What's behind Bitcoin's return to $30,000 and market share soaring?

Author | Hei Mi, Bai Ze Research Institute

As of this writing, Bitcoin is up more than 6% over the past 24 hours, briefly touching $29,000 (editor's note: price has breached $30,000 at time of publication). At the same time, Bitcoin regained control of 50% of the entire cryptocurrency market. You know, since May 2021, Bitcoin's market dominance has never broken above 50%.

I think that the current round of Bitcoin’s rising market and rising dominance is mainly due to three aspects, financial giants entering encrypted transactions, Bitcoin spot ETF competition resurgent, and the fourth Bitcoin halving is coming.

Under the regulatory crackdown, financial giants enter the encrypted trading

EDX Markets, an institutional-only exchange backed by three of the largest asset managers in the US, Charles Schwab, Fidelity Digital Assets and Citadel Securities, was announced in September 2022 and officially launched yesterday, triggering heated discussions in the crypto community .

In terms of core leadership, the CEO of EDX Markets will be Jamil Nazarali, former head of global business development at Citadel Securities, and the CTO and general counsel will be Tony Acuña-Rohter, former chief technology officer of ErisX, and David Forman, former general counsel of Fidelity Digital Assets, respectively.

As an upstart exchange with a strong endorsement, EDX adopts a cautious attitude towards the supervision of the US Securities and Exchange Commission (SEC), focusing on security and compliance.

On the one hand, the biggest difference between EDX and other exchanges is that it is a "non-custodial" exchange, which means that it does not directly hold customers' encrypted assets, and uses trusted intermediaries to ensure the safety of customers' funds.

On the other hand, recently, two major cryptocurrency exchanges, Coinbase and Binance, have been sued by the US SEC.

In the Binance lawsuit, the SEC classified ten tokens as securities, including SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI. In the Coinbase lawsuit, the SEC classified seven other tokens as securities, including CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO.

None of the aforementioned EDX tokens offer trading, and customers can only trade four cryptocurrencies: BTC, ETH, LTC and BCH — none of which the SEC says are securities.

As a result, EDX has refocused institutional interest on established cryptocurrencies, including Bitcoin.

While some Twitter users found the timing of the SEC's recent lawsuits against Binance and Coinbase worrisome, many saw the launch of EDX as positive news for bitcoin prices.

In addition, some industry insiders speculated that it was no coincidence that these financial giants launched exchanges after the SEC’s enforcement actions. Suddenly, “these big Wall Street companies entered the encryption market after the runway was cleared.” Regulators hit native cryptocurrency exchanges with lawsuits first, creating fear and then allowing financial giants to swoop in. Perhaps regulators are more inclined to let established companies enter the crypto market than native companies that have supported the crypto market from the beginning.

Bitcoin spot ETF competition resumes

Although the US SEC has cracked down on the encryption industry, traditional financial giants and institutional investors still show interest in Bitcoin and accelerate their entry.

Previously, BlackRock, the world's largest asset management company, applied for a bitcoin spot ETF. If passed, it will open a regulated investment channel for a wider range of investors without actually buying bitcoin, and eventually lead to bitcoin demand and value growth.

Markus Thielen, director of cryptocurrency research at Matrixport, a digital asset service platform, believes: "The possibility of the US SEC approving BlackRock's Bitcoin ETF is high. ... The ETF may be available in September/October 2023." Approved, and will attract $10 billion in three months, $20 billion in six months — that will support the bitcoin price tremendously.”

Bitcoin has risen 12 percent since BlackRock filed its ETF application, as has Coinbase stock Coin.

Followed by WisdomTree. Less than a week after BlackRock filed, the $87 billion asset manager has resubmitted an application for a bitcoin spot ETF. WisdomTree said in the filing: “Bitcoin markets have matured to operate in a manner similar in material respects to mature equity, fixed income, and commodity markets.”

This is not WisdomTree's first application. As early as December 2021, the US SEC rejected it on the grounds of lack of a "regulatory sharing agreement" and concerns about market manipulation.

A number of ETF issuers have tried bitcoin spot ETFs over the past few years, but have all been rejected by the SEC, including WisdomTree, VanEck, ProShares, Invesco, Valkyrie, and ARK.

Recent rumors have suggested that Fidelity, the third-largest asset manager, is planning to cause an “earthquake” in the crypto market, filing for its spot bitcoin ETF and possibly launching a takeover of struggling Grayscale. However, Fidelity did not confirm this rumor, and it remains to be seen whether the company will really enter the encryption market in a big way.

However, BlackRock's actions may indeed attract traditional financial giants to imitate, triggering another "bitcoin spot ETF competition" after 2021, and bitcoin may soon usher in its "golden gold" moment” – after the first gold spot ETF was approved in the US in 2004, its price exploded in the following years.

** Upcoming Bitcoin Halving **

The upcoming fourth Bitcoin halving will happen in 10 months time (May 9, 2024) and the block reward will be reduced to just 3.125 Bitcoins. Bitcoin halving is an important narrative of Bitcoin and the catalyst for the growth of the last 3 bull markets. It cuts the block reward issued to miners by half every four years. The number of coins will decrease, so this often leads to strong speculation and expectations about the price of Bitcoin in the Bitcoin community.

Historically, this narrative has triggered new all-time highs for Bitcoin and the broader crypto market every time.

As shown in the figure below, the blue line, orange line, and green line represent the price trend of Bitcoin in the three halving cycles of 2012-2016, 2016-2020, and 2020-present.

It can be seen that all lines reach their maximum price between the 400th day and the 600th day.

The most popular Bitcoin analyst Plan B believes that through the fourth halving, the price of Bitcoin is expected to rise to more than $32,000 and start a new round of bull market cycle in 2025.

Finally, DYOR, dig deep into any event.

risk warning:

According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any operation and investment behavior. Participate in any illegal financial practice.