The Bitcoin craze continues to heat up.

After two days of minor fluctuations, on February 18th, Bitcoin once again stood above $52,000 per coin, with a daily increase of nearly 2%. On February 19th, the price of Bitcoin continued to operate above $52,000 per coin. As of the time of the reporter's article submission, Bitcoin was reported at $52,323 per coin.

In fact, since January 24th, the price of Bitcoin has been soaring. According to data from the global cryptocurrency price website Coin Gecko, on January 24th, the price of Bitcoin was still below $40,000 per coin, and then it rose rapidly over several trading days. On February 15th, it surged to $52,660 per coin, setting a new high since December 2021. Compared with the mid-October 2023 low of $26,750 per coin, the increase is close to 100%.

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(Bitcoin's trend in the last 30 days)

In addition to spot Bitcoin, the newly issued Bitcoin ETFs in 2024 have also been continuously hot, with a fierce "money-sucking" momentum. Some industry insiders have said that the Bitcoin market is recovering strongly due to factors such as the issuance of the first batch of spot ETFs and the rising expectations of interest rate cuts by the Federal Reserve. However, the future performance is still difficult to predict. The Bitcoin market is highly volatile, and the regulatory policies for digital assets vary greatly across different countries and regions, so it is not advisable to enter the market blindly.

Funds continue to pour in

Industry insiders believe that this round of the Bitcoin trend began with the issuance of ETFs.

On January 11, 2024, the U.S. Securities and Exchange Commission officially approved 11 Bitcoin spot ETF applications, including those from BlackRock and other institutions. Prior to this, investors in the cryptocurrency market were mainly "scattered soldiers," and the entry of these asset management giants announced that the "regular army" is accelerating its entry into the market, bringing more incremental funds.

In fact, after the "regular army" entered the market, the Bitcoin ETF has continued to be hot, and the "money-sucking" has been continuous. According to data from BitMEX Research, just last week (February 12th to February 16th), the net inflow of funds into the aforementioned 11 Bitcoin ETFs exceeded $2.27 billion.

Among them, the Bitcoin spot ETF (IBIT) under BlackRock is at the forefront of the inflow. Bloomberg ETF analyst Eric Balchunas disclosed data showing that the inflow of funds into BlackRock's Bitcoin spot ETF (IBIT) has reached $5.2 billion so far in 2024, and the total inflow of funds into the 417 ETFs under BlackRock is about $10.4 billion. This means that the IBIT fund inflow has accounted for about 50% of the total inflow of the 417 ETFs under BlackRock so far this year.Regarding the source of massive funds, there are different opinions in the industry. "The market speculates that some market investors have chosen to sell gold ETFs and buy Bitcoin ETFs," a domestic cryptocurrency observer told the reporter. While Bitcoin ETFs are attracting a large amount of funds, the redemption scale of gold ETFs continues to expand, showing certain signs of market rebalancing.

Bloomberg's senior analyst, Balciunas, previously wrote that the incremental funds for Bitcoin ETFs may come from the Grayscale Bitcoin Trust (GBTC). GBTC was originally one of the largest Bitcoin trust products in the market, with an asset scale once exceeding 40 billion US dollars. However, since its transition to a Bitcoin spot ETF listing, it has brought about a large amount of selling. During February 12th to 16th, GBTC outflows exceeded 600 million US dollars.

The return of risk capital is also considered a potential positive factor by the market. Data from PitchBook, a US data analysis company, shows that in the fourth quarter of 2023, the total amount of venture capital for cryptocurrency-related companies was 1.9 billion US dollars, a 2.5% increase from the previous quarter. This marks the first increase in venture capital for cryptocurrency startups since the third quarter of 2022.

It is worth noting that after ETFs have swept the market funds, they also continuously "transfuse" to the Bitcoin market. Data from CryptoQuant shows that from January 11th to February 15th, about 9.5 billion US dollars of new funds have invested in the Bitcoin market through these ETFs. Monitoring data from HODL15Capital shows that 9 new spot Bitcoin ETFs have purchased 273,500 Bitcoins, worth 14 billion US dollars, within 26 trading days. With market funds pouring into Bitcoin through ETFs, the price of Bitcoin has also risen accordingly.

