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Buy Crypto Or Get Indirect Exposure? (Part 1)

Blockchain tech at the core of the digital space presents itself as both the innovation and the hassle for those who struggle with technologies. There have been alternative ways to get indirect exposure to cryptocurrencies without going through the whole process of setting up your own wallet, getting on-ramp, and purchasing Bitcoin for instance. The most popular one recently is via spot Bitcoin ETFs, but the question remains: should we opt for those alternatives or is it better to own your cryptocurrencies? Viva La Crypto The ultimate idea behind blockchain and the inception of Bitcoin is, first and foremost, freedom. Freedom to access personal holdings without relying on any third party, freedom to own any type of assets regardless of place and time limitations, and freedom to attach a value to any cryptocurrency. People used to jeer at the mere mention of Bitcoin in the late 2000s-early 2010s, but look at us now: over US$1 trillion in total be859bc7-d249-44f6-af7f-a16ffd805ac1 cap, Bitcoin is now the second largest ETF commodity in the U.S. (with Larry Fink having a refreshed perspective on Bitcoin) and countries in the race to be global and regional crypto hubs. It's been a long-winded journey from a joke to the emerging asset class, and it's mind-boggling to say cryptocurrencies aren't here to stay. Unclear Regulations As One Major Entry Barrier However, only around 1.3% of the world's population owns Bitcoin, a real modest number with regards to the recent movement by financial institutions. It's because up until now, countries in the Latin-America and Asia seem to be more open to cryptocurrencies than their peers in Europe and North America. The land of dreams, ironically, was among the most hostile towards blockchain and crypto, with several cases between the U.S. SEC and crypto companies going on for years. Financial markets need an encouraging sign from lawmakers, and the average people almost always follow the crowd to stay out of any potential trouble. Therefore, once again, we want to celebrate a major win for the entire space: DDD-Day: Bitcoin ETF Is Approved. Alternative Option 1: Bitcoin Mining Stocks (P1) Bitcoin ETFs are not the only options for those who are more traditional-minded. In the first part of this series, let's talk about Bitcoin mining stocks as a salute to one of crypto's forefronts. Keep in mind that Bitcoin miners tend to cover other sectors as well, for example, energy, or diversify into other business areas rather than focusing solely on Bitcoin mining. Bitcoin mining stocks had a brilliant 2023 with an average return of 344% compared to NASDAQ 100's 55%. The best performer of the year is Marathon Digital Holdings Inc. (NASDAQ:MARA), whose shares ended the year with a 591% increase. Marathon currently owns 15,174 Bitcoin or US$610 million as of today (January 26, 2024 ) and is the biggest Bitcoin holder among publicly listed miners in the U.S. Almost all Bitcoin miners outperformed NASDAQ 100 (100 largest tech companies) in 2023, especially in July thanks to the market's bullish sentiment on the SEC's approval of spot Bitcoin ETFs. They even outperformed Bitcoin itself, however at the costs of higher volatility than the flagship cryptocurrency. How is that possible then, if the 13 mentioned miners hold at least 40,000 Bitcoin or 0.2% Bitcoin's total supply and are constantly creating new ones? The answer lies in efficiency. Bitcoin undergoes halving every four years, meaning the numbers of Bitcoin to be mined will reduce by half after each halving event. Bitcoin miners are the main target of the Bitcoin halving function: they have to compete with newer, more efficient mining rigs, which of course means higher costs, to survive the halving, let alone keep generating profits as Bitcoin has become extremely volatile after spot ETF launch. The chart above shows Bitcoin mining stocks all dipping in red since the approval and first trading day of spot Bitcoin ETFs (January 10-11). Prices reduced by half can also be a result of capital reallocation from investors; after all, spot Bitcoin ETFs provide exposure to Bitcoin without taking into consideration revenues, cash flows, and expenses of miners. If you are to purchase Bitcoin mining stocks, brace yourself for a rollercoaster of emotions, at least into Q2 this year. To be discussed next are the Bitcoin mining landscape, an introduction to the best Bitcoin mining stocks, and what to expect as the fourth Bitcoin halving is drawing near. Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.

Bitcoin Halving: Will We Land on the Moon?

