Grayscale sees positive catalysts on the horizon for bitcoin

A light at the end of the tunnel?

Grayscale said Friday that there’s a number of positive catalysts for bitcoin on the horizon from potential spot bitcoin ETF approvals, the halving and even the upcoming presidential election.

In a note summarizing November’s price action, the research team said that it wasn’t just bitcoin that saw a positive November. The team stated that “crypto recovery broadened to a wider array of market segments.”

So far, bitcoin has rebounded a whopping 130% in 2023 after a rough 2022.

“Grayscale Research sees gradually improving crypto fundamentals and a relatively tight supply picture in major tokens (due to Bitcoin’s current ownership structure, for example). This may be consistent with rising crypto valuations in the year ahead, especially if the Federal Reserve has finished tightening and the US economy can avoid [a recession.]”

The macro environment has been focused on whether or not the Federal Reserve and Chair Jerome Powell will be able ensure a soft landing for the US economy, which would ultimately avoid a recession. A hard landing, on the other hand, would most likely force the US into a recession.

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Researchers are concerned about the negative impact that a hard landing could have on crypto recovery.

“That being said, the central scenario for financial markets and the economy are likely to be positive for Bitcoin and other crypto assets, in our view. Bitcoin’s supply is relatively ‘tight’ ahead of potential investor inflows into spot ETF products in the US. For example, according to Glassnode data, the share of Bitcoin’s supply held by short-term speculators reached a record low,” the note said.

Additionally, the presidential election next year is “expected” to bring some attention to “excessive government borrowing,” and other issues — such as the Fed’s independence — which would impact the US dollar.

If this plays out, then Grayscale “expects that this combination would be positive for demand for physical and digital gold, and may be consistent with rising Bitcoin valuations.”

TheBlock’s research director Lars Hoffmann found that adjusted on-chain volume increased by nearly 30%, with ethereum increasing 43% and bitcoin up 21%.

Bitcoin’s hash rate hit an all-time high in November, which Grayscale believes is due to miners upgrading ahead of the 2024 halving. Open interest for bitcoin futures listed by CME also hit a high, “possibly pointing to rising institutional activity in the market.”

Grayscale estimates that global crypto ETP net inflows hit $2.2 billion for the year, with November inflows totalling $1.3 billion.

Stablecoins are also getting a boost from a more positive outlook.

“Over the last month, aggregate stablecoin market capitalization increased by $4bn and the amount of gas used on stablecoin transactions moved higher,” Grayscale wrote.

Hoffmann, in a post on X, said the issued supply of stablecoins increased by 3.7%. USDT and USDC were the frontrunners, with nearly 75% and nearly 19% of market share respectively.

JPMorgan, in a note on Thursday, found that the spot bitcoin ETF hype has led to “tentative signs of revival” in both the DeFi and NFT spaces, with NFT volumes spiking and a “gentle” recovery in DeFi activity.

JPM credits the resurgence in DeFi, in part, to liquid staking initiatives spearheaded by Lido; a trend that started prior to the widespread attention on spot bitcoin ETFs.

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