4 Reasons to Bet on Bitcoin ETFs for the Rest of 2024

The cryptocurrency market experienced a lull in April following a strong rally in the first quarter that took Bitcoin (BTC) to an all-time high of $73,750. Over the past month (as of May 9, 2024) Bitcoin is down approximately 11%. The escalation of the geopolitical crisis may also be responsible for this collapse. The decentralized nature of cryptocurrencies allows for faster reactions to geopolitical events than even stocks.

The decline in April is perhaps temporary. It seems unlikely that investors’ interest in Bitcoin will decrease. iShares Bitcoin Trust IBIT raised approximately $1.62 billion in April despite the decline in bitcoin price. IBIT’s streak of 71 consecutive days of inflows ended in April, but it is still poised to become the largest spot Bitcoin ETF. Currently, IBIT’s asset base is over $17 billion.

Against this backdrop, we highlight below a few factors that may support bitcoin or crypto ETF investment.

Bitcoin Prices Have to Increase

One of the biggest reasons behind the volatility and decline in Bitcoin price was the halving event that took place last month. Bitcoin halving event occurs every four years. Following the recent completion of Bitcoin’s halving in April, there is widespread speculation that the reduced supply of Bitcoin could lead to a price increase in the cryptocurrency in the coming months due to increasing scarcity.

Bitcoin has a fixed supply (21 million). As a result, demand for new Bitcoins increases and prices rise. However, analysts suggest that since the timing of the halving event is anticipated, its effects are already priced in and are not devastating.

Advent of Bitcoin ETFs Contributes to the Stability of Cryptocurrencies

Since the launch of the first Bitcoin ETFs on January 11, the asset is up more than 50% and even reached a record high of just under $74,000. ETFs represent a turning point in Bitcoin’s journey, offering both retail and institutional investors a regulated and accessible means of investing in the cryptocurrency. This development not only increases liquidity but also contributes to price stability.

Is Bitcoin Performing Well Amid Inflation?

Bitcoin is often touted as a hedge against inflation. Bitcoin has a fixed supply. This move contrasts with traditional fiat currencies, which central banks can issue in unlimited quantities. Therefore, in times of inflation, the value of fiat currencies tends to decrease. Meanwhile, some market observers see Bitcoin as a store of value that can preserve wealth despite high inflation due to its limited supply. Having said that, we would like to point out that the crypto space is extremely volatile.

The story continues

Is Crypto Creating Wealth Effect?

Cryptocurrencies have made headlines lately as early investors enjoy newfound wealth. Investors should note that early crypto investors saw life-changing wealth, but its impact on spending, known as the wealth effect, was not as extreme as lottery winnings.

But over a decade, cryptocurrency windfalls have increased household consumption by $30 billion, per one study, and led to nine cents in unrealized spending for every dollar. This figure is almost twice the marginal propensity to consume when it comes to stock market returns. It has also been noticed that some of the sudden wealth from crypto has gone into real estate, boosting markets in crypto-friendly regions, according to Bloomberg as reported in the Economic Times.

ETFs in focus

In this context, investors can follow ETFs such as Grayscale Bitcoin Trust GBTC, IBIT, Fidelity Wise Origin Bitcoin Fund FBTC, ARK 21Shares Bitcoin ETF ARKB and Bitwise Bitcoin ETF Trust BITB.

Want the latest recommendations from Zacks Investment Research? Today you can download the Top 7 Stocks of the Next 30 Days. Click to get this free report

Grayscale Bitcoin Trust ETF (GBTC): ETF Research Reports

iShares Bitcoin Trust (IBIT): ETF Research Reports

Fidelity Wise Origin Bitcoin Fund (FBTC): ETF Research Reports

ARK 21Shares Bitcoin ETF (ARKB): ETF Research Reports

Bitwise Bitcoin ETF (BITB): ETF Research Reports

Click here to read this article on Zacks.com.

Zacks Investment Research