As the next Bitcoin halving is drawing near, we have every reason to tell each other 'LFG'. But how long and how far does it take to go to da moon? In Digital Gold We Trust Similar to gold, Bitcoin has a limited supply (capped at 21 million) and can very well be utilised as a hedge against inflation due to its decentralised i.e. untouchable nature, low correlation with traditional assets, and a much higher level of accessibility: anyone can buy and hold any fraction of Bitcoin, at anytime, from anywhere. The biggest 'flaws' of Bitcoin must be its notoriously high volatility and a barren ecosystem. Unlike Ethereum, which fuels innovations in DeFi, GameFi, SoFi, LSDs, RWAs, NFTs, and pretty much everything you can think of, Bitcoin was originally created as a 'purely peer-to-peer version of electronic cash ' and thus doesn't support the development of too complicated dApps. However, the majority of us see and actually invest in Bitcoin as a store of value rather than a new type of asset. The chart below shows Bitcoin volatility compared to the NASDAQ Composite Index (COMP) and the SP 500 Index (SPX). Clearly, it swings back and forth in insane magnitude, but do you remember how people used to laugh at Bitcoin back then? A guy once traded 10,000 Bitcoin for two pizzas, and now we are at US$40K a coin. Still in its infancy whilst others' markets have well matured, Bitcoin is expected to be volatile. And in this very volatility lies marvellous opportunities. 2022 was a year we all want to forget - the bear market began and Bitcoin fell to as low as US$15,508 after nearing US$69,000 in November 2021, but, as K33 Research has pointed out, it seems that the bears didn't stay that long. Source: K33 Research on Twitter As of December 12, 2023 , Bitcoin's year-to-date return is 147.5% and the first-ever Bitcoin ordinal collection is available for bid on the online platform of the 279-year-old auction house Sotheby's through December 13, 2023 . And there are 13 spot Bitcoin ETF filings on the SEC's table - we'll get there shortly in the next part. Overall, 2023 is way better than expected, and 2024 is set to be even stronger, especially with the 4th Bitcoin halving happening. Bitcoin halving is an event that takes place every four years where block rewards are cut in half, meaning new Bitcoins to be mined will be reduced by 50%. Satoshi designed it so that Bitcoin miners received 50 Bitcoin per block in 2009, 25 after the first halving in 2012, 12.5 after the second in 2016, 6.25 after the third in 2020, 3.125 after the fourth in 2024 and so on. The idea behind halving is to keep Bitcoin inflation in check and avoid selling pressure from miners. In short, Bitcoin halving is most likely to affect Bitcoin prices in a positive way. Everybody Now Wants A Piece Of The Pie One main reason for Bitcoin's soaring to US$40K this year is because TradFi is hungry for Bitcoin. We've got futures Bitcoin ETFs, with the biggest ones being ProShares Bitcoin Strategy ETF (BITO) and ProShares Short Bitcoin Strategy ETF (BITI), mining stocks (RIOT, MARA, CAN, HUT, CIFR for example), Coinbase and pro-Bitcoin firm MicroStrategy stocks (COIN and MSTR), then the first leveraged Bitcoin ETF in the U.S. (BITX), yet Wall Streets is still waiting for greenlight from the SEC to really get in. The number of SEC filings that mentioned the term 'Bitcoin' went from 0 in 2012 to 167 in 2016, and 1421 in 2020 before skyrocketing in 2021-23. Larry Fink going from 'Bitcoin is an index of money laundering' to 'Bitcoin is an open, verifiable and stateless currency' must be among the most clear-cut evidence of institutional demand for Bitcoin. The performance of all mentioned stocks is updated on a weekly basis in our Bitget Hot Takes Series , together with a summary of the crypto market and the biggest news of the week. We know that Bitcoin is already up by almost 150% YTD, and 3,158 times from the start of 2013, leaving all other assets behind in terms of performance. Now, as the emerging store of value, Bitcoin can be added to investment portfolios for the sake of better risk diversification. When we compare a portfolio of 100% COMP with 100% SPX, we see that COMP easily outperforms SPX as NASDAQ is tech-heavy (and tech is the new oil). But then we hypothetically allocate as little as 3% to Bitcoin, 97% to SP 500 and returns are on par with 100% COMP. At 10% Bitcoin and 90% SPX, the portfolio would even beat a portfolio of 95% COMP - and COMP is, historically speaking, normally the most profitable out of the big three (Dow, SP 500 and NASDAQ Composite). Bitcoin is not subject to (fiat currency) inflation and can't be manipulated, hence it has become the new obsession of all investor types. Although Bitcoin has long been loved by advocates of decentralisation and financial freedom, the institutional Bitcoin fever will, in time, spread to main streets and eventually bring Satoshi's ideology to many more people. Take Some Hopium With Bitcoin halving as the key premise for the next bull run, let's do some forecasting. Two things to be observed here: • The time needed for Bitcoin prices to achieve a new high is longer after each halving; • The rate at which Bitcoin climbs to a new all-time high is smaller after each halving. Data shows that Bitcoin only needed over a year after the first halving to make its new ATH. The window expands to 527 days and 548 days after two halvings in 2016 and 2020, hence it's safe to say we could expect a new ATH after 500 - 600 days or somewhere between August and December 2025. We're still pretty early. And check out a simple Bitcoin price projection here: As Bitcoin's highest value increases from US$1,147 in the first halving cycle (after first halving) to US$19,783 in the second halving cycle and to US$68,925 in the third halving cycle, we can assume a depreciation of 0.15 for its max value growth rate. From there, we land at a potential US$95K after the 4th halving and US$100K after the 5th halving. Note that a 0.15 depreciation rate is quite large, therefore this is a very conservative forecast for Bitcoin's maximum value in the next halving cycle. Meanwhile, we tried to predict the lows of the next halving cycles using historical spreads and arrived at a depreciation of 0.13 for spread change, slightly lower than the depreciation rate of the max value growth. The given scenarios for Bitcoin's min value after 2024 and 2028 are US$16.9K and US$19.5K, respectively, which is indeed not too shabby for those who scooped some at US$15.5K in November 2022. Of course, this too is a humble prediction of Bitcoin prices; it's possible that Bitcoin can moon higher and the spread will become smaller faster with better liquidity (translation: more people willing to buy and sell makes price swings smaller). From all points of view, it's easy to understand the bullish sentiment across markets and why Bitcoin is poised for a take-off going into 2024. Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.