It’s the start of a new era for bitcoin as spot ETFs begin trading in the US.
Traders on Thursday gained access to the first 11 ETFs linked directly to bitcoin’s spot price after a contentious, decade-long approval process with the Securities and Exchange Commission.
But this milestone also means that the fun part of bitcoin is over, according to Ran Neuner, the co-founder of OnChain Capital and owner of Crypto Banter, a YouTube channel with more than 703,000 subscribers.
That’s because the days are over where investors could get abnormal returns from bitcoin due to slightly lower liquidity and information asymmetry, he said. As spot ETFs trade, Neuner believes bitcoin will become more of an institutional asset and its price action will mimic institutional flows. This means the crypto’s four-year cycle linked to the halving of miner rewards will be more muted; its new cycle will depend on how institutional investors view the asset, he added.
“In all likelihood, they’re going to start treating bitcoin as digital gold, which is the one way institutions see bitcoin,” Neuner said in an interview before the ETF approvals. “And then we might follow the gold cycle more than we follow the stock cycle.”
But there is also a likelihood that it could be seen as similar to investing in technology, especially in the beginning as it is adopted, he added. This means that it can also be correlated with technology stocks.
Regardless, the ETFs mean a lot more money will go into bitcoin, making its supply scarcer and sending its price higher while lowering volatility, Neuner said. While he doesn’t have a set price target, he’ll be surprised and disappointed if it doesn’t top $150,000 by the end of 2024, assuming no black swan events. In 2021, bitcoin reached nearly $69,000, a gain of more than 245% from its previous peak of nearly $20,000 in 2017. At the very least, he expects it to surpass 2021’s peak by at least 50%.
This year’s market cycle
The typical crypto bull cycle has historically been kicked off by bitcoin. Every four years (2024 is a fourth year), the reward for mining a bitcoin block is cut in half, and the tightening supply helps send the price up. When investors believe they have reached peak returns on bitcoin or feel the risk-reward curve is skewed against them, they shave off their profits to make riskier bets on smaller-cap cryptos by migrating to ETH, followed by other large-caps, and finally small caps, Neuner said.
Neuner pointed out that the wait for spot bitcoin ETF approvals has shifted the crypto market’s attention this year. At the moment, it is not crypto investors who are buying bitcoin. Instead, they are moving higher on the risk curve to lower cryptos, he said. For crypto investors, a spot ETF approval is a “sell-the-news” event.
“We’ve seen crypto cycles and we kind of understand that in a bull market the returns are going to come from the smaller altcoins, but you just have to make sure you get out in time,” Neuner said. “Now, because we’re so early in the crypto cycle — or we believe we’re so early in the crypto bull cycle — I think people are starting to place their bets lower on the table.”
In a July 2021 interview with Insider, he shared a breakdown of the cryptos he bet on during that bull market. Half of his exposure was in BTC and ETH with smaller amounts in Chainlink (LINK), polkadot (DOT) and cardano (ADA). By September 2021, he told Insider he had sold about 40% of his ether holdings to increase his exposure to solana (SOL).
So far, investors seem to have skipped the ETH trade and started investing in large-cap cryptos earlier, he said. This is evident from upward price movements that started in the last quarter of 2023 in tier-1 cryptos such as solana, by more than 130%, injective (INJ) by more than 160%, sei (SEI) by more than 200%, and celestia (TIA) rose more than 500%.
In 2022, solana took a significant hit from the collapse of FTX because the exchange was an investor in the crypto. But its network remains faster and cheaper than ethereum, which is why it’s attracting investors’ attention again, he said. The latter three cryptos are all part of a technology stack on Cosmos (ATOM), a layer-1 protocol that allows developers to create more on which other blockchains are built, and is interoperable.
Neuner told Insider that he and his family office are invested in the aforementioned cryptos.
But Neuner pointed out that once a bitcoin ETF is approved, all eyes will be on an ethereum ETF because the digital currency has had a similar path to bitcoin: ethereum futures ETFs are already trading and approvals for an spot ETF has been submitted. In December, the SEC delayed its decision on several ethereum ETFs until May 2024, while BlackRock and other firms also filed for an ETH spot ETF. This story will send money flowing back to ethereum, which will be the one to rise next, he predicted.
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