How Spot Bitcoin ETFs Can Rally Higher in 2024

These factors support a bullish outlook for bitcoin in 2024.

kent
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Research Lead
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Reviewed by: etf.com Staff
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Edited by: James Rubin

After approval from the Securities Exchange Commission, and their subsequent launch on Jan. 11, spot bitcoin ETFs fell 15% over their first nine trading days, as measured by the iShares Bitcoin Trust ETF (IBIT). Through Jan. 29, IBIT’s price was more than 10% higher than its post-launch low. 

Will IBIT and the other new spot bitcoin exchange-traded funds continue their march higher? 

Bitcoin’s price isn’t known for moving in a straight line, but there are multiple factors that support higher prices for BTC in 2024, lifting the ETFs that track it. 

GBTC Outflows Are Slowing 

A contributing factor to the post-launch decline in the value of spot bitcoin ETFs was the heavy outflows from the Grayscale Bitcoin Trust (GBTC). While outflows are still occurring for GBTC, they’ve slowed significantly, and in response, the price of spot bitcoin ETFs like IBIT have risen more than 10%.  

Through Jan. 26, total outflows from GBTC reached $5 billion, most of which was profit-taking after its conversion to a spot bitcoin ETF following years of trading as a closed-end fund at a discount to net asset value. Investors aiming for an arbitrage trade bought GBTC at steep discounts last year expecting to profit by selling at par after the fund converted to a spot bitcoin ETF. 

The largest known example of GBTC outflows came from the FTX estate, which sold approximately $1 billion of GBTC shares to pay its creditors. The crypto exchange giant filed for Chapter 11 bankruptcy protection in November 2022 amid balance sheet irregularities that eventually led to the conviction of its CEO, Sam Bankman-Fried, for defrauding customers.  

Bitcoin Halving in April

Bitcoin, the best known and largest cryptocurrency by market capitalization, has historically performed well after each halving (also called a halvening). If you’re new to crypto, bitcoin halvings in the Bitcoin network occur every four years. The halving process is designed to control the supply of new bitcoins and gradually reduce the rate at which new coins are introduced into circulation.  

Bitcoin’s history has included three halvings, which have all spurred a similar pattern of substantial rallies leading up to the event followed by brief price corrections and then more significant surges. For example, bitcoin rose above $1,000 for the first time about seven months after the 2016 halving from 25 to 12.5 bitcoin, and hit an all-time high above $69,000 after the 2020 halving to 6.25 bitcoin, according to CoinGecko, a crypto data platform.  

What’s important for investors to remember is that price volatility is to be expected leading up to and following the halving event. 

BTC Technical Analysis

Technical indicators point to higher prices for bitcoin in the months ahead. Bitcoin's price is primarily driven by supply and demand in the cryptocurrency market, and not traditional valuation metrics like P/E ratio, making technical analysis useful to visualize historical price movements and identify potential support and resistance levels. 

For example, 10x Research’s Founder Markus Thielen, who correctly predicted bitcoin’s decline to $38,000, correctly forecast in a note Monday that BTC would reach $43,000, which was crossed this week. 

Thielen’s bullish view is based on the Elliot Wave theory, in which the market moves in a repeating five-wave patterns, like surfing an ocean swell, with corrections in between. 

According to Thielen, bitcoin has been in a five-wave bullish pattern since early last year, and wave five has begun, potentially taking BTC’s price above $50,000. 

Google Allowing Crypto Advertising

Google recently announced that advertisers offering “Cryptocurrency Coin Trust targeting the United States may advertise those products and services” beginning last Monday. In the announcement, Google further defined the products and services as those “that allow investors to trade shares in trusts holding large pools of digital currency,” which would include spot bitcoin ETFs. 

While the ability to advertise a spot bitcoin ETF on Google does not automatically ensure that the new spot funds will rise in value, it does underscore the legitimacy of the investment product and will certainly raise its awareness to the mainstream public. 

Bitcoin ‘Whales’ Are Buying

Bitcoin whales are individuals or entities holding massive amounts of bitcoin, giving them the potential to significantly influence the market through their buying and selling activities. These large investors have accumulated $3 billion in bitcoin this month, according to data tracked by on-chain analytics firm IntoTheBlock

Bottom Line on Spot Bitcoin ETF in 2024

With the SEC approving 11 spot bitcoin ETFs in January 2024, it opened a significant new avenue for investor access to bitcoin with a familiar, regulated ETF structure. This could lead to a rise in institutional and retail investment, increasing demand and prices. Other factors, including the highly anticipated halving, could also support higher prices for the cryptocurrency. 

Investors should remember that bitcoin is a speculative investment security with high potential for wide price swings. Therefore, diversification is crucial, and investors are encouraged to conduct thorough research and assess their risk tolerance before investing in any ETF. If an investor decides to buy shares, they should consider allocating only a portion of their portfolio to a spot bitcoin ETF. 

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.