Bitcoin's Milestone Surge and the ETF Revolution: Navigating the Future of Crypto Investments

Bitcoin and market update

Last year in March BTC was ~$20,000. It rallied up to $45,000 just before the ETF was approved. As of March 8th it has breached an all time high of $70,000!!

All Bitcoin ETFs are now profitable

The newly approved Bitcoin spot ETFs are barely 2 month old babies and they have gathered AUM that took gold ETFs almost 3 years! The smallest ETF, WisdomTree Asset Management Bitcoin Fund has around $60M AUM and even they are profitable. So there is no sign of any of the nine ETFs closing their shop as was speculated earlier by some who didn’t see the need for 9 of them offering the same thing. 

And it is just getting started. Down the road more financial advisors will introduce the asset to their client. Many advisors still haven’t advertised it to their clients. There is a multi-month process for most advisors in order to let their clients add BTC ETFs to their portfolio. These are pools of capital that couldn't buy BTC before, but can now do so through ETFs. 

The Arizona State Senate entering the space

The Arizona State Senate is considering a proposal to encourage the Arizona State Retirement System (ASRS) and the Public Safety Personnel Retirement System (PSPRS) to explore the inclusion of Bitcoin ETFs in their investment portfolios. 

Fidelity Allocates BTC to their “conservative all in one” portfolio

Fidelity Canada is now allocating 1-3% spot Bitcoin ETFs allocation into its “All-in-One” asset allocation funds, These are their “conservative all in one” portfolio. Fidelity has a 23 page research report on The case for bitcoin if you want to understand why they are betting on this technology. 

Stanford’s Blyth Fund allocates 7% to BTC

On March 5, computer science major and leader at the Stanford Blockchain Club Kole Lee announced that the university’s student-run Charles R. Blyth Fund allocated around 7% of the portfolio to BTC (at around $45,000/BTC) through BlackRocks IBIT ETF.

Meanwhile, BlackRock filed an amendment with the SEC on March 4 to incorporate Bitcoin exposure in its Strategic Income Opportunities Fund (BSIIX) which manages close to $36.5B AUM. 

All these factors and a lot more that we cannot cover in this short article have led to the rise in the price recently. An interesting fact this cycle was that Bitcoin hit ATH in many countries before it hit ATH in the US which means the currencies in those countries are devaluing faster against the US dollar. 

Lyn Alden has the best explanation of what these ETFs are: "in developer terms, it is the API for the fiat system to plug into the Bitcoin network a little better than it used to. It is an upgrade to the TradFi system not the Bitcoin system"

Spot BTC ETF options trading

Spot BTC ETF options trading is next in line for approval. Many exchanges have filed to offer derivatives products related to the newly approved spot ETFs. Nasdaq for example is seeking to list and trade options specifically on BlackRock's iShares Bitcoin Trust ETF. However, the SEC pushed back the decision to open up options trading on spot Bitcoin ETFs as of March 6th citing they need “sufficient time to consider”. Apr 24, 2024 is the next deadline for this, which almost coincides with the halving of BTC. So that should be a very interesting time to watch. 

Layer-2 Bitcoin Developer Activity is on a tear

The future of Bitcoin is the most exciting it has ever been. There is a lot more activity on Layer 1 Bitcoin blockchain through the use of Ordinals (on-chain NFTs on Bitcoin chain). However, if BTC wants to truly evolve into something more than just a store of value, it has to move to Layer-2, where the transaction speed is high and fees are cheaper. There are several projects worth watching in the Bitcoin Layer 2 ecosystem. 

I’ll mention a few that I am personally watching: 

Stacks is a Layer-2 on bitcoin blockchain working on bringing smart contract functionalities to the network treating BTC as the TCP-IP protocol of the internet applications. It is the leading Bitcoin L2, bringing smart contract functionality to Bitcoin, without modifying Bitcoin itself. Stacks has a token sBTC which is a 1:1 Bitcoin-backed asset on the Stacks Bitcoin L2 that will allow developers to leverage the security, network effects, and .5T in latent capital of the Bitcoin network. There is a proposal to bridge Stacks and BitVM. Future updates on Stacks will enable sub-5 second finality (currently around 10 minute on the L1 Bitcoin network). This will also enable DeFi on Bitcoin which as you know is my core focus at Coinchage . It already has around $150M TVL. 

David Marcus (ex-facebook lead of Diem, ex-PayPal responsible for PYUSD stablecoin) is now building stablecoins on the Bitcoin network through his startup Lightspark.  

Liquid is a sidechain-based, Bitcoin layer-2 settlement network linking together cryptocurrency exchanges and institutions around the world, enabling faster, more confidential Bitcoin transactions and the issuance of digital assets.

Lightning network is a state-channel (a concept drawn from Ethereum state channels) and is a completely trustless/ non-custodial way for ultra cheap and ultra fast (lightning fast) bitcoin transactions. 

BitVM (a Bitcoin Virtual Machine, very close to being fully trustless where the trust is based on 1-of N signers) requires no change to the L1 Bitcoin chain. It is like an optimistic rollup on bitcoin. Most of the logic is off-chain and there are "fraud-proofs" settled on the Layer 1 Bitcoin blockchain. 

There are other initiatives such as zk-rollups, Polkadotcompatible chains, Cosmos compatible chains. Bottom-line, there is tons of experimentation on building applications on the Bitcoin Network, now that the asset has received blessings from the TradFi in the form of ETFs. I think Bitcoin L2s have the potential to overtake Ethereum L2s if it really catches on. 

Halving

Halving is a yet another beast of an event that is coming up at the end of April. Every four years, the number of new bitcoins that are released into the market by the network (aka can be mined by the miners), reduces in half. Around 900 new Bitcoins are mined per day currently, and after the halving it will go down to 450. While Halving does have an impact in terms of reminding users of the scarcity of BTC which is a key factor for price to go up (assuming demand goes up over time), the global M2 growth (liquidity) is a much better metric to follow in terms of predicting tops and bottoms of the cycle. Previously the highs and the lows have correlated with the liquidity highs and lows. Will liquidity go up over the next couple of years? Probably yes. So is there room for BTC Price to go up from here? You guessed it! 

The highest monthly candle ever in the history of BTC. 

Feb 2024 printed a $19.84k Bitcoin candle, the largest monthly USD increase in history, which added a whopping $390B (47% increase) to its market cap. 

Bicoin is entering Academia. 

Three philosophy professors wrote a book called Resistance Money: A Philosophical Case for Bitcoin. These are Associate Professors at Yale-NUS College and the University of Wyoming. This is going to be an academic textbook exploring bitcoin, not a regular retail book. 

Bitcoin is the 5 largest monetary base in the world. 

The monetary base is the total amount of a currency in circulation or held in reserves. By this measure, Bitcoin has become the 5th largest monetary base in the world. It is remarkable that it surpassed the oldest fiat currency in the world (The pound sterling).

Final thoughts

Typically when there are such hot run ups in the price of an asset this volatile, there can be unforeseen air pockets. I do expect some choppy roads ahead. But there is no fundamental change to the bitcoin code, the positive sentiment is strong, the adoption is on the rise, and there is no reason to believe you are late to this adoption cycle. At Coinchange we are positioned to capture this once in a lifetime opportunity, message me if you want to work together!