Macro conditions, ETF optimism collide at the right time ahead of bitcoin halving

Cryptos extended their rally Friday as stocks traded sideways. Analysts say the bull run for bitcoin is beginning.

Bitcoin was back in the green Friday after a slight dip Thursday. The largest crypto was trading around $43,700 at time of publication after briefly surpassing $44,000 yet again.

Ether was trading mostly flat Friday, but maintained its monthly gains of nearly 25% over the past 30 days. As 2023 comes to a close, ether is up around 95% year-to-date.

Equities posted mild gains, with the S&P 500 and Nasdaq Composite indexes gaining around 0.2% each midway through the trading session Friday.

Newsletter

Subscribe to Blockworks Daily

With bitcoin’s next halving slated for April 2024, coinciding with a potential policy shift from the Federal Reserve, investors may be in for the perfect storm Thomas Perfumo, head of strategy at Kraken, said.

“This is going to be the fourth halving and pretty much every single one has kicked off a bull cycle where the top has come in about 18 months or so after the halving event,” Perfumo said.

“This halving is special in the sense that you’re going to have inflation in bitcoin’s circulating supply drop below 1% for the first time in history,” he added. “That’s basically crossing that threshold that gold has historically served as this kind of bellwether-sound currency where the supply growth of gold is something that’s been north of 1%, but very steady and very low single-digits.”

The catalyst for the rally, which has seen both bitcoin gain more than 56% since the start of October 2023, was optimism about a bitcoin exchange-traded fund finally hitting the market in the US, Luke Nolan, research associate at CoinShares, said.

“People [are] frontrunning what they believe will be significant flows stemming from the potential launches of the ETFs,” Nolan said. “If the SEC approves a spot bitcoin ETF, there is a ‘stamp of approval’ for the asset class from the largest capital market regulator in the world.”

As traders wait anxiously for the first ETFs to hit the market, Perfumo said the rally for spot bitcoin prices shouldn’t stop there.

“That’s positive for prices, generally speaking,” Perfumo said. “What I mean by that is one of the biggest barriers for the US specifically when it comes to investment has been the accessibility of crypto in retirement accounts. Having crypto in a securitized format via an ETF, which is a very commonly understood product nowadays, even by consumer investors, I think that’s a really powerful statement.”

JTO, the governance token for Solana-based staking project Jito, made its debut via an airdrop Thursday. Close to $110 million was up for grabs when the airdrop hit Thursday morning, and by Friday, JTO was trading more than 180% higher than its initial price of $1.20.

Solana (SOL) apparently riding the JTO wave, posted gains Friday as well, up more than 11% over the past 24 hours at time of publication.

“If history repeats itself, what you tend to see is the smart contract platforms pick up and then the dapps and whatnot that are subject to higher levels of volatility — because they’re smaller assets in general — tend to follow,” Perfumo said. “I can definitely see a situation where Bitcoin leads into a cycle for Ethereum, Solana and some of the other alts.”

Get the news in your inbox. Explore Blockworks newsletters:

Blockworks Daily: Unpacking crypto and the markets.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
0xResearch: Alpha directly in your inbox.
Lightspeed: All things Solana.
The Drop: Apps, games, memes and more.
Supply Shock: Bitcoin, bitcoin, bitcoin.