What are the driving factors after Bitcoin broke through the $40,000 mark? What is the future trend?

Author: flowie, ChainCatcher

Today, Bitcoin has broken through the $42,000 mark (currently reported at $41,687), reaching its highest price since May 2022, and surpassing Berkshire Hathaway to return to the top 10 global assets by market capitalization.

The unexpected surge in Bitcoin has caught crypto users off guard, signaling the arrival of a bull market. Since October 16, when crypto media Cointelegraph mistakenly reported that BlackRock's iShares Bitcoin spot ETF was approved, the price of Bitcoin has risen from $28,000 to $41,687, an increase of nearly 50% in less than two months.

As 2024 approaches, many institutions predict that the Bitcoin spot ETF will be approved in January 2024. How much will Bitcoin break through at that time? Besides the expectation of the Bitcoin spot ETF approval, what other factors are driving Bitcoin's rise? What predictions do institutions have for Bitcoin's performance in 2024, and what potential narratives should investors be looking out for?

Nearly 50% Increase in Bitcoin Over Two Months: What Forces Are Driving It?

One obvious driving factor for Bitcoin's rise is the expectation of the Bitcoin spot ETF approval. Most of Bitcoin's gains over the past two months are related to this, despite the presence of many false reports that have not dampened user enthusiasm for Bitcoin.

Less than half an hour after Cointelegraph's erroneous report on October 16 regarding the approval of BlackRock's iShares Bitcoin spot ETF, Bitcoin surged from below $28,000 to above $30,000, breaking the $30,000 mark for the first time in two months. Although this was quickly debunked and Bitcoin's price fell back to $28,000, a week later, Bloomberg ETF analyst Eric Balchunas posted on X, stating that BlackRock's iShares Bitcoin Trust had been listed on the DTCC (Depository Trust & Clearing Corporation, responsible for clearing Nasdaq trades) with the stock code $IBTC. Since this process is one of the necessary steps for the Bitcoin spot ETF to enter the market, the market viewed this as a more concrete signal that the Bitcoin spot ETF approval was imminent, leading Bitcoin to touch $35,000, its highest level in nearly 18 months.

However, this news also encountered confusion, as Barron's editor Joe Light tweeted that BlackRock's "IBTC" had disappeared from the official website. Bloomberg ETF analyst Eric Balchunas also believed that "IBTC" was advised to wait until just a few days before the realization date to announce it, rather than weeks or months in advance. Amid perceptions of market manipulation at the DTCC, BlackRock's iShares Bitcoin spot ETF reappeared on the DTCC website, but the Create/Redeem status changed from "Y" to "N."

Despite the confusion surrounding the Bitcoin spot ETF approval news, with continuous actions from giants like BlackRock and Grayscale, as well as positive statements from crypto KOLs, the market clearly leans towards the approval of the Bitcoin spot ETF, which is expected to happen early next year. For instance, last week, Bloomberg analyst James Seyffart posted on X that Grayscale had met with the SEC's Trading and Markets Division (the department responsible for approving or rejecting 19b-4). BlackRock is also suspected to have met with the SEC to discuss the Bitcoin ETF structure.

Recently, Franklin Templeton CEO Jenny Johnson stated in an interview at the Fortune Global Forum that they have made a small investment in cryptocurrencies, and regulators will approve the Bitcoin spot ETF at the appropriate time. Coinbase CEO Brian Armstrong also expressed being "quite optimistic" about the approval of the spot Bitcoin ETF.

In addition to the expectation of the Bitcoin spot ETF approval, this rise may also be related to Binance's $4 billion settlement with U.S. regulators. According to a recent report from Matrixport, this settlement provides another concrete favorable factor for the approval of the Bitcoin spot ETF and the rise of Bitcoin. Through this plea agreement, expectations for the spot Bitcoin ETF may have risen to 100%, as the entire industry will be forced to comply with the rules that traditional financial companies must follow. More importantly, this industry's "cleaning up" will strengthen institutional investors' cases for adopting Bitcoin and may position Bitcoin as a safe-haven asset in investors' portfolios.

As Bitcoin's price continues to rise, crypto analyst Phyrex (@Phyrex_Ni) stated that the spot ETF has driven up BTC prices, and the rising BTC has attracted a lot of external funds, which in turn has activated the activity of on-site funds. CoinShares mentioned in its latest weekly report released on November 13 that over $1 billion has been injected into Bitcoin in just two months.

Additionally, MicroStrategy's purchase of $593 million in Bitcoin in November reflects its bullish attitude towards Bitcoin and may have also contributed to Bitcoin's rise.

