As inflation persists and government deficits remain unsustainable, store of value assets like Bitcoin continue to gain traction, according to Zach Pandl, Grayscale’s managing director of research.
Pandl highlighted to Cointelegraph the correlation between ongoing fiscal pressures and the appeal of cryptocurrencies.
“We expect persistent inflation and unsustainable budget deficits to contribute to continued demand for store of value assets, like Bitcoin,” he explained.
The economic landscape, marked by high inflation rates, means that the Federal Reserve is unlikely to lower interest rates in the near future, Pandl suggested.
Despite this, he remains optimistic about the future of cryptocurrencies, pointing to factors such as Bitcoin’s upcoming halving event, scheduled for April 20, along with increasing economic growth and broader crypto adoption, as potential catalysts for price increases.
“The Fed won’t be able to cut rates for a while with core inflation this high, but booming nominal growth, the Bitcoin halving and adoption trends like tokenization should create a supportive environment for crypto markets,” he stated.
In March, inflation rose by 0.4% month-on-month and 3.5% year-over-year, slightly above the forecasts from a Dow Jones economists survey, which anticipated a monthly increase of 0.3% and an annual rise of 3.4%.
The persistent high inflation has led many experts, including Pandl, to anticipate delays in any potential reduction of interest rates by the Fed.
This sentiment was echoed by Ernst & Young chief economist Greg Daco, who, in an interview with Yahoo Finance, noted that elevated inflation rates would compel policymakers to maintain a higher-for-longer monetary policy stance.
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Despite the challenges, Pandl sees a silver lining for cryptocurrencies over the long term.
He acknowledged that rising real interest rates might temporarily dampen crypto enthusiasm but underscored the enduring demand for store-of-value assets.
From a broader perspective, the real interest rate for 10-year terms experienced a notable increase, jumping 19% from the previous month to 1.934.
Historical data shows that significant spikes in the 10-year real interest rate often lead investors towards less volatile options like bonds and term deposits, impacting Bitcoin prices negatively.
For instance, a 52.35% surge in the 10-year real interest rate from December 2017 to January 2018 correlated with a significant 28% drop in Bitcoin’s price during the same period.
Following the latest CPI data release, Bitcoin also saw a slight decrease, with prices dipping 2.5% on April 10, as per data from Cointelegraph Markets Pro and TradingView.
Currently, Bitcoin stands at $70,640, according to CoinMarketCap. Crypto analyst Matthew Hyland recently noted an ascending triangle formation on Bitcoin’s chart, suggesting a new resistance level above $71,500, with the price peaking at $72,329 on April 8.
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Tim Draper, a prominent venture capitalist, predicts a significant increase in Bitcoin’s value in 2024, driven by several key factors including spot exchange-traded funds (ETFs) and the upcoming Bitcoin halving event.
During the Paris Blockchain Week, Draper spoke to Cointelegraph about his optimistic forecast for the cryptocurrency, suggesting a potential rise to $250,000 by year-end.
“If I had to predict, maybe we could see $250,000 by the end of the year; I mean, it’s looking pretty good,” he remarked, reflecting on his earlier 2022 price prediction.
The introduction of spot Bitcoin ETFs in the United States has significantly rejuvenated interest and capital inflows into Bitcoin.
These ETFs have made it easier for investors interested in Bitcoin but reluctant to hold it in self-custody, providing a safer and more familiar investment route through traditional financial institutions like Fidelity or JPMorgan.
Draper emphasized the protective role of Bitcoin against fiat currency devaluation: “I think that it gives people an opportunity to buy some Bitcoin and hold on to it so that they can take care of themselves when there’s a run on the dollar or the euro.”
He also noted Bitcoin’s increasing attractiveness as it becomes more commonly used for purchases and its finite supply, which contrasts sharply with the inflationary nature of fiat currencies.
“I don’t really need to hold on to any fiat currency that decreases in value over time because of political whims or government spending, or politicians that just decide they’re going to spend more money and inflate your money,” he stated, asserting Bitcoin’s security against inflation and economic instability.
Furthermore, Draper highlighted the anticipated impact of the fourth Bitcoin halving scheduled for April 20, which will reduce the supply while demand is expected to rise, naturally driving up the cryptocurrency’s price.
“If you’re an investor in the stock market, they say don’t bet against the Fed [U.S. Federal Reserve]. If you’re a Bitcoin buyer, don’t bet against the halving. It changes everything.
