Is the Party Over? When Will Bitcoin Rise Again?

👇1-14) Crypto, the most thrilling asset class, is characterized by its wild, cyclical swings and ever-changing narrative. It offers new ways to dissect data and generate alpha while regulatory approval - such as through Bitcoin and Ethereum ETFs - broadens the crypto user base.

👇2-14) However, it's crucial to remember that without discipline and solid analysis, many will fall victim by purchasing coins at the top of the cycle while professionals and OGs sell. The average Bitcoin ETF buyer is underwater. Will they be ready to repeat this with an Ethereum ETF?

👇3-14) During the darkest moment of the 2022 bear market, we called on October 28, 2022, for a massive rally into the 2024 halving with a price target of $63,140 (here). We also correctly predicted the 2023 year-end target of $45,000 (here). Also, in this bull market, we called for setbacks tactically – in August 2023 ahead of the 15% Bitcoin correction, similarly in January 2024 when Bitcoin fell from $45,000 to $38,000 and also in March/April when Bitcoin fell to $56,500. No other crypto research firm does this – this makes 10x Research unique.

👇4-14) These are tough calls, especially in an asset class where everybody tends to be vocally positive, but some quietly sell near the top of the cycle. This could be the case again, as we explain below. But there will also be a time to buy again. We are convinced that HODL—buying and holding for the long term—does not work with Bitcoin at nearly $70,000. However, there will be future opportunities to buy, and we are here to guide you through them.

Bitcoin and Ethereum futures Open Interest ($bn)

👇5-14) Bitcoin is about to enter its seasonally weakest quarter (+5%), including August and September, where Bitcoin returns have been negative, on average, during the last thirteen years. Simply following a seasonal strategy, investors would sell at the end of June and buy back at the end of September, as the fourth quarter tends to be the strongest, with average returns of +62%.

Bitcoin Monthly Returns (last 13 years)

👇6-14) Historically, we have seen Bitcoin corrections whenever a listing of a regulated exchange product is launched. This was the case with the CME Bitcoin Futures launch in December 2017, the Coinbase IPO in April 2021, the Bitcoin ETFs based on Futures in October 2021, and the Bitcoin ETFs based on Spot in January 2024. However, all corrections occurred after a sizeable price run-up driven in anticipation of these launches.

👇7-14) The potential approval of Ethereum ETFs is a welcome development. Approval appears to be imminent. ETF issuer VanEck met with the SEC on Monday and shortly after filed form 8-A, which they did precisely seven days before the Bitcoin Spot ETFs were approved.

👇8-14) Other sources quoting lawyers involved in the approval process indicate 1 to 2 weeks before approval looms. SEC Chair Gensler also said the approval process is working smoothly this week. Expectations are for approval by the end of this week or early next week and potential trading around the July 4 holiday. However, a holiday-shortened week could make a disappointing start as many will wait until after the holiday before deploying significant amounts of capital.

👇9-14) As with Bitcoin Spot ETFs, once the SEC signs off, ETFs could start trading within 24 hours. The Bitcoin ETFs have received $14bn of net inflows, and various comparisons - market cap, ETFs based on Futures, etc. indicate that investors allocate roughly 20% of their Bitcoin exposure to Ethereum. Hence, we could expect $2.8bn ($14bn for BTC ETFs * 20%) to be allocated over five months into Ethereum Spot ETFs.

👇10-14) Open interest for Ethereum has increased by $2.6bn since the May 20 announcement — a $2.6bn futures positioning increase vs. a $2.8bn realistic spot inflow over five months—hence our argument that the market is well positioned for this approval.

Ethereum (LHS) vs. Open Interest (RHS, $bn)

👇11-14) The fee structure on these ETFs will also be nail-biting, low with just 0.2% indicated by VanEck – once their ETH ETF reaches $1.5bn or sometime in 2025, they won’t charge any fees before. VanEck raised only $520m for their BTC ETF. Only BlackRock ($17.6bn), Fidelity ($9.2bn), ARK ($2.4bn), and Bitwise ($2.0bn). We can assume that all the others might judge their BTC ETF adventure as unprofitable.

👇12-14) Grayscale remains a strong contender and pioneer, with sizeable AUM for their ETFs at 1.5% fees. But under $1bn, the costs (compliance, operations, marketing, etc.) will be too significant. Hence, launching an Ethereum ETF will have fewer issuers than Bitcoin ETFs, and this will also keep the inflow into Ethereum relatively low as the marketing narrative for Ethereum still needs to be improved. We haven’t heard BlackRock’s CEO Larry Fink once on TV praising an Ethereum ETF – contrary to the numerous ‘Bitcoin is digital gold’ market slogans.

👇13-14) When Ethereum traded around $3,800/$3,900, we pointed out the over-positioning by futures traders in anticipation of this ETH ETF approval. We repeatedly indicated that a steeper correction could occur once Ethereum breaks $3,725. Now, Ethereum is 9% lower, while future positioning is still very elevated, with expectations of strong ETF inflows.

👇14-14) The ETH ETF approval could still be a sell-the-news event due to over-positioning. We are also entering a more challenging seasonal period, and the market awaits the next catalysts, such as the US Presidential election and Fed rate cuts. Both catalysts are still months away—pointing to September before a more sustainable rally could occur. The party is not over, just pausing - stay tuned….