Will Bitcoin Break Through $100,000 Next Year? Unignorable Driving Factors Behind It

While the Bitcoin spot ETF may be approved at any time in the future, many analysts indicate that there is a 90% chance of approval before January 10 next year. Bloomberg analyst James Seyffart stated on X that the approval window for the Bitcoin spot ETF is expected to be between January 5 and 10, 2024. By January 2024, Matrixport also anticipates that the SEC will approve the Bitcoin ETF, with trading expected to start in February or March.

Even if there is no concrete news in January, March 15 is the deadline for BlackRock's approval, and bullish market sentiment may persist into the first quarter of 2024. Besides the approval of the Bitcoin spot ETF, multiple factors are expected to drive Bitcoin's rise in 2024.

For example, the Bitcoin halving cycle expected to occur in April next year. Historically, BTC has entered a high-growth mode six months after a halving. Federal Reserve interest rate cuts theoretically may lower borrowing costs, thereby increasing the inflow of investor funds into high-risk assets like Bitcoin, leading to a rise in Bitcoin prices. At the same time, Fed rate cuts may also lead to a depreciation of the dollar, thereby pushing up the prices of cryptocurrencies like Bitcoin.

Additionally, Matrixport's latest research report titled "Six Predictions for the Crypto Market in the First Half of 2024" states that in the first half of 2024, the listing of Circle, the resumption of operations for FTX, and Ethereum's Cancun upgrade will have a positive impact on the industry and drive up Bitcoin's price.

If the Bitcoin spot ETF is approved next year, how much will Bitcoin's price rise above several tens of thousands? Crypto financial services company Matrixport stated in a report that if BlackRock's spot Bitcoin ETF is approved by the SEC, Bitcoin's price could rise between $42,000 and $56,000. Moreover, Bitcoin is expected to break through $63,140 in April 2024 and reach $125,000 by the end of 2024.

In addition to Matrixport, other institutions have also made positive predictions, with Standard Chartered analysts repeatedly stating in reports that Bitcoin will break through $100,000 by the end of 2024, possibly even reaching $120,000. On one hand, the approval of the Bitcoin spot ETF acts as a catalyst; on the other hand, they believe that Bitcoin's velocity of circulation is at a historical low, indicating a significant change in market sentiment compared to the previous bear market cycle, as Bitcoin holders are unwilling to sell, and buyers need to seek new supply price points.

Similar views to Standard Chartered's are echoed by Blockstream co-founder and CEO Adam Back, who stated on social media that he believes BTC could reach $100,000 before the next halving. Back also believes that in a bullish scenario, Bitcoin's price could reach between $750,000 and $1,000,000.

From the recent potential volatility, Matrixport believes Bitcoin may rebound after the release of the U.S. Consumer Price Index (CPI) data and plans to reach $45,000 by the end of the year. Standard Chartered analysts also predict that Bitcoin will rise 67% this year, reaching $50,000.

With the Bull Market Approaching, How to Strategically Position?

As the next bull market begins, how to strategically position in potential sectors? Zonff Partners recently provided a comprehensive and clear investment perspective in their report "2023 Q3 Web3 Primary Market Review and Sector Analysis."

Zonff Partners believes that by Q3 2023, potential core sectors for the next bull market cycle have emerged in the market, categorizing the existing major sectors into four categories:

Source: Zonff Partners

First, sectors driven by Ethereum's legitimacy, such as Ethereum Layer 2 and other Layer 1s; cross-chain and interoperability; modularity and data availability; L3/Rollup as a Service/application chains; AA wallets.

Second, objective trends that show turning points or create new asset classes. Such as RWA and RWAFi, new stablecoins like PYUSD issued by Paypal, LSD and LSDFi, and the latest hot BTC ecosystem/BRC20.

Third, the scale expansion of mature sectors. Specifically including Web2.5 games (including hyper-casual light games, MMO, SLG, and other AAA heavy games; game state synchronization off-chain, introducing factors like NFT, DID, tokens into the on-chain economic system); product expansion during the DeFi 1.0 period, DeFi derivatives trading markets, mainly focusing on futures perpetual contracts, as well as options, synthetic assets, etc.; Depin, decentralized infrastructure networks; blockchain payment sectors.

Fourth, breakthroughs relying on user scenarios or operational experience that bring large-scale traffic. Specifically including Fully on-chain Games, Automouse World; AI + Web3.0 integration; social and creator economies, Telegram Bot, and NFTs.

Recommended reading “2023 Q3 Web3 Primary Market Review and Sector Analysis: The Bull Market is Gradually Approaching, How to Position?”

In addition to the sector capture framework summarized by Zonff Partners, Nansen's founder recently shared six major trends to watch for next year. Besides RWA and Web3 games, he also expressed optimism about NFTs that combine with physical entities, such as Pudgy Penguins toys launching on Amazon, and decentralized social platforms led by friend.tech.

As the bull market returns, while the market presents wealth opportunities, it is also filled with FOMO sentiment. Crypto users need to conduct thorough research and choose investment paths that suit them.