Various signs indicate that the Bitcoin market is entering a recovery zone. In addition, the aforementioned industry insiders told the reporter that, in addition to the positive market information brought by ETFs, Bitcoin will usher in a once-in-four-years "halving" in April. During this phase, the number of Bitcoins obtained by "miners" from mining on computers will decrease, which is generally considered a signal to promote price increases.

"The law of halving objectively limits the growth rate of Bitcoin supply and has an anti-inflation effect, which helps to promote the appreciation of the currency price," the research team of Zhang Liangwei at Dongwu Securities pointed out in their report. Since 2009, Bitcoin has undergone three halvings, and each halving has led to a significant increase in the price of the currency. It is expected that the fourth halving will arrive in April 2024.

What about the future trend?

What will the future trend of Bitcoin be, and can it reach a new high again? There is a divergence of opinions in the market at present.

Some analysts are not optimistic about the continuous rise in Bitcoin prices. Crypto analyst Marcel Pechman wrote in his analysis that data shows investors expect the earnings growth of S&P 500 companies to reach 10.9%, higher than the 3.8% in 2023. Assuming that the current inflation risks are equivalent to the risks when Bitcoin reached its historical peak, investors are likely to lack the motivation to seek alternative assets. For Bitcoin to reach a historical high of 70,000 US dollars from the current level of 52,000 US dollars, it would require an additional increase of 34.5%, which means the market value of Bitcoin would increase by 350 billion US dollars.

Marcel Pechman believes that as long as the US dollar continues to depreciate, Bitcoin still has hope to rise above 70,000 US dollars, but this is unlikely to happen before the block reward "halving" in April.However, there are also institutions betting on the continued rise of Bitcoin.

"It has sparked tremendous interest in traditional finance, beyond my expectations," said Matt Hougan, Chief Investment Officer at Bitwise Asset Management. Factors such as the supply tightening due to the halving could push the trading price of Bitcoin above $80,000.

The options market indicates that investors are increasing their bets on Bitcoin's rise. According to data from cryptocurrency options exchange Deribit, there has been a noticeable increase in the number of open contracts for call options with strike prices of $60,000 and $65,000 expiring on March 29.

In the long term, there are multiple favorable factors accumulating for the Bitcoin market in 2024.

"In 2024, Bitcoin will welcome three major benefits: the halving, the rise of the Bitcoin ecosystem, and expectations of interest rate cuts by the Federal Reserve," the team led by Zhang Liangwei at Dongwu Securities believes that the slowdown in economic growth brings expectations of rate cuts, and it is expected that the federal funds rate may fall to 4.6% in 2024. If the supply of dollars increases and the dollar depreciates, Bitcoin may see more demand due to its inflation-resistant effects.

It is worth noting that about ten fund companies are preparing to launch spot ETFs for virtual assets in Hong Kong, China. For example, there are market rumors that Harvest Fund Hong Kong has already submitted an application for a Bitcoin spot ETF to the Hong Kong Securities and Futures Commission; previously, Zhu Chengyu, Chairman of the VSF Group, publicly revealed that VSF is interested in cooperating with a local fund company to submit an application before the Lunar New Year and launch it in the first quarter, with an initial target of reaching $500 million in asset management scale by the end of the year.

Xu Wei Zhi, a non-bank financial analyst at Guoxin Securities (Hong Kong), believes that Hong Kong is becoming the first market in Asia to allow the listing of spot ETFs for virtual assets, and the launch of spot ETFs for virtual assets will strengthen Hong Kong's position as a leading digital asset center in the region.

However, some industry investors believe that the cryptocurrency market itself is highly volatile and requires investors to have a certain level of professional knowledge and risk tolerance. Moreover, the regulatory policies for digital assets vary greatly across different countries and regions and may change, so it is not advisable to enter the market blindly.