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By now, even the most infrequent of dabblers in the realm of cryptocurrencies know that Bitcoin is set to undergo its next halving event in April 2024, which heralds reduced mining rewards and a fierce price pump – as has been the convention so far – on the back of the cryptocurrency’s reinvigorated deflationary impulse. However, there are two major headwinds that are currently limiting the ability of the halving frenzy to pump Bitcoin’s price.
As we covered in a previous post, Bitcoin has been showing strength in recent weeks on the back of growing institutional interest. Specifically, Blackrock – one of the largest asset managers on the planet – submitted its application with the SEC to launch a spot Bitcoin ETF a few weeks back. This prompted Bitwise, WisdomTree, Invesco, and Grayscale to also revive their respective applications. Bear in mind that a spot Bitcoin ETF will make it extremely convenient for investors to acquire exposure to Bitcoin without the pitfalls associated with futures-based ETFs. This development, should it materialize, is expected to unleash a sizable inflow of investment into the Bitcoin ecosystem.
Hold up a second, this isn't as bad as headline. The key paragraph is deep in story. Basically SEC wants them to name the "crypto exchange" and give more details on SSA. That's understandable, arguably good news. I was under impression they'd have to update that as well. pic.twitter.com/bh9qn65Xh2
— Eric Balchunas (@EricBalchunas) June 30, 2023
Unlike past episodes when the SEC summarily rejected applications for a spot Bitcoin ETF, this time around, the apex regulator has been quite circumspect. Even though the SEC termed the latest applications as “inadequate,” it went a step further and highlighted the precise lacunae that have been hindering the process, including the absence of a “surveillance-sharing agreement” with eligible spot Bitcoin exchanges. This has opened the doors for applicants to remove the highlighted deficiencies and refile their applications. According to analysts, this time around, the SEC is much more likely to approve at least one application for a spot Bitcoin ETF, with Blackrock’s iShares currently the leading candidate.
Theoretically, when one combines this revived institutional interest with the approaching halving event, Bitcoin’s price should be able to scale a one-way escalator to the stratosphere, particularly when the recently delivered favorable ruling in the Ripple vs. SEC case aims to ease the regulatory noose around the crypto sector in general. However, two major factors stand to complicate this unmitigated bullish view.
Bitcoin’s Two Major Headwinds in the Months Ahead
First, the US government is slated to liquidate a stash of around 40,000 Bitcoins in four equal installments this year. The Department of Justice had acquired this stash when the US federal agencies seized the Silk Road dark net marketplace a couple of years back. On the 12th of July, the DoJ moved around 9,825.25 Bitcoin worth nearly $300 million to over 100 addresses. A liquidation remains probable. For the rest of 2023, these liquidations will continue to act as a headwind to Bitcoin’s sustained price pump.
What’s more, the Mt. Gox creditors – whose stash of less than 200,000 BTC that had been recovered from a high-profile hack and has since then lounged in the custody of a trustee – will finally receive their Bitcoin holdings by the end of October 2023. As a refresher, Mt. Gox had lost a whopping 850,000 BTC in a high-profile hack in 2014, prompting the exchange’s bankruptcy. As part of a civil rehabilitation plan, $1.7 billion in cash, 141,000 BTC, and 142,000 BCH are slated for distribution by the end of September. This situation adds another avenue for price-indiscriminate selling pressure around Bitcoin in the months ahead as the creditors who receive their Bitcoin stash are much more likely to sell their holdings after having waited for nearly a decade.
#BTC is now in the post-breakout Upward Acceleration Phase
The Macro Downtrend is over
And a new Macro Uptrend has begun$BTC #Crypto #Bitcoin pic.twitter.com/fOjjXQaHeM
— Rekt Capital (@rektcapital) July 15, 2023
Of course, this is not to say that Bitcoin can’t embark on a significant bull run in the weeks and months ahead. After all, the world’s premier cryptocurrency is now firmly lodged within a macro uptrend.
#BTC is still sub-$35,000
And so according to data science metrics, it is still in "bargain over the long-run" territory
Even at current prices, +100% up from the November 2022 bottom
Just shows the magnitude of the opportunity over the coming years$BTC #Crypto #bitcoin https://t.co/A6VclJ8p0b
— Rekt Capital (@rektcapital) July 16, 2023
Moreover, Bitcoin is already up around 100 percent from its lows in November 2022.
https://twitter.com/kamikaz_ETH/status/1679592903075561472
Nonetheless, the present setup reeks of another pump-and-dump, particularly when one considers the fact that the Blackrock-induced ramp-up did not begin until 24 hours after the news of the asset manager’s bid for a spot Bitcoin ETF hit the airwaves. This is a shocking lag for a market that prides itself on being efficient and open for business around the clock.
