The cryptocurrency market faced a sluggish April following a robust first quarter, which saw Bitcoin (BTC) reach a new all-time high of $73,750. By May 9, 2024, Bitcoin had dropped about 11%, partly due to rising geopolitical tensions. Cryptocurrencies, being decentralized, often react more swiftly to such events compared to stocks.
Despite April’s downturn, investor interest in Bitcoin remains strong. The iShares Bitcoin Trust (IBIT) accumulated around $1.62 billion in April, even as Bitcoin’