” and “Fed pausing interest rate hikes” push US Treasury yields to a 16-year high, Arthur Hayes believes that when long-term US Treasury bonds no longer offer security to investors, they will seek alternative solutions, and the preferred assets in this background are gold and BTC. Arthur Hayes believes that the rise in BTC and gold is not speculation about whether ETFs will be approved, but a reaction to the high inflation caused by the devaluation of the future US dollar and the war. Arthur Hayes also mentions another reason for the bond sell-off, as the cycle of Fed rate hikes comes to an end and the US economy remains normal, investors no longer have the incentive to hold onto bonds, which will also lead to a sell-off of US Treasury bonds.

Bitcoin price may rise due to other factors

A group of key investors may also be one reason behind this surge. Since September 21, whale addresses holding between 100 and 1000 BTC have been accumulating Bitcoin. In the span of one month, this group’s BTC holdings increased by 50,000 BTC, worth $1.7 billion; this raised their holdings from 3.85 million BTC to 3.9 million BTC.

Bitcoin Trends

As of writing this article, the BTC price stands at $34,572 and may continue to rise due to strong market momentum. It remains at the mid-to-high range in the market, and the chart above shows the evaluation from the low point in early 2023 to this year’s high of $35,184.

Bitcoin has doubled in price since December 31 when it closed at $16,542, surpassing the crucial 61.8% Fibonacci retracement level of $28,067 during its uptrend. The strong momentum of this rebound also surpassed the 78.6% Fibonacci level, reaching $31,197.

The pressure from the increase in buying volume may push the BTC price to continue rising with a target of $35,000. In this case, the most reasonable target would be the Fibonacci chart’s top level of $35,184.

However, if profit-taking begins, the BTC price may still experience a downward trend. In this case, the support level for BTC could be around $31,197 or more likely around $28,067. In the most severe case, the price could drop to $25,869.

Conclusion

With the continuous increase in BTC price, market sentiment is clearly bullish. The upcoming Bitcoin halving, pressure in the US banking industry, and rising US Treasury yields are just a few of the factors driving this price surge. Although there may still be volatility in the short term, BTC price is in an upward trend in the medium to long term. For investors, now is still a good opportunity to invest in BTC. With the gradual release of the halving effect, BTC may enter a new bull market cycle, which is worth looking forward to.

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