Crypto expert Duncan (@FloodCapital) recently expressed a strong belief that Bitcoin has hit its market bottom and is poised for new all-time highs. Are analysisshared on
Has the Bitcoin Bottom Been Reached?
In his in-depth analysis, Duncan pointed out that the crypto market has underperformed stocks in recent weeks. This trend caused concern until a crucial development occurred regarding Mount Gox. Duncan noted, “Yesterday’s Mt. Gox headline offered a reasonable explanation for recent market behavior.” The expectation that billions of Bitcoin would be distributed to creditors was anticipated by insiders, leading to a temporary market dip.
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The situation was analyzed in depth by Alex Thorn, head of research at Galaxy Digital suggested that the selling pressure resulting from this event may be less intense than initially feared. As Duncan explained, “We have exceeded the lows in the range, resulting in approximately $300 million in long-term liquidations.” While these numbers are significant, they are modest compared to the liquidation events in March and April, where over $750 million was liquidated in three separate 24-hour periods. This indicates a cooling market, which is also reflected in reduced open interest for altcoins, lower funding rates and a less bullish skew of options.
Duncan noted that sentiment on Crypto Twitter is “literally the worst I’ve ever seen,” despite Bitcoin being less than 20% below its all-time high. This sentiment is rooted in the traumatic experiences of crypto natives who, after witnessing the altcoin boom that outperformed Bitcoin and Ethereum in 2021, tried to anticipate a similar pattern this year but faced a drastically different market structure.
Capital inflows into Bitcoin have been significantly impacted by ETF developments, with Blackrock filing for an ETF in June 2023 when Bitcoin was priced at $26,000. The approval and subsequent $14.3 billion inflow into the ETF was a stark contrast to previous years, dominated by decentralized finance (DeFi) and high consumer interest in altcoins. “This year, capital has been heavily focused on Bitcoin, influenced by the perceived stability and formal financial product structure of ETFs,” Duncan explains.
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On the fundamental side, Duncan highlighted Blackrock’s strategic moves within the crypto space. “With $17 billion in IBIT and a 25 basis point fee, Blackrock is poised to generate approximately $45 million per year from this ETF indefinitely,” he said. This steady stream of income could be a harbinger of more institutional products and greater acceptance of Bitcoin as a legitimate asset class.
Duncan also discussed the possible normalization of a 1% Bitcoin allocation in large investment portfolios, which he said could drive significant future inflows. “If 1% becomes the global default allocation to Bitcoin, we still have a lot of inflows to go,” he noted, suggesting that not having such an allocation could soon be considered a strategic oversight. He added: “A great selling point of these companies is that if you don’t have 1% in BTC, you are essentially short/underweight BTC. This starts to shift career risk from owning BTC to not owning BTC, a huge paradigm shift.”
Ethereum and the future of altcoins
On Ethereum, Duncan expressed optimism about the upcoming US spot Ethereum ETF, which he believes could outperform the Bitcoin ETF in terms of profitability due to higher fees and potential income from staking. “Blackrock’s most successful product launch ever will likely be followed up with the Ethereum ETF, which could be even more profitable,” he predicted.
He criticized the current low expectations surrounding the Ethereum ETF, which he attributes to widespread misinformation and underestimation of its potential impact. “The ETH ETF is likely a higher margin product for Blackrock, and adding staking could increase profitability even further,” Duncan explains, suggesting that the integration of real-world assets (RWA) into the chain could increase its appeal.
At the time of writing, BTC was trading at $61,764.
Featured image created with DALLE, chart from TradingView.com