Matrixport: Bitcoin spot ETF is about to be approved and BTC will jump to $50,000

Matrix on Target wrote on December 21, 2023, “Bitcoin will explode to $50,000 in January”. After a typical mid-to-late December consolidation, Bitcoin is poised for a strong wave of early-year buying power that could see it break through resistance.

A year ago, most market participants were bearish and therefore under-positioned. However, the situation is different now, with stocks and cryptocurrencies rising sharply. Institutional investors cannot afford to miss out on any potential rebound again and must buy immediately when the market opens in 2024. We expect that the upcoming rebound will catch investors off guard again.

The potential approval of a Bitcoin spot ETF could be announced today or tomorrow, earlier than the January 8th, 9th, or 10th that most traders expect. If this happens, we expect a significant increase in the price of Bitcoin. This is unlikely to be a “sell on the news” event, as approval would legitimize Bitcoin as an asset class for institutional portfolios that can be used as collateral to purchase other assets.

Conversely, the risk could rise as $5-10 billion of fiat currency may not be able to find enough Bitcoin on exchanges to gain exposure to a Bitcoin ETF. After the 2022 bankruptcy and collapse of the FTX cryptocurrency exchange, many Bitcoin holders have moved their BTC off exchanges, and familiarity with cold storage options has increased. As a result, 70% of circulating Bitcoin has remained “untouched” over the past 12 months.

In October 2023, we estimate that US-listed Bitcoin spot ETFs could see inflows of $24-50 billion. We also estimate the potential upside to Bitcoin prices based on its relationship to the change in Tether's market cap. This keeps us bullish throughout the year end, especially after Fed Chairman Powell appears to turn dovish in October 2023.

Bitcoin mining companies tend to restrict supply around the halving cycle, which is expected to take place in April 2024; this could be another reason for the supply shortage. Sometimes, this is a price development seen in commodity markets, when market participants are forced to buy and sellers refuse to sell at those price levels. The result is a sharp increase in prices. What happens to the price of Bitcoin this year could surprise everyone.

As we have noted, Bitcoin tends to rally strongly during halving cycles, which coincide with US election cycles. Bitcoin averaged a +192% return in 2020, 2016, and 2012. This could lift Bitcoin to our $125,000 target set by our “new year high” indicator in July 2023. Likewise, US stocks tend to perform strongly in US election years, with the only two declines since 1960 (i.e. 60 years) being 2008 (-37%) and 2000 (-9.1%).

Surprisingly, Bitcoin funding rates have remained high during the holiday period, which suggests that crypto traders are still very optimistic and expect Bitcoin ETF approval to be imminent. With the Bitcoin dominance indicator falling to 50.3%, we are approaching the altcoin season, when the cryptocurrency market will enter a beta rocket-like upward phase.

Bitcoin price surges, funding rate exceeds 66% (annualized)

Even though we are not seeing an increase in Tether minting activity, which would indicate a fiat inflow into crypto, the fact that prices are rising could indicate that there are no sellers in the market and prices are heading higher. This morning, the funding rate hit a new high of +66%. This means that longs are paying shorts 66% per year to stay long.

This is how the futures market squeezes the spot market and could push Bitcoin above the $50,000 target level in January 2024, which seems reasonably achievable. We could be trading above $50,000 by the end of the week.