The quality of the virtual currency market, centered around Bitcoin, has changed. The US Securities and Exchange Commission (SEC) approval of the Bitcoin exchange traded fund (ETF) on the 10th of last month was a catalyst. For 15 days after its approval, the price of Bitcoin fell by about 15% due to short-term selling due to the realization of listed materials and profit taking by long-term investors. However, due to the continued net purchase inflow from institutions, it rose to 70 million won, breaking the highest price in 27 months. Some predict that he will try to surpass the 100 million won within the year.
More important than price movements are qualitative changes in the market. Because it is a very volatile market, market conditions can go up and down, but few movements are noticeable.
First, an opening was opened for the inflow of institutional funds that had not been able to enter due to inadequate systems. ETF approval gave institutional investors the justification to freely invest in Bitcoin. At the same time, as ETF influence in the virtual asset allocation market has grown, the correlation with real macroeconomic variables has increased. Attention is paid to whether the Bitcoin market, which has been used as a ‘money game’ for investors, will grow into an ‘investment market’ in name and reality that reflects the flow of the real economy such as stocks and bonds. Additionally, it is expected that as stable funds such as pension funds enter the Bitcoin market, it will not only lead to an increase in price but also lower volatility. Based on these changes, there are also predictions that the period before and after the halving scheduled for April will provide another upward price momentum.
Organizational leadership, greater engagement with macro indicators
The current virtual asset distribution market trades 24 hours a day, 365 days a year, making investment convenient, but has been criticized for a lack of proper regulations or investor protection. However, with the approval of ETFs, the proportion of over-the-counter trading markets has increased and they are gradually being incorporated into the mainstream investment market. A large proportion of virtual asset transactions are traded in the same time zone as the stock market.
This also directly affects the price of Bitcoin. The analysis is that as the proportion of ETF transactions has increased, the correlation between macroeconomic variables affecting the intraday market and the price of Bitcoin has increased.
Kim Dong-hwan, CEO of WonderFrame, a virtual asset specialist, said, “Until the end of last year, the Bitcoin price barely responded to macroeconomic indicators. However, this year, it clearly responded to employment indicators such as the Price Index Consumers (CPI) and the number of unemployment claims, “I do,” he said. On the 7th, when the US CPI for January exceeded expectations, the price of Bitcoin fell 2% in a short period of time. When US prices rise, the Federal Reserve’s interest rate cut is pushed back, which acts as a factor in strengthening the dollar. In this case, the value of risky assets other than the dollar is falling relatively. Safe-haven assets such as gold, as well as emerging market stocks and bonds, which are considered risky assets, were closely linked to the dollar’s movements. Attention is paid to see if Bitcoin, together with these assets, will be evaluated as an asset that moves according to macro variables. In fact, as the number of new unemployment claims in the United States was published on the 1st, showing signs of worsening employment, the price of Bitcoin rose by about 1%.
Another change is the inflow of long-term investment funds such as pension funds. John Palmer, head of the digital division of the Chicago Board Options Exchange (CBOE), referred to the biggest effect of the approval of the spot Bitcoin ETF as opening investment channels for funds operated by pension funds and professional investment advisers. It is expected that if long-term stable investment funds enter the virtual asset market, which fluctuates significantly even on small issues due to the majority of individual investors, the fundamentals will be sound and volatility will be reduced .
Because of these changes, the inflow of new money into Bitcoin through ETFs continues to increase. CryptoQuant, a virtual asset data analysis company, published a report and said that about 70% of the new investments that came in as Bitcoin surpassed $50,000 this month were made in ETFs. Among the assets under management of all ETFs, they found that Bitcoin spot ETFs accounted for 83% of the total ETFs launched last month. Changes in the quality of the market lead to an expansion of quantity.
A new record is possible when the halving period arrives.
In the 40 days since the ETF was approved and the 10 ETFs were listed, trading performance has exceeded market expectations. IBIT, Blackrock’s Bitcoin spot ETF, has net inflows of nearly 7.5 trillion won. Nine other ETFs, including Fidelity, record net inflows of 9.2 trillion won. GBTC Grayscale, which was converted from a Bitcoin trust to an ETF, saw a net sale of almost 10 trillion won during the same period, but this amount is more than acceptable. It can be seen that more than 6.8 trillion won from net purchases flowed into the Bitcoin market through ETFs during the period.
Due to this large-scale buying trend, the price of Bitcoin exceeded 70 million won in 27 months. Bitcoin is evaluated to have overcome the virtual asset ice age that occurred when Bitcoin fell to the 20 million won range due to the double disaster of Terra collapse and FTX bankruptcy in 2022. This price range is more than 27% higher than the highest price last year of 55 million won.
In particular, attention is focused on whether it will be possible to surpass the previous highest price of 82 million won due to the halving scheduled for April. Market experts believe that the halving, which limits supply, is likely to act as a positive factor as it provides an avenue for institutional demand for coin investment to flow through ETFs. Jeff Kendrick, head of virtual asset research at Standard Chartered, said that Bitcoin could reach $100,000 by the end of this year, and demand from pension funds through ETFs is behind this. It is predicted that the period won Bitcoin 100 million can reach after the halving.
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