The battle for control of bitcoin after the ETF is approved
Bitcoin may be about to face a war for power, between long-time investors who believe in decentralization and financial giants like BlackRock, Fidelity, etc.
According to CoinDesk, this year's World Economic Forum (WEF) has had the appearance of many individuals and businesses in the cryptocurrency community. However, the above presence also highlights a paradox for this money industry.
On one hand, the cryptocurrency industry wants acceptance from the traditional business community. On the other hand, some worry that this support will weaken the characteristics of cryptocurrencies such as disruption, rebellion, and decentralization.
2024 is expected to be the year that traditional financial businesses gain more access to cryptocurrencies. Right in the first days of the year, the US Securities and Exchange Commission (SEC) approved a series of spot bitcoin ETFs, creating opportunities for giant asset managers like BlackRock or Fidelity and banks like Goldman. Sachs and JPMorgan participate in this nascent market.
The question is whether the participation of the above organizations will affect the balance of power of bitcoin or not.
Will bitcoin absolutists (bitcoin maxis) or reckless investors (degens), who value decentralization, security and freedom, accept that financial giants control bitcoin? ?
Will BlackRock, Goldman Sachs or JPMorgan require the purchase of only bitcoin mined by renewable energy or not linked to criminal activity? Will the above needs cause miners to change their mining methods?
In 2017, the bitcoin community had a “Block Size War”. At that time, 58 cryptocurrency businesses lobbied to increase the capacity of each block.
These businesses want to reduce network congestion, process more transactions and collect more fees. Some miners have also supported the above proposal.
However, developers and users object to increasing the block size beyond 2 MB (megabytes). These people argue that increasing the size will increase transaction costs, creating a more centralized network.
The opposing group came up with another proposal and decided to reject any bitcoins requested by the faction to increase the size of the mining blockchain. In the end, the developers and users won, despite the asset size advantage in the bitcoin network of whales and miners.
Now, the market is asking whether the 'little guys' can continue to dictate the future of bitcoin, given that spot ETFs may own a huge portion of the coin's supply this money.
Some analysts estimate that bitcoin ETF demand could be as high as $100 billion. If so, the number of bitcoins in the hands of traditional financial giants would account for about 1/8 of the total supply in the market.
However, not all bitcoin supply is currently in an active state. For example, large amounts of bitcoin remained in cold wallets for more than five years. These bitcoins may belong to long-term investors or because their owners have forgotten their password.
According to Glassnode's estimates, about 30% of the bitcoin supply is in an inactive state and can be considered "dead coins".
Therefore, if spot ETFs held $100 billion worth of bitcoin, financial giants would have the ability to control 17% of the bitcoin supply.
Additionally, Wall Street is not the only huge holder of bitcoin. According to data from Bitcoin Rich List, there are currently about 2,000 "whale" addresses, holding more than 1,000 bitcoins per wallet and controlling 40% of the total supply. These “whales” will also be a major variable in the battle for control of bitcoin's future.
Standard Chartered Bank believes that spot ETFs will attract an additional $50 to $100 billion into the cryptocurrency market in 2024, helping bitcoin reach $200,000 by the end of 2025.
According to Cointelegraph, multinational bank Standard Chartered has just predicted that bitcoin could reach nearly 200,000 USD by the end of next year if a spot ETF is approved and succeeds in the US market.
The bank based its forecast on the assumption that between 437,000 and 1.32 million bitcoins will be held by spot ETFs by the end of 2024. Standard Chartered estimates that new inflows into the market will be around 50 million. to 100 billion USD.
“If new ETF-related inflows reach what we forecast, a bitcoin price of nearly $200,000 by the end of 2025 is possible,” said Standard Chartered's head of digital assets, Mr. Geoff Kendrick and precious metals analyst Suki Cooper, commented in a report published on January 8.
With the above forecast, bitcoin will have to increase by 325% (4.3 times) compared to the current price (47,000 USD). Compared to the peak of 69,000 USD recorded at the end of 2021, bitcoin needs to increase by 190%. Standard Chartered made the above estimate based on the gold price increasing 4.3 times (330%) in about 7 to 8 years after the metal's ETF was launched in 2004.
“We expect bitcoin to record similar results when the ETF is approved. However, the above increase will need a shorter time (only about one to two years), based on the view that the bitcoin ETF market will develop faster,” experts commented. Mr. Kendrick and Ms. Cooper said the approval of the spot ETF was “a turning point” in normalizing participation in the cryptocurrency market. These analysts also added that bitcoin price expectations for 2025 are also in line with Standard Chartered's forecast of the currency reaching $100,000 by the end of the year.
Some other analysts look to “fundamentals” to value bitcoin. Blockchain strategist Jamie Coutts from Pragmatic Blockchain Research notes that “activity on the bitcoin network” is at an all-time high. Mr. Coutts added that applications like the Ordinals protocol have made the fundamentals of the bitcoin blockchain the strongest it has been since the 2016-2017 cycle.
The Ordinals protocol allows users to create NFTs on the bitcoin blockchain. “However, BTC is still 40% below valuation,” Mr. Coutts said. “Low pricing”. However, Bloomberg Intelligence senior macroeconomic strategist Mike McGlone is not very confident that bitcoin will maintain its upward momentum after the ETF is approved. “Risk assets must fall in price. Almost always. At the same time, bitcoin is one of the riskiest assets,” said Mr. McGlone. “We had a bit of blind hope (hopium). Bitcoin price has increased 50% from $30,000,” he said. This expert believes that this week will be decisive. If the SEC refuses, the results will be dire. But even in the case of SEC approval, there is still too much optimism, similar to previous bitcoin peaks.
