Since the start of 2024, the cryptocurrency market has seen a significant surge in the prices of Bitcoin and Ether, the two largest digital assets by market capitalization. This rally has captured the attention of investors and analysts alike, with several factors contributing to the upward momentum: the emergence of Bitcoin exchange-traded funds (ETFs), the impending April ‘halving’ event for Bitcoin, and growing anticipation surrounding the approval of spot ETFs for Ether.

These developments underscore the increasing institutional acceptance and mainstream adoption of cryptocurrencies as legitimate investment assets and the potential for further growth and maturation in the cryptocurrency market in the years ahead.

Bitcoin ETFs Fueling the Price

One of the primary drivers behind the recent surge in cryptocurrency prices, particularly the price of Bitcoin and Ether, is the growing popularity of Bitcoin exchange-traded funds (ETFs).

These investment vehicles provide traditional investors with an accessible, regulated way to gain exposure to Bitcoin without directly purchasing digital coins. The approval and launch of several Bitcoin ETFs in key markets have injected fresh capital into the cryptocurrency market, driving up demand and consequently pushing prices higher. Debuting in January 2024, on the first day of availability spot Bitcoin ETFs in the United States saw $4.6 billion worth of trades.¹

Investors’ enthusiasm for Bitcoin ETFs stems from their ability to offer exposure to the digital currency within the framework of traditional investment vehicles, such as mutual funds and retirement accounts. This accessibility has widened Bitcoin’s investor base, attracting institutional and retail investors alike and contributing to the sustained upward trajectory of its price.

Bitcoin ‘Halving’ Event Set for April

Another significant factor contributing to the bullish sentiment surrounding Bitcoin is the upcoming ‘halving’ event, which is scheduled for April.

This event, which occurs approximately every four years, is programmed into the Bitcoin protocol and involves reducing the rate at which new Bitcoin is created. Specifically, the supply of new Bitcoins issued as rewards to miners for validating transactions will be cut in half, effectively reducing the rate of Bitcoin inflation.

Previous halving events have resulted in periods of higher Bitcoin price volatility and upward price movements. The reduced new supply entering the market, coupled with sustained or increased demand, tends to create a supply-demand imbalance that pushes prices higher. As the April halving event approaches, investors are anticipating a potential price appreciation, contributing to the recent rally in Bitcoin prices.²

Anticipation of Ether Spot ETF Approval

In addition to Bitcoin, Ether, the native cryptocurrency of the Ethereum blockchain, has also experienced a notable surge in price this year. Its price is now above $4,000 USD for the first time since December 2021.³

A key catalyst driving this surge is the growing anticipation surrounding the approval of spot ETFs for Ether. While Bitcoin ETFs have already gained regulatory approval and entered the market, Ether ETFs are still pending approval. Depending on which analyst you talk to, the odds of an Ether spot ETF happening this calendar year are between 50% (so says JPMorgan) and as high as 70% (according to Bloomberg).^{4 5}

The prospect of Ether spot ETFs represents a significant milestone for the cryptocurrency market, particularly for Ethereum and its ecosystem. These investment products would expose investors to Ether’s price movements without requiring direct digital asset ownership. Like Bitcoin ETFs, Ether spot ETFs are expected to attract a broad range of investors, including institutional players seeking exposure to the burgeoning Ethereum ecosystem.

We can already see some evidence of this anticipation. In the week before spot Bitcoin ETFs went live, Ether saw a 15% price rally, and in the 24 hours after the debut of spot Bitcoin ETFs, the price of Ether rose 9% to a 20-month high. All this suggests traders are betting on the immanent approval of spot Ether ETFs and that there is a great deal of unrealized value in Ether.⁶

Impact of Ether Spot ETF Approval on Prices

The approval of spot ETFs for Ether is anticipated to have a similar positive impact on its price as spot ETFs have had for Bitcoin.

Firstly, it would significantly enhance the accessibility of Ether as an investment asset. Institutional investors, who often face regulatory and operational barriers when investing directly in cryptocurrencies, would gain a streamlined avenue to allocate capital to Ether through regulated investment products.

Some analysts argue that institutional investment through an ETF could help to stabilize the broader Ethereum ecosystem, as has already happened with Bitcoin and gold ETFs. Such stability, driven by institutional investment, could help stave off crashes and bubbles alike and could help foster sustained growth over time.⁷

Secondly, introducing Ether spot ETFs is expected to increase demand for Ether, driving up prices as investors seek exposure to the asset. This heightened demand could lead to a supply-demand imbalance similar to that seen with Bitcoin, resulting in sustained upward pressure on Ether prices.

