Bitcoin ETF Equilibrium Price Dynamics: ETF likely to drive significant rise in daily demand
We are attaching our deck on Bitcoin ETF equilibrium price dynamics. Please click here to download.
If you have not yet registered for our Crypto Market Update on Tuesday, July 25 at 2pm, please register using the block below.
Executive Summary
- Bitcoin ETF could finally get approved. Sean Farrell sees the “Blackrock effect” making this far more likely today.
- Bitcoin ETF likely one of the largest ever launches. Precious metals ETF > $225 billion. Grayscale, largest asset manager of crypto has $18 billion of Bitcoin AUM.
- Current bitcoin market is in balance with $25 million in daily block rewards and $25 million in daily demand.
- INCREMENTAL ETF DEMAND: Sean believes $25 billion of demand is possible in the first year. This is $100 million in daily demand.
- This would bring daily demand to $125 million, while daily supply is only $25 million. The implied equilibrium price would need to rise so daily supply matches daily demand. Equilibrium analysis suggests that a clearing price is $140,000 to $180,000, before the April 2024 halvening.
- Generally, this idea of higher equilibrium price is consistent Sean Farrell estimates of flow multiplier for Bitcoin of 4X-5X.
Reports you may have missed
BTC AS A POSSIBLE STRATEGIC RESERVE Last week, we discussed the rising political tailwinds affecting crypto. Despite events earlier in the year that might have suggested a changed stance from the Democratic Party, the political divide over the issue has grown stronger. The GOP has become the party that is undoubtedly more favorable to the industry. The attempted assassination of former President Trump, juxtaposed against a Democratic Party seemingly in...
Gox Wallet Movements Still Present a Risk, But Macro & Politics Keeps Us Allocated Here (Core Strategy Rebalance)
DISCUSSING THE SUPPLY CONCERNS On balance, macro conditions have moved in our favor thus far in early Q3. We have received soft jobs numbers and softer ISM reports, and cooler inflation figures, which have sent rates and the DXY lower. Unfortunately, the mere reveal of imminent sales from the German BKA and the solidification of the Mt. Gox disbursement timeline were not enough to put a bottom in for bitcoin....
LESSONS FROM OPEC We have witnessed a significant market panic partially related to formerly locked BTC hitting the order books. The major sources of supply include:Mt. Gox – 141,686 BTCUS Government – 8,100 BTCGerman Government – 50,000 BTC At current prices, this would equate to over $12 billion in supply. This threat, combined with an inhospitable macro backdrop (rising DXY, higher rate expectations, hawkish Fed), has brought BTC down to...
LDO Risk/Reward Looks Good Here, Immediate-term Macro Picture Still Uncertain (Core Strategy Rebalance)
FLOWS AND SENTIMENT STILL SUBDUED Last week, we received a better-than-expected CPI print, but the DXY continued to move higher due to global weakness and a hawkish Fed. We discussed the risks appearing in the metrics we use to gauge sentiment and flows. The overall lack of follow-through in the crypto market was evident. Volumes, net ETP flows, the Coinbase discount, stablecoin market cap trend, and search interest for key...