Bull Market Playbook: Time Forecasting, ETF Adoption and Beyond

Written by: Chain Research Society

This article is a collection of ETF series “Predicting the Passage Time of BitcoinSpot ETFs and the Launch Time of Bull Market”, “What Will Happen to BitcoinSpot ETF Passages? Will the Big Bull Market Come?”.

The content is relatively long, for the convenience of everyone to read, I put the conclusion at the top, and it is recommended to collect and forward, so that in the next six months, we can witness the historical process of the passage of BitcoinSpot ETF together.

First, predict the ETF passage time and the Bull Market start time

Bull Market Scenario Prediction

Referring to the timing of the passage of the last round of Grayscale Trust, I think the most likely playbook at the moment is:

1. Apply for a BitcoinSpot ETF in January 2024 (the Fed will no longer raise interest rates or the market has no expectation of a rate hike);
2. April 2024 BitcoinSpot ETF will take effect (before BitcoinHalving, to help attract funds);
3. Officially launched BitcoinBull Market July 2024 (after Halving adjustment and monetary easing expectations are fulfilled in the market);
4. In September 2024, the Federal Reserve began to enter a cycle of interest rate cuts and monetary easing. (The expectation of interest rate cut will be realized immediately once the risk is released, 1~2 months in advance, we can refer to the prerequisite indicator of GDP >CPI).

The reason why it is judged that the official launch of the Bull Market will be around July, not when the BitcoinSpot ETF takes effect, is because we will often experience a wave of adjustment 2-3 months after the Halving, not immediately, and the current macro market expects the cycle of interest rate cuts to set the time in July.

Looking back at the beginning of the 20-year Bull Market: Grayscale GBTC Trust Passage Journey

• November 2019: Grayscale files application for registration of GBTC trust fund with SEC;
• January 2020: Grayscale GBTC Trust was approved and registered by the SEC, becoming the first digital asset vehicle to meet U.S. SEC standards;
• April 2020: Grayscale Bitcoin Trust GBTC officially came into effect, the scale expanded rapidly, and Three Arrows also helped GBTC’s arbitrage to grow rapidly;
• A round of bull market in 2020 brought about $10 billion of incremental funds to the Crypto Community, and the incremental funds in the total market may be at the level of 100 billion.

GBTC’s secondary market premium rate was once as high as more than 30%, and Grayscale did not continue to increase its holdings of BTC after February 2021.

The previous grayscale Holdings of 654,885 BTC had an estimated cost of $8.931 billion, with an average cost of only about $13,700.

Possible starting point and incremental funds for this round of Bull Market

In 20 years, grayscale used 10 billion US dollars to bring about 100 billion incremental funds to the market, and the total Market Cap of the crypto market in 21 years was up to 3 trillion compared with more than 100 billion yuan in 19 years, which increased about 30 times.

If you go through the same Bull Market again, the inflow of funds can only be seen in more than 100 billion, and BlackRock’s application for Bitcoin ETF is regarded as a necessary condition for the next round of Bull Market, and it takes about half a year for the ETF to be truly approved (grayscale is applied for in November 19, effective in April 20, and BitcoinHalving in May 20).

Then the ETF incremental funds alone will exceed Grayscale’s existing fund size ($25.5 billion), but this is not enough to really have a big Bull Market Another necessary condition for a big is that the market has enough currency Liquidity, after the adoption of the BitcoinSpot ETF is expected to bring hundreds of billions Liquidity of dollars to the crypto market, and the increase in total Market Cap is at least trillions, then the total Market Cap will also exceed the world’s Market Cap highest company (currently Apple)

3 Necessary Conditions for the Start of the Bull Market

1. The SEC passes Spot BTC ETFs
2. Next BitcoinHalving
3. Monetary easing, excess market liquidity

And then the final summary of BitcoinSpot ETF

1. Approved BitcoinSpot ETF application in January 2024 (the Fed will no longer raise interest rates)
2. Effective April 2024 (pre-BitcoinHalving)
3. Officially launched BitcoinBull Market July 2024 (after Halving adjustment and monetary easing expectations are realized in the market)
4. In September 2024, the Federal Reserve began to enter a cycle of interest rate cuts and monetary easing. (The expectation of interest rate cut will be realized immediately once the risk is released, 1~2 months in advance, we can refer to the prerequisite indicator of GDP >CPI)
5. The passage of BitcoinSpot ETF will bring hundreds of billions of dollars of Liquidity to the market

Second, what will happen to the passage of ETFs? Will the big Bull Market come?

I judged the history of gold ETFs in the U.S. to judge what would happen if BitcoinSpot ETF passed, and came to the following conclusions (FYI)

1.BitcoinSpot There is a sustained expectation in the market before the approval of the ETF that can be considered Favourable Information

2.BitcoinSpot There will still be a small sprint after the ETF is approved

3.BitcoinSpot Soon after the ETF starts trading, there will be a large drop after the peak, or even below the price before the ETF passed

Next is rational analysis, will the big Bull Market come because of the passage of the BitcoinSpot ETF?

If the BitcoinSpot ETF passes now, I don’t think it’s good news on the whole. Because it is more about influencing market sentiment to promote the price of funds in the market, because the world economy has not yet recovered, and monetary policy is in a state of extreme tightening, it is still difficult for funds to continue to flow in. Of course, it is possible to maintain a high level of shock, but the time is difficult to last, and it cannot be expected that the Crypto Community can have an independent market, which is very probable. In addition, for the Bear Market out of such a heavy Favourable Information is really a loss, in the Bull Market can rise 100%, the Bear Market may be 30%, look at the performance of US stocks in the near future, if the US stock market falls, it is basically no play. Based on the current information, I don’t think that the passage of BitcoinSpot ETF will directly start the big Bull Market

Looking back at the passage of gold ETFs

• In March 2003, Australia launched the world’s first gold ETF
• In October 2004, the SEC approved GLD, the first gold ETF in the United States
• In November 2004, the US Gold ETF GLD officially came into effect and began trading

Economic environment and monetary policy at the time

Economic Environment: In 2004, the macroeconomic environment in the United States was relatively stable. At that time, the gross domestic product (GDP) of the United States was on a growth trend, unemployment was relatively low, and Inflation was moderate. While there are some economic challenges, the U.S. economy is not in a state of crisis.

Monetary policy: In 2004, the Federal Reserve implemented a relatively loose monetary policy. The Fed raised interest rates gradually (from 1% to 1.75% in 2004), but short-term intrerest rates remained relatively low. Accommodative monetary policy has created support for gold’s performance, as gold is often seen as a safe-haven asset for HedgingInflation and currency depreciation.

Historical performance of gold before and after

1. Gold saw a sharp rally after the first gold ETF passed and continued until the US ETF began trading
2. The U.S. gold ETF GLD continues its slight sprint after the SEC approval
3. Shortly after the U.S. gold ETF began trading, the market fell by about 9% over the next two months, falling below the price at which the ETF passed

By allowing more traders to invest through ETFs without having to keep the metal in custody and custody in a bank, more money entered the market in the following years, and the financial crisis of 2008 pushed gold to $1,000

Historical course of BitcoinSpot ETF

• In February 2021, the world’s first Bitcoin ETF passed in Canada, and BTC began to fall after sprinting to a high of 65000 in the following two months, during which it experienced 519 events
• In October 2021, the first Bitcoin futures ETF in the United States was listed, and after sprinting to 69,000 more than a month, it began a year of gloom
• BlackRock, one of the world’s largest asset managers, began applying for BitcoinSpot ETFs in July 2023, reaching a high of 31,800 that month before starting to decline

The current status of Bitcoin ETF applications is illustrated by a diagram borrowed from Odaily@OdailyChina

Current Economic Environment and Monetary Policy

• Economic Environment: 2023 has been a year of macroeconomic instability in the United States, with a banking crisis at the beginning of the year. Inflation is on the high side, US GDP growth is weak and not fully out of recession, unemployment is relatively low, long-term and short-term bond intrerest rates are inverted, and the economy is facing economic challenges, although the Fed wants a soft landing, but it is not out of a crisis state.
• Monetary policy: The Fed’s interest rate hikes and balance sheet reduction in 2023 are in a state of monetary tightening. In order to control inflation, the Fed has implemented an extremely aggressive interest rate hike policy, and the Fed has Intrerest Rate to 5.25% and has not stopped raising interest rates, but it is nearing the end. The market expects a rate cut in September 2024

The passage of BitcoinSpot ETFs will allow tens of millions of new investors and traders to invest through ETFs, further increasing the legitimacy of the Bitcoin, and more money will surely enter the market in the future.

Summary

As mentioned in the previous article, there are 3 necessary conditions for the start of the next Bull Market:

1. The SEC passes Spot BTC ETFs

2. Next BitcoinHalving

3. Monetary easing, excess market Liquidity

For now, the time has not yet come, but I will adjust my judgment according to market information and macro changes in the future, so don’t forget to follow me@lianyanshe let’s witness the historical moment of BitcoinSpot ETF and the next round of magnificent Bull Market.