The supply shrinks, the demand increases and the price goes up. That’s natural economics — supply and demand,” he explained.
Draper’s views also include a broader financial strategy, suggesting that a small, single-digit percentage investment in Bitcoin could serve as a hedge against potential bank failures and the decline of sovereign currencies, enhancing financial stability for investors amidst global economic uncertainty.
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Over the past week, Bitcoin Cash (BCH) experienced a significant decline in both open interest (OI) and price following its halving event on April 4.
Data from CoinGlass reveals that as of April 12, BCH’s OI was $378.3 million, a sharp 47% fall from its pre-halving peak of $708.5 million.
This reduction in OI was accompanied by a 13% decrease in BCH’s market price, according to figures from CoinMarketCap.
A significant portion of this drop occurred on April 10, with BCH losing 7.51% of its value within just three hours after fluctuating between $676 and $691 for four days.
This downturn contrasts starkly with the aftermath of BCH’s first halving in 2020, which saw the cryptocurrency gain 4.7% in value and a 10% increase in OI, totaling $73.86 million.
At that time, Bitcoin Cash was not yet three years old and was generating debate over its utility, primarily due to its lower transaction costs and reduced energy requirements for block verification.
Recent dynamics in cryptocurrency communities have also seen notable developments.
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On March 18, Blockstream CEO Adam Back made a public appeal to Roger Ver, a prominent early Bitcoin proponent who later became a major advocate for Bitcoin Cash, via an X post.
Back’s post read: “Join the f*cking party @rogerkver It’s just warming up. you know you want to. you don’t have to go it alone, be the prodigal son and return.”
Ver, often referred to as “Bitcoin Jesus,” has been a vocal supporter of Bitcoin Cash, arguing that it more faithfully represents Satoshi Nakamoto’s original vision for Bitcoin and is better suited as both a store of value and a currency due to its lower fees.
Meanwhile, the broader Bitcoin market is also seeing significant activity, with investors positioning themselves ahead of Bitcoin’s upcoming halving.
Currently, Bitcoin’s OI is at $34.89 billion, showing a substantial increase compared to the levels seen prior to the May 2020 halving.
These shifts in Bitcoin and Bitcoin Cash reflect broader trends and sentiments in the cryptocurrency landscape, influencing market dynamics and community interactions as key events unfold.
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Traders utilizing leveraged positions in Bitcoin may face unexpected outcomes as the cryptocurrency approaches a pivotal moment that might lead to significant price fluctuations, according to analysts.
Crypto trader Honeybadger, writing pseudonymously, expressed concerns about the market’s current state.
“The market was in easy mode, but right now clearly there’s too much leverage and market makers are having a field day exploiting high emotions and degenerate behavior,” he stated in an April 11 post on X.
He also remarked on the activity of market makers: “Market makers are having the best time ever chopping everyone up.”
Recent data from CoinGlass highlighted that $39 million in leveraged Bitcoin positions were liquidated in just 24 hours, encompassing $18.38 million in long positions and $20.62 million in short positions.
Honeybadger noted the formation of a symmetrical triangle on the Bitcoin price chart, a neutral indicator that might mislead traders into overly confident long positions.
He cautioned about the potential for a fakeout, which could surprise traders expecting a stable pattern.
Andrew Kang, co-founder of Mechanism Capital, contrasted with a more optimistic view.
He anticipates Bitcoin will reach new highs post the April 20 Bitcoin halving.
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“I expect BTC to touch $80K by May,” Kang predicted on X. Currently, Bitcoin trades at $70,500, after testing a support level of $68,500 multiple times within the week, according to CoinMarketCap.
The market also responded negatively to recent U.S. inflation data, leading to a 3% price drop below the support level on April 10.
Additionally, a sudden 5% decrease in Bitcoin’s price on April 2 resulted in $50 million in long position liquidations.
Another similar drop now would severely impact long positions, with predictions of $2.14 billion in short positions being liquidated if Bitcoin increases by 5% to $73,819.
Peter Schiff, a gold advocate and Bitcoin skeptic, warned of overconfidence among Bitcoin long position holders.
“Markets seldom work out the way speculators expect them to. More often than not they end up disappointed,” Schiff observed in his X post.
Given the current market volatility, Honeybadger has chosen to remain uninvolved, prioritizing capital protection over potential gains.
Arthur Hayes shared this cautious approach, opting out of trading until May due to potential market downturns.
Similarly, Jelle, another crypto trader, advised his followers on X to avoid unnecessary risks with leveraged trading.
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Bitkub Capital Group Holdings, the leading force behind Thailand’s most prominent cryptocurrency exchange, is setting the stage for an initial public offering (IPO) by bringing financial advisers on board.
This move aligns with its strategic vision to enhance its market presence and secure additional funding by going public on the Stock Exchange of Thailand (SET) by 2025, as confirmed by CEO Jirayut Srupsrisopa in a discussion with Bloomberg.
In a bid to strengthen its workforce, Bitkub is looking to recruit 1,000 more employees, aiming to double its current team size by 2025.
This decision marks a shift from the previous years, during which the company reduced its staff by 6%.
This expansion effort underlines Bitkub’s ambitious growth plans despite the workforce reduction in 2022 and 2023.
The announcement of Bitkub’s IPO was initially hinted at in a shareholder letter in 2023, albeit without much detail.
With its headquarters in Bangkok, Bitkub dominates the Thai cryptocurrency exchange market, boasting a 77% share as of December 2023, as per HashKey’s analysis.
The exchange sees about $30 million in daily transactions.
Thailand’s cryptocurrency scene is witnessing a surge, with over 13 million users as of 2023, which is expected to grow significantly in the coming years.
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Amid this expanding market, Bitkub faces competition from local and international players, including the recent entrance of Binance’s local subsidiary in January 2024 and significant moves by Kasikornbank, one of Thailand’s largest banks.
Bitkub’s journey towards an IPO also follows a strategic partnership where Asphere Innovations acquired a 9.2% stake in Bitkub Online, the exchange’s operational arm, for 600 million baht ($16.5 million).
This collaboration is anticipated to bolster Bitkub Online’s valuation, particularly as its trading volumes approach the peak levels last seen during the crypto bull market in 2021.
Bitkub Online significantly contributes to Bitkub Capital’s profitability, accounting for about 80% of its earnings.
However, the path has not been without challenges. In 2022, a major acquisition deal by SCB X for a 51% stake in Bitkub Online was called off amid growing regulatory scrutiny.
This backdrop illustrates the evolving dynamics within Thailand’s cryptocurrency landscape, highlighting Bitkub’s strategic moves to consolidate its leadership while navigating through regulatory and competitive pressures.
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Upbit, a leading cryptocurrency exchange in South Korea, experienced a notable decrease in its 24-hour trading volume, which fell to $3.8 billion at the beginning of April, a stark contrast to its performance in early March.
The exchange had previously witnessed a remarkable spike in daily trading volume, reaching nearly $15 billion on March 5, marking its highest trading volume for the year.
This surge was closely linked to Bitcoin’s climb to an unprecedented peak of $69,200 on the same day, fueled significantly by the influx of capital into newly introduced spot Bitcoin exchange-traded funds (ETFs) in the United States.
Notably, Bitcoin’s price on Upbit soared to a new all-time high of 96,734,000 South Korean won (approximately $72,504) at around 3:00 pm UTC on March 5, while it remained under $70,000 in global markets.
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This distinct price gap, known as the “Kimchi Premium,” refers to the variation in Bitcoin prices between South Korean exchanges and those abroad, drawing its name from a popular Korean dish.
However, the excitement was short-lived, as trading volumes plummeted to as low as $2.6 billion by the end of March.
As of April 1, according to CoinGecko, Upbit’s trading volume has modestly recovered to $3.8 billion.
Despite the fluctuations in trading volume, Upbit’s parent company, Dunamu, faced a significant financial setback in 2023, with an 81% drop in net profits.
On November 28, Dunamu reported earnings of $23 million, a decrease from the $123 million earned in the same period in 2022.
The company attributed the decline to a “sluggish investment market” due to economic downturns and the diminished value of digital assets.
In the face of these challenges, Dunamu has not halted its expansion efforts.
On January 9, Upbit received a Major Payment Institution license from the Monetary Authority of Singapore, enabling the company to provide a range of crypto and fiat-related services in Singapore, signaling its commitment to growth despite the financial downturn.
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CryptoQuant CEO Ki Young Ju has recently highlighted that the cost of mining Bitcoin using Antminer S19 XPs is projected to escalate from $40,000 to an eye-watering $80,000 following the Bitcoin halving event set for mid-April.
This adjustment occurs in the backdrop of the Bitcoin halving, an event that unfolds approximately every four years or after 210,000 blocks are mined, effectively slashing the mining reward by half.
This pivotal moment not only influences Bitcoin’s market value indirectly but also exerts a profound effect on miners’ operations by doubling the expenses required to mine the same quantity of Bitcoin.
Reflecting on the aftermath of the May 2020 halving, the cost for miners to sustain profitable operations surged past $30,000.
Concurrently, Bitcoin’s valuation soared to a record peak of $69,000 within the same cycle. As of April 6, the average expense tied to Bitcoin mining stands at $49,902, with the cryptocurrency’s market price breaching the $70,000 mark.
Post-halving on April 20, the mining cost is anticipated to climb beyond $80,000, necessitating a corresponding increase in Bitcoin’s market price for mining ventures to remain viable.
Historical patterns post-halving showcase significant surges in Bitcoin’s price, substantiating miners’ ability to maintain profitability despite initial apprehensions of potential insolvency.
Following the 2012, 2016, and 2020 halvings, Bitcoin’s value experienced monumental rises of approximately 9,000% to $1,162, 4,200% to $19,800, and 683% to $69,000, respectively.
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Such increments have consistently offset the heightened costs and technological demands placed on mining operations, rendering only the most efficient machines competitive.
In the immediate aftermath of halving events, the Bitcoin community often faces a phase of uncertainty, marked by a below-profit-price BTC value, increased sales of mining equipment, and the exit of smaller mining entities.
Nonetheless, this period typically precedes a market correction driven by reduced supply and heightened demand, eventually elevating Bitcoin’s price well above average mining costs, thus securing miners’ profit margins in the longer term.
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The potential for Bitcoin‘s price to surge is a hot topic in the financial world, with some analysts predicting significant growth.
A notable analysis by a pseudonymous analyst, TechDev, shared with their 440,000 followers on social media, suggests that Bitcoin could see its price double from its current $69,000 within three months.
This prediction is based on Bitcoin’s performance in relation to the upper Bollinger Band, a technical indicator measuring market volatility.
According to TechDev, “every time Bitcoin had done this in the past, its price had doubled within the next three months.” If this pattern holds, Bitcoin could hit approximately $140,000 by July.
Bollinger Bands, used in this analysis, are a technical analysis tool that indicates the momentum and volatility of an asset within a specific range, with prices near the upper band typically signaling an overbought condition.
However, while Bollinger Bands can provide insights, they are more reactive than predictive, relying on past price actions and volatility.
Their effectiveness can vary significantly across different market conditions.
Beyond technical indicators, significant optimism about Bitcoin’s future price comes from influential figures in the financial sector.
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Anthony Scaramucci, CEO of SkyBridge Capital, voiced on CNBC his belief that Bitcoin’s value could soar to $170,000 during this cycle and potentially reach a market cap half that of the global gold market.
This implies a dramatic increase to around $400,000 per Bitcoin, given the current market caps of Bitcoin and gold.
Scaramucci highlighted the role of recently approved spot Bitcoin exchange-traded funds (ETFs) in driving up demand, noting that nine out of ten such ETFs have already seen over $12 billion in net inflows.
Furthermore, the anticipation surrounding the upcoming Bitcoin halving, expected on April 20, is seen as a significant catalyst for price appreciation.
This sentiment is echoed by Ripple CEO Brad Garlinghouse, who expects the value of the entire crypto sector to double by year’s end, driven by factors like halving, regulatory developments, and the growing popularity of Bitcoin ETFs.
Garlinghouse, with his extensive experience in the industry, remains “very optimistic” about the sector’s growth potential, particularly with the entry of institutional money facilitated by ETFs.
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Bitcoin has made a lot of progress in the last couple of years, with the emergence of Layer-2 projects such as Stacks, Rootstock and Merlin Network enhancing its capabilities to support basic smart contract functionality.
Those projects are striving to create a new generation of Bitcoin-native DeFi applications, play-to-earn games and NFTs, but they face a number of challenges in pursuing this dream. Many of these new Bitcoin L2s are unable to interoperate with each other, leading to problems around ecosystem fragmentation.
It’s with these challenges in mind that a new project, which leverages the unique capabilities of the EOS blockchain, has emerged, to streamline the flow of data between Bitcoin and its nascent ecosystem of L2s.
A hybrid consensus mechanism to link Bitcoin’s L2s
That new project presents itself as exSat, and it is building what it describes as a “Docking Layer” for Bitcoin’s ecosystem. It utilizes a revolutionary hybrid consensus mechanism that encompasses the traditional Proof-of-Work, the Proof-of-Stake algorithm used by Ethereum and other chains and the Delegated Proof-of-Stake mechanism pioneered by projects such as Polkadot.
exSat’s plan is to facilitate direct interaction between Bitcoin and its L2s without compromising the inherent security of Bitcoin’s original blockchain.
The exSat architecture relies on a system of both Synchronizers and Validators. The Synchronizers’ role is to supply a bridge between Bitcoin’s blockchain network and exSat (and hence, all of Bitcoin’s L2s), ensuring that data and transactions can be processed quickly and accurately. According to exSat, existing Bitcoin miners will take on this role, with their work secured by Bitcoin’s standard PoW consensus mechanism. For participating, they’ll be rewarded with exSat’s native XSAT tokens for processing each block.
As for the Validators, their job is to verify the data that’s processed by the Synchronizers. This is where the PoS consensus mechanism comes in, as anyone will be able to become a Validator simply by staking both BTC and XSAT tokens. There’s quite a hefty barrier to entry though, as exSat requires a minimum 100 BTC stake to participate, plus another XSAT stake to become eligible for the XSAT rewards.
On-Chain Data Storage and EVM Compatibility
There are few other components to this system, with the most notable one being its Data Consensus Extension Protocol, which makes it possible for exSat to make use of EOS’s blockchain, supporting on-chain data storage with high-speed access for BTC assets such as BTC tokens, Runes, BRC20, BRC217 and Ordinals.
Another element of exSat’s architecture is its decentralized state data indexing platform for Bitcoin-native assets, which is a fundamental ingredient for smart contracts, EVM compatibility and trustless interactions. Finally, exSat has created its very own smart contract platform that leverages its EVM interoperability to enable universal gas fees for Bitcoin assets.
Combined, the various features of exSat’s architecture make it possible for Bitcoin and any L2 network to interoperate seamlessly with one another. At the same time, it supports enhanced smart contract functionality required for the next-generation of Bitcoin-native dApps.
Accelerating Bitcoin’s Transition
What exSat is building sounds ambitious, yet it also appears to be very well thought out, catering to a real need that will only become more acute as Bitcoin’s L2 ecosystem grows.
Those L2 networks have already propelled Bitcoin on an evolutionary path that will transform its utility and, perhaps, ultimately help it compete with and maybe even surpass Ethereum as the world’s number one smart contract chain. exSat can play a pivotal role in accelerating that translition.
Cboe Global Markets has formally requested approval from the United States Securities and Exchange Commission (SEC) for a rule modification that would enable the combination of exchange-traded funds (ETFs) and mutual funds.
In a report by Reuters on April 4, it was disclosed that Cboe submitted a 19b-4 form, seeking permission to introduce an ETF share class to existing mutual funds.
This move aims to establish a multi-share class fund structure, enabling issuers to merge and offer similar mutual funds and ETFs under one investment vehicle.
Todd Sohn, an ETF analyst at Strategas LLC, emphasized to Reuters that if the SEC greenlights Cboe’s proposal, “both the number of ETFs and ETF assets could soar.”
Distinguishing between mutual funds and ETFs, these investment vehicles operate differently, each with its own regulatory framework.
Mutual funds are typically traded at the end of the trading day at a price determined by the fund’s net asset value, computed post-market closure.
Conversely, ETFs trade on exchanges throughout the trading day at market prices akin to stocks, subject to fluctuations at any given moment.
Should the rule alteration be sanctioned, Bitcoin ETF shares might be integrated into a mutual fund’s portfolio, thereby providing exposure to the digital asset.
This prospective system is not without precedent. Vanguard Group has employed a patented investment strategy since 2001, facilitating a distinctive “share class” structure within their ETFs.
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This approach allowed Vanguard to incorporate ETFs as a share class of their existing mutual funds, sharing the same underlying portfolio. Vanguard’s patent on this share class concept lapsed in May 2023.
According to Reuters, eight asset managers, including Dimensional Fund Advisors, Morgan Stanley, and Fidelity, have sought regulatory approval to replicate this model. T. Rowe Price and JPMorgan have also indicated interest in adopting a similar strategy.
Cboe’s application is subject to approval or rejection by the SEC within 240 days. Bloomberg ETF analyst Eric Balchunas observed that the filing provides issuers with an opportunity to prompt the SEC’s response to their applications.
Mordor Intelligence projects that the North American ETF market will surpass $8 trillion in 2024, with a compound annual growth rate of 14% expected to propel it to $15.52 trillion by 2029.
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