04 Jul 2023

July Outlook: Institutions are back

The resurgence of the U.S. ETF race represents a monumental change to bitcoin, with all ingredients in place for a spicy market in the coming nine months in favor of more aggressive positioning in BTC.
Opinion Vetle

BlackRock enters the game

The importance of the BlackRock ETF filing should not be understated. The signaling effects from the world’s largest asset manager getting involved with bitcoin, followed by headlines in a similar tune from Fidelity, Citadel, and Deutsche Bank, all contribute to greenlighting BTC as a viable sound investment alternative. Further, none of the above-mentioned companies are charities. They are aiming to get involved in BTC, motivated by future profits. The influx of positive headlines from financial institutions over the past weeks has subconsciously delivered a message of longevity and relevancy of BTC and, thus, future cashflows for the aforementioned institutions. After traversing the depths of despair following FTX’s collapse and the credit crisis of 2022, the BlackRock entrance is monumental, swiftly changing the gears of the institutional investor sentiment towards BTC.

Institutional FOMO

Bitcoin very naturally saw a strong period as the market absorbed the news, and institutions have led the rally. On CME, open interest is approaching all-time highs. Activity levels on CME have been frantic, leading CME’s BTC Futures to see a higher 2-week volume than what it saw during the FTX collapse. The thriving activity is accompanied by futures premiums soaring to multi-year highs on CME. ETPs are also seeing a very noticeable uptick in inflows, further pointing towards massive growth in activity from institutional pockets.

Retail apathy

We’re not anywhere close to seeing similar tendencies of FOMO from the retail side of the market. Trading volumes, both in the spot market and offshore derivatives market, align with the yearly averages, and premiums in futures are far less frothy. Further, google search numbers for Bitcoin, Coinbase, and other crypto-related keywords trended down in June from May, illuminating a general apathy from retail participants. In essence, the current momentum is caused by thriving institutional activity with a subdued retail presence. A very welcoming market signal. To some extent, this is reminiscent of the August-November 2020 activity in the market, and it strengthens my outlook on BTC towards the tail-end of the year.

A mistaken knee-jerk reaction from the market last Friday

Last Friday, the market responded negatively to news on the SEC viewing the current ETF filings as inadequate, missing the silver lining that the SEC provided context and guidance to the ETF filings, unlike the SEC’s previous approach of waiting it out before denying the filing amidst the final deadline. In my opinion, this move by the SEC strengthens the odds of approval for the current filings, which all re-filed and added information the SEC had targeted.

Bitcoin’s path onwards

ETF developments will continue to dictate BTC’s path onwards. BlackRock’s filing has yet to be recognized in the Federal Register, but day 45 and day 240 after the recognition is due to represent two crucial dates for the market.
The First Inflection Point: Late August/Early September
Anticipations will be high as the initial outcome deadline approaches. There are several murmurings of an early approval, and the market could exhibit exuberance as we approach this deadline. I expect momentum to ensue as we approach this unknown deadline for now. If the verdict is postponed, brace for short-term negative storms in the market.
The Second, and Spiciest Inflection point: March 2024
If the SEC postpones its BlackRock decision, the 240-day deadline will be the most interesting to follow. We estimated BlackRock’s filing to reach the Federal Register on June 28. The registration is behind our estimation, pushing the 240-day deadline closer and closer to the anticipated halving date of BTC, estimated to be late March/early April. Bitcoin could thus benefit from a solid halving narrative and ETF expectations as we enter 2024. Both should lead to significant strength in BTC, reflecting positively on the market in Q1 2024.

What to do in July?

Trading at $30k, with multiple positive catalysts ahead, I am becoming more bullish on BTC and view this summer as a key period to accumulate aggressively.
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