The cryptocurrency market experienced a lackluster April following a strong rally in the first quarter that led Bitcoin (BTC) to a new all-time high of $73,750.Over the past month (as of May 9, 2024), Bitcoin slumped about 11%. The rise in geopolitical crisis can also be held responsible for this crash. The decentralized nature of cryptocurrencies enables quick reactions to geopolitical events, even quicker than stocks.

April’s slump is perhaps temporary. Investors’ interest in Bitcoin is unlikely to wane. iShares Bitcoin Trust IBIT amassed about $1.62 billion in April, despite the slump in bitcoin price. The streak of 71 consecutive days of inflows into IBIT ended in April, yet it is still poised to become the largest spot Bitcoin ETF. Currently, IBIT has an asset base of over $17 billion.

Against this backdrop, below we highlight a few factors that could favor bitcoin or crypto ETF investing.

Bitcoin Halving to Boost Prices

One of the major reasons behind the volatility and decline in Bitcoin price was the recent halving event, which took place last month. The Bitcoin halving event happens once in four years. Following the recent completion of Bitcoin's April halving, there is widespread speculation that the decreased supply of Bitcoins could result in a price increase for the cryptocurrency in the coming months due to increased scarcity.

Bitcoin has a fixed supply (21 million). Consequently, demand for new Bitcoins increases, driving up prices. However, analysts argue that because the timing of the halving event is anticipated, its effects are already priced in and not disruptive.

Arrival of Bitcoin ETFs Add to Cryptocurrencies’ Stability

Since the launch of the first Bitcoin ETFs on Jan 11, the asset has surged more than 50%, even hitting a record high of just under $74,000. The ETFs represent a landmark in Bitcoin’s journey, offering both retail and institutional investors a regulated and accessible means to invest in the cryptocurrency. This development not only enhances liquidity but also contributes to price stability.

Does Bitcoin Perform Well Amid Inflation?

Bitcoin is often touted as a hedge against inflation. Bitcoin has a fixed supply. This move contrasts with traditional fiat currencies, which central banks can issue in unlimited quantities. Thus, in times of inflation, the value of fiat currencies tends to fall. Meanwhile, some market watchers view Bitcoin as a store of value due to its limited supply which can preserve wealth amid high inflation. Having said this, we would like to note that the crypto space is extremely volatile.

Crypto Creating Wealth Effect?

Cryptocurrencies have hit headlines lately as early investors bask in newfound wealth. Investors should note that early crypto investors have seen life-changing wealth, but its impact on spending—known as the wealth effect—hasn't been as overgenerous as lottery winnings.

But over a decade, crypto windfalls increased household consumption by $30 billion per a study, with each unrealized dollar leading to nine cents of spending. The figure is almost double the marginal propensity to consume when it comes to stock-market returns. It has also been noticed that some of the sudden wealth generation from crypto goes into real estate, boosting markets in crypto-friendly areas, per Bloomberg, as quoted on Economic Times.

ETFs in Focus

Against this backdrop, investors can keep track of ETFs like Grayscale Bitcoin Trust GBTC, IBIT, Fidelity Wise Origin Bitcoin Fund FBTC, ARK 21Shares Bitcoin ETF ARKB and Bitwise Bitcoin ETF Trust BITB.

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Grayscale Bitcoin Trust ETF (GBTC): ETF Research Reports

iShares Bitcoin Trust (IBIT): ETF Research Reports

Fidelity Wise Origin Bitcoin Fund (FBTC): ETF Research Reports

ARK 21Shares Bitcoin ETF (ARKB): ETF Research Reports

Bitwise Bitcoin ETF (BITB): ETF Research Reports

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