Since the beginning of 2023, Bitcoin (BTC-USD) is up a whopping 280%, becoming one of the best-performing large-cap assets in the market. With a valuation of $1.2 trillion, this is truly a massive cryptocurrency, and one that’s not likely to be rivaled any time soon by most of its competitors in this space.
Most of this recent surge has come amid a shift in investor sentiment tied to various macro factors. However, there’s also key BTC-specific catalysts that have driven much of this recent rise.
Earlier this year, the Securities and Exchange Commission approved spot Bitcoin ETFs, allowing institutional investors access to funds that directly own Bitcoin. This removed a significant hurdle for such investors and opened the floodgates of capital for this asset class.
Then, the recent Bitcoin halving took hold, with mining rewards cut in half for Bitcoin moving forward. This will limit the amount of incoming supply, creating a further supply/demand dislocation, driving prices higher. That’s the bull thesis, at least.
Let’s dive into whether such a dynamic will play out, or if this recent sell-off is more likely to continue.
2-Week Price Dip
Bitcoin dropped before Wall Street opened on April 26, with trading conditions restraining bullish momentum. BTC fell from the $65,000 level, and currently trades around $63,500 at the time of writing. All eyes are on whether this top cryptocurrency can regain the $70,000 level and move to new highs.
The thing is, net outflows of more than $200 million over the past week from spot Bitcoin ETFs are dimming Bitcoin’s prospects. Billions surged into these exchange traded products initially, but with more recent outflows, this catalyst is dissipating.
Despite a subdued crypto market, some analysts anticipate a prolonged absence of clear Bitcoin trends. Few altcoins are diverging for notable gains. Indeed, a period of stagnation and consolidation could be underway, in which Bitcoin trades sideways for some time. At least, that’s what the experts seem to expect following the halving.
Steady at $63,000
Bitcoin held above $63,000 on April 29 despite the aforementioned outflows from spot Bitcoin ETFs and increased regulatory scrutiny. Spot BTC ETFs in the U.S. saw a net outflow of $218 million on April 25, with only Franklin Templeton recording inflows, indicating diverse factors at play.
On April 25, U.S. Senators Elizabeth Warren and Bill Cassidy asked the Justice and Homeland Security Departments about fighting cryptocurrency use in child exploitation. They cited a Chainalysis report. Investors and fans of Bitcoin remain positive for the token despite inflation looming around and lower gross domestic product U.S. growth.
According to CNBC, analysts also expect that the Fed will continue raising its interests, although it’s undetermined when. I think the macro environment is likely to remain murky for some time.
Bottom Line on Bitcoin
Amid a crypto market sell-off, concerns have arisen around the future inflows or outflows tied to spot Bitcoin ETFs. I think this is the key catalyst to watch right now, as it will provide a real-time indication of institutional investor sentiment. And it’s this group of investors that’s going to be needed to drive prices higher, given how large Bitcoin has become.
The trend will ultimately be higher for Bitcoin over the long-term, but predicting price movements over any short-term time horizon is extremely difficult to do. Thus, following this halving, I think it’s better to be long than short, but we’ll have to see what happens.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
