Updated Investment Case for Bitcoin in Q4 2024 and Post-Halving

‍

2. Institutional Adoption and Spot Bitcoin ETF Approval

‍

The approval of 11 spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January 2024 has been a game-changer for the institutional market. These ETFs offer institutional and retail investors direct exposure to Bitcoin through traditional financial channels, without the need to hold the underlying asset.

• ETF Success: The approval of ETFs such as BlackRock’s iShares Bitcoin Trust (IBIT), Fidelity’s Wise Origin Bitcoin Fund (FBTC), and ARK 21Shares Bitcoin ETF (ARKB) has resulted in billions of dollars in net inflows. As of September 2024, BlackRock’s ETF leads the market with $20.9 billion in assets under management (AUM), followed by Fidelity with $9.45 billion and ARK 21Shares with $2.28 billion​. The steady growth of these products signals strong institutional demand and highlights Bitcoin's increasing legitimacy within regulated markets.
• Recent Fund Flows: According to the CoinShares Weekly Digital Asset Fund Flows Report, Bitcoin-focused funds saw inflows of $200 million in a single week​. This comes after a brief period of outflows, suggesting that investor confidence in Bitcoin is returning amid increasing market liquidity and post-halving expectations.
• Long-Term Impact of ETFs: The successful launch of these ETFs is expected to provide more stable and sustained demand for Bitcoin. With many large financial institutions now offering Bitcoin as part of their investment portfolios, the potential for Bitcoin to be seen as a legitimate alternative asset has never been higher. The approval of these ETFs has the potential to unlock significant inflows from more conservative institutional investors, further supporting price appreciation in the long term.

‍

3. Macroeconomic Environment and Central Bank Policy

‍

Both the ECB and the Federal Reserve have shifted to more accommodative monetary policies, creating a favorable liquidity environment for speculative assets like Bitcoin. However, the possibility of continued economic uncertainties may add short-term volatility to the market.

• ECB Rate Cuts: The ECB has already implemented two rate cuts in 2024, bringing the key deposit rate down to 3.50%​. These cuts, combined with additional stimulus measures, have created a more favorable liquidity environment, supporting risk-on assets such as Bitcoin. However, investors must consider that this increase in liquidity could also lead to long-term inflationary pressures, potentially adding to Bitcoin's appeal as a hedge against inflation.
• Fed Rate Cuts: The Federal Reserve initiated its first rate cuts in September 2024, marking a reversal from the hawkish stance of previous years. With inflation under control but economic growth showing signs of weakening, additional rate cuts are expected through 2025​. This shift to easier monetary policy is likely to increase liquidity in financial markets, which typically benefits Bitcoin, as seen in previous periods of loose monetary conditions. However, this liquidity-driven rally could also introduce volatility if economic conditions worsen.

‍

4. Hedge Against Currency Debasement and Geopolitical Risks

‍

Bitcoin’s role as a hedge against currency debasement and geopolitical risks remains strong, particularly as central banks continue to ease monetary policy.

• Fixed Supply: Bitcoin's capped supply of 21 million coins offers a hedge against fiat currencies, which are subject to expansion through central bank policies. As the ECB and Fed continue to inject liquidity into the market, the risk of long-term inflation or currency debasement rises, increasing Bitcoin's appeal as a store of value for investors seeking protection against such risks.
• Geopolitical Instability: Ongoing geopolitical risks, such as the Ukraine conflict and rising sovereign debt concerns in emerging markets, have enhanced Bitcoin’s role as a hedge against macroeconomic shocks. However, investors should be cautious of the volatility that these risks can introduce, as geopolitical events can affect broader market sentiment, leading to fluctuations in Bitcoin’s price.

‍

5. Market Volatility and Political Uncertainty

‍

While Bitcoin’s Q4 2024 outlook remains positive, the potential for heightened volatility due to political uncertainty and macroeconomic conditions should not be overlooked.

• U.S. Elections and Uncertainty: The upcoming 2024 U.S. Presidential Election is a key source of uncertainty. Election outcomes, particularly changes in regulatory policy or economic priorities, could influence investor sentiment and contribute to volatility in Bitcoin and other risk assets. Historically, election cycles have been associated with market fluctuations due to shifts in policy outlook.
• Volatility Considerations: Despite the favorable macroeconomic environment and institutional inflows, Bitcoin remains a highly volatile asset. External factors such as regulatory changes, geopolitical events, and market sentiment can significantly impact short-term price movements. Investors should approach Bitcoin with a neutral stance on near-term price expectations while maintaining a long-term view on its potential as a store of value and inflation hedge.

‍

Conclusion: Cautious Optimism for Q4 2024

‍

Bitcoin’s Q4 2024 outlook is promising, supported by post-halving supply constraints, ETF-driven inflows, and a favorable macroeconomic liquidity environment. However, potential volatility arising from political uncertainty and broader economic risks requires a balanced approach.

• Supply-Demand Dynamics: Reduced supply following the 2024 halving sets favorable conditions for price appreciation, but volatility remains a near-term risk, especially amid uncertain political and economic conditions.
• Institutional Inflows: The approval of spot Bitcoin ETFs and subsequent inflows from institutional investors provide strong support for Bitcoin’s price trajectory. Continued growth in assets under management (AUM) across funds from BlackRock, Fidelity, and others adds to the positive outlook​.
• Macroeconomic Liquidity: The shift toward easier monetary policy by the Fed and ECB could provide further tailwinds for Bitcoin, but investors must remain mindful of inflation risks and potential economic slowdowns.

In summary, Q4 2024 presents significant upside potential for Bitcoin, but investors should balance optimism with caution, considering the volatility risks associated with macroeconomic and political events. A neutral, risk-managed approach will likely help investors navigate the opportunities and uncertainties that lie ahead. For further insight, you can explore the CoinShares Weekly Digital Asset Fund Flows Report here.

‍