The Bitcoin example is useful again here. Prior to the debut of spot Bitcoin ETFs, only around 12% of financial advisors recommended Bitcoin to clients as part of a diversified portfolio. However, after spot Bitcoin ETFs, fully 77% planned to recommend the asset to clients.⁸ Given this example, it’s easy to see how the widespread inclusion of spot Ether ETFs in the average portfolio would positively impact the overall price of Ether.

Additionally, the approval of spot Ether ETFs would validate its status as a legitimate investment asset, further bolstering investor confidence and attracting additional capital to the cryptocurrency market.

So, as regulatory barriers continue to diminish and investment products like spot Ether ETFs become more accessible, the cryptocurrency market looks poised for further growth and maturation in the years ahead.

Investing in Cryptocurrency with ETFs

Deciding which cryptocurrency to own and how much to allocate can be overwhelming for many investors.

Evolve’s Ether ETF (ETHR ETF) is the world’s first Ether ETF and offers a great way for investors to access the price of Ether through a secure investment solution. For more information on this fund, visit evolveetfs.com/ethr/.

Evolve’s Bitcoin ETF (EBIT ETF) is one of the world’s first bitcoin ETFs and provides investors with a simple and efficient way to access the price of physical Bitcoin through a secure investment solution. For more information on this fund, visit evolveetfs.com/ebit/.

For a more diversified cryptocurrency investment solution, the Evolve Cryptocurrencies ETF (ETC ETF) is Canada’s first multi-crypto ETF. ETC ETF is designed to be a one ticket solution to cryptocurrency exposure. It is market cap weighted and rebalanced monthly. It currently holds Bitcoin (TSX: EBIT) and Ether (TSX: ETHR) but as regulators approve other crypto ETFs, they may be added as well. For more information on this fund, visit evolveetfs.com/etc/.

To stay updated with insights on investing in cryptocurrency and related investment products, sign up for our weekly newsletter here.

 

Sources

1. Lang, H., McGee, S. & Saini, M., “US bitcoin ETFs see $4.6 billion in volume in first day of trading,” Reuters, January 12, 2024; https://www.reuters.com/technology/spot-bitcoin-etfs-start-trading-big-boost-crypto-industry-2024-01-11/
2. Hajric, V. & Pan, D., “What Is Bitcoin ‘Halving’ and Does It Push Up the Cryptocurrency’s Price?,” Bloomberg, March 6, 2024; https://www.bloomberg.com/news/articles/2024-03-06/what-is-bitcoin-halving-and-does-it-push-up-the-cryptocurrency-s-price
3. Pan, D., “Bitcoin Hits $70,000 Mark for First Time Ever Before Retreating,” Bloomberg, March 8, 2024; https://www.bloomberg.com/news/articles/2024-03-08/memecoins-ether-are-outpacing-bitcoin-during-record-breaking-week
4. Canny, W., “No More Than 50% Chance of Spot Ether ETF Approval By May, JPMorgan Says,” CoinDesk, January 19, 2024; https://www.coindesk.com/markets/2024/01/19/no-more-than-50-chance-of-spot-ether-etf-approval-by-may-jpmorgan-says/
5. C, H., “Ethereum Spot ETFs Could Be Next, According to Bloomberg Analyst,” Yahoo Finance,
   January 11, 2024; https://finance.yahoo.com/news/ethereum-spot-etfs-could-next-065704036.html
6. Shukla, S., “Bitcoin Rival Ether Jumps on Bets Token Is Next for ETF Approval,” Bloomberg, January 11, 2024; https://www.bloomberg.com/news/articles/2024-01-11/ether-eth-jumps-on-bets-token-is-next-for-sec-etf-approval
7. Malwa, S., “Ether ETFs Unlikely to Cause a ‘Bubble,’ Traders Say,” CoinDesk, February 23, 2024; https://www.coindesk.com/markets/2024/02/23/ether-etfs-unlikely-to-cause-a-bubble-traders-say/
8. Kunke, M. & Rudick, B., “Sizing the Massive Spot Bitcoin ETF Opportunity,” CoinDesk, November 6, 2023; https://www.coindesk.com/consensus-magazine/2023/11/06/sizing-the-massive-spot-Bitcoin-etf-opportunity/

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