There are several reasons for the rally, some point to signs that a slate of exchange-traded funds that hold actual bitcoin — known as spot bitcoin ETFs — may soon be approved by the SEC as early as January 10, 2024. If granted, such approval will provide investors with additional products to access bitcoin exposure and may attract participants who may have been sitting on the side-lines.
The approval of the futures-based ProShares Bitcoin Strategy ETF (BITO) made history in October 2021 as one of the strongest ETF launches, amassing more than $1 billion in assets in just two days, and continuing to attract interest.
Another popular theory is tied to bitcoin’s upcoming “halving.” This pre-programmed adjustment to the blockchain cuts in half the reward miners receive for processing transactions as well as the new bitcoin supply from the current 6.25 to 3.125 bitcoin per block. This event occurs after 210,000 blocks are mined or about every four years until the maximum supply (21MM) is reached. The next halving, bitcoin’s fourth, is expected to happen by mid-April 2024.
In the past, this event and the associated supply reduction has coincided with a strong run-up in bitcoin’s price and could potentially lead to pre- and post-halving volatility. The geopolitical and macro backdrop for the upcoming halving is very different from previous ones and the availability of regulated, robust and liquid Bitcoin futures and options from CME Group means firms have trusted and tested products to hedge their bitcoin price risk or gain exposure.
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