Bitcoin

$100,000? Adam Back says don’t underestimate Bitcoin ETF influence.

adminDecember 15, 2023

The COVID-19 pandemic, rampant inflation, and regional conflicts have had a direct impact on the decline in the value of Bitcoin (BTC) over the past two years. But according to Blockstream CEO Adam Back, 2024 promises to be a time of resurgence.

A cryptocurrency expert who pioneered the proof-of-work algorithm applied to the Bitcoin protocol tells Cointelegraph that the prominent cryptocurrency is falling below the historical price trend line of the previous mining reward halving event.

A “biblical” event harmed Bitcoin.

White weighed in on Bitcoin’s potential price action with the next halving in April 2024, when Bitcoin miners’ block rewards will decline from 6.25 BTC to 3.125 BTC. 210,000 blocks will be mined.

Bitcoin’s supply issuance is built into the protocol, and BTC mining rewards are halved every 210,000 blocks. Source: bitcoinblockhalf.com

The superimposed average of previous market cycles and halvings indicates that Bitcoin’s relative value lags widely accepted predictions. Various events have played a role in lowering the price of BTC, and this has also been seen in traditional financial markets.

“The last few years have been like the plagues and pestilences in the Bible. There was COVID-19, quantitative easing, and wars that affected electricity prices. “Inflation causes people to increase and businesses to go bankrupt.”

According to Back, this impact has had a major impact on markets and portfolio management. Investment managers have had to manage risk and losses over the past few years, which has forced them to sell more liquid assets.

“They need to raise cash and sometimes they will sell good stuff because there is liquidity and Bitcoin is very liquid. This used to happen with gold as well, and I think this has become a factor for Bitcoin over the last few years,” explains Back.

Bitcoin may have already reached $100,000.

As 2023 approaches, many of these macro events Back cited have receded and more industry-specific failures have also been resolved. This is reflected in Bitcoin’s recent price surge since November 2023.

“The majority of companies that went bankrupt due to exposure to the wave of contagion, Three Arrows Capital, Chelsea, BlockFi and FTX, are over. We don’t think there will be a bigger surprise than this,” Back said.

Related: Blockstream Continues Targeting Bitcoin Miner Surplus with Series 2 BASIC Note

The Blockstream CEO reiterated this point earlier this year when he predicted Bitcoin would reach $100,000 in the next market cycle. He believes that BTC would have already achieved this goal if not for the factors highlighted in his conversation with Cointelegraph.

Baek also cited Bitcoin’s “stock-to-flow” model created by PlanB, an unnamed former institutional investor, as a benchmark for Bitcoin’s potential upside in 2024.

Back explains that PlanB’s model and heuristics suggest that historically smart Bitcoin investors bought BTC six months before the halving and sold on significant price spikes in the 18 months following the decline in mining rewards.

“People thought it was a slightly crazy claim that we could halve $100,000 up front because I said it when the price was about $20,000.”

He added that the Bitcoin price reaching $44,000 multiple times in December 2023 suggests his previous prediction may not be so far-fetched.

Bitcoin ETF Effect

Prominent investors and market analysts have also highlighted that the U.S. Securities and Exchange Commission (SEC) is likely to approve applications for several spot Bitcoin exchange-traded funds (ETFs).

Senior ETF analysts Eric Balchunas and James Seyffart touted that these applications could be approved in early 2024. Galaxy Digital co-founder Michael Novogratz also predicted a massive influx of institutional investment into BTC back products, a point echoed by Back:

“I think Bitcoin could reach $100,000 before ETFs and even before halving. “But I don’t think the impact of ETFs should be underestimated.”

The main reason cited by Bitcoin advocates is that entire sectors of the traditional market, including major fund managers such as BlackRock and Fidelity, are not permitted to invest directly in assets such as Bitcoin.

Related: Bitcoin ETFs Will Drive Institutional Adoption in 2024 — Mike Novogratz of Galaxy Digital

“If you manage a mutual fund, there are rules that say you can only purchase things like public stocks and ETFs that are externally charged or part of the fund. They can’t buy startups and they can’t physically buy precious metals. They can’t do any of that,” Back emphasizes.

This is a good reason why spot Bitcoin ​ETFs could attract large capital inflows into the sector. Back added that the investment vehicle provides access to Bitcoin exposure for various types of funds, especially in the U.S., which tend to do so through Fidelity or BlackRock rather than through cryptocurrency exchanges.

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