Bitcoin is expected to rise to the $100,000 level in the second half of this year, while prospects for the launch of a spot Ethereum-ETF seem less optimistic. These predictions were confirmed by a macroeconomist who goes by the pseudonym Luxon, in a conversation with journalist Colin Wu.
According to the expert, investment in digital gold by the US asset management industry could account for 1-3% of total assets under management (AUM).
The timing of this growth is related to the postponement of the expected reduction of the Fed’s key rate from May to June or later, as well as the gradual realization of institutional investors’ plans to inсlude bitcoin in their portfolios.
The expert admitted that he underestimated the enthusiasm for spot bitcoin-ETFs, which led to the renewal of the historic high before halving. According to Luxon, the nature of bitcoin’s positive momentum in the face of tight monetary policy and the postponement of the start of its easing to a later date is “surprising.”
The expert highlighted three key features of digital gold as an asset:
- Indirect influence on the price: Bitcoin acts as an indicator of changes in global liquidity, without directly influencing the decisions of central banks.
- Low correlation: What sets bitcoin apart from many assets is its low long-term correlation, making it an important tool for balancing overall portfolio risk.
- Easy access and high volatility: Bitcoin is easy to trade and obtain and has higher volatility than other major asset classes, providing potentially higher returns.
According to Luxon, the Federal Reserve (Fed) expects to cut its key rate three times in 2024. He recalled that the monetary authority would prefer to avoid overheating the economy in the event of rapid policy easing and that a cautious approach would characterize the Fed’s approach throughout the year.
An expert expressed his opinion on Bitcoin’s continued leadership in the cryptocurrency market. According to Luxon, this opinion is justified by his skepticism about the likelihood of the SEC approving an exchange-traded fund based on Ethereum.
He noted that the SEC is investigating the PoS mechanism in the context of its security and possible impact on price manipulation. In addition, he pointed out a possible obstacle in the form of the regulatory definition of an asset as a security.
The specialist also suggested that in case there is no ETF on Ethereum and the number of developers in Polygon and Solana networks increases, part of the capital may be reallocated from Ethereum to these networks.
“It would be more difficult for altcoins to get liquidity, especially in the context of high interest rates […]. Within the cycle, there could be a noticeable growth of bitcoin and relatively weaker dynamics of competitors,” the expert concluded.
Bloomberg recently estimated the likelihood of an Ethereum spot ETF registering by May at 35%.
In early March, Grayscale and Coinbase discussed the possibility of converting ETHE into an Ethereum-based spot exchange-traded fund, but the regulator was not optimistic about it. News outlets Bloomberg and FOX Business saw the development as reducing the chances of the product being approved in May.
Although some experts expect the instruments to be registered in May, others doubt it due to several factors.
