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Bitcoin’s fundamentals are more important than ETF approval says Grayscale

Bitcoin’s fundamentals are more important than ETF approval says Grayscale
Snapshot
Grayscale's flagship fund has performed well last year, as spot Bitcoin ETF hopes grew. Credit: Rcc_Btn/Shutterstock.
By
Adam Morgan McCarthy
2 January 2024 at 16:17
  • The SEC could approve Bitcoin ETFs this week.
  • Demand will prove more important for Bitcoin’s price, Grayscale research said.
  • But the investment firm also warned that “crypto remains a volatile asset class.”

Spot Bitcoin exchange-traded funds could be approved in the US this month, more than 10 years after the first ever application.

One applicant, Grayscale, says it’s not just ETFs that will drive the price of Bitcoin in 2024.

Fundamentals

The approval of spot Bitcoin ETFs will increase the number of investors into digital assets and potentially result in “new net demand for Bitcoin,” Grayscale said in a report on Tuesday.

There is a “tight supply” of Bitcoin at present and “new net inflows into the asset should have positive implications for Bitcoin’s valuation,” Grayscale said.

But ETFs won’t be the most important driver for Bitcoin’s price going forward, the digital asset manager said.

A “sustained demand for Bitcoin from end investors will ultimately be more important for its price than these shorter-term supply/demand technicals,” Grayscale researchers said, referring to the ETF approval and the halving in April 2024 — when the rewards for mining a new block of Bitcoin are halved, reducing supply.

Bitcoin is ultimately a “store of value” asset, Grayscale said, likening it to gold.

“Therefore, its price will be influenced by the factors that drive demand for gold-like investments,” the firm said.

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These factors include things like changes in real interest rates and geopolitical risks.

“Bitcoin and many other digital assets produced strong returns in 2023, but crypto remains a volatile asset class, and investors should be mindful of both the macro and micro factors that can drive crypto valuations,” Grayscale noted.

Crypto market movers

  • Bitcoin traded above $45,000 for the first time in 21 months. Changing hands for about $45,300, up 6% since Monday.
  • Ethereum added 3% to trade around $2,360.

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BITCOINBITCOIN ETFGRAYSCALE (GRAYSCALE BITCOIN TRUST, GBTC)