BTC breaks through the $40,000 mark, analysis of the reasons behind it

The price of Bitcoin (BTC) recently broke through the $40,000 mark, attracting widespread attention in the market. However, the conversion of a certain trust company's BTC trust into a spot ETF may have a negative impact on the price of Bitcoin.

The market has reacted to this news, but we cannot ignore the second part of "buy the rumor, sell the news." It is likely that the market will sell off significantly when the news is confirmed, leading to a decline in BTC prices.

In the coming years, we may see a repetition of the BTC price cycle. It is worth noting that ETFs could have a positive impact on cryptocurrency prices in the long run.

However, the conditions for starting a new bull market are not yet in place. We should not rule out the possibility that the market may go through a small bear market phase before that.

Speculators maximize their profit potential by betting on these events. A certain BTC trust has attracted significant attention this year, with billions of dollars flowing into the secondary over-the-counter market. Therefore, once trading begins, both new and old investors may rush to liquidate, which could lead to a sharp decline in BTC prices.

Analysts Support Bearish View

An analyst from a large bank believes that during the process of converting trusts into ETFs, there could be "at least $2.7 billion in capital outflows." It is expected that the outflow of investors will lead to a price drop and return to cyclical lows, which is consistent with the historical price cycles of BTC.

Therefore, an ETF may not immediately drive up the price of BTC, but rather become a "sell the news" event, similar to what we witnessed previously with the launch of futures products.

A certain exchange launched Bitcoin futures in December 2017, coinciding with the peak of a bull market and the beginning of a two-year bear market. Another exchange launched Bitcoin futures in September 2019, allowing for cash settlement. However, this also became a "sell the news" event, and Bitcoin subsequently entered a small bear market that lasted for several months.

Currently, multiple funds are applying for a Bitcoin spot ETF, and despite facing regulatory pressure, authorities may have to accept it.

Analysis of Trust Discount Rate

Due to a significant gap between the certain BTC trust and the spot price of Bitcoin (with a discount rate dropping as low as 48%), coupled with the increasing likelihood of regulators accepting the conversion of the trust into an ETF, traders significantly bought into this trust product in 2023.

Currently, the trust's discount rate is 10% (below the spot price of BTC on the exchange). After approximately $2.5 billion in funds flowed into its only trading market, the discount rate has significantly narrowed.

We can foresee that once the ETF starts trading, most of the trading volume will convert into capital outflows.

Most speculators see it as an annual trading opportunity and bet heavily on the potential for the trust to transform into a Bitcoin ETF.

However, the main event of 2024 will be the BTC halving (and the speculation surrounding it). This halving could be the last one of significant importance and may become a turning point for the excessive growth of BTC prices.

With the launch of multiple spot ETFs, institutional capital inflows may become a key factor driving BTC prices to surpass $100,000 in 2024.

Conclusion

Despite the strong interest the financial industry has in cryptocurrencies, the adoption of cryptocurrencies in real life will be determined by the free market rather than regulatory agencies.

The market will determine the application scenarios and advantages of cryptocurrencies, and end users will decide their practicality and value.

The financial industry will consider BTC's potential as a reliable store of value and the possibility of achieving substantial applications through the Lightning Network.

In addition to Bitcoin, the financial industry also recognizes the characteristics and importance of other cryptocurrencies such as Bitcoin Cash, Ethereum, and Litecoin.

Looking ahead, the cryptocurrency market is expected to maintain a good momentum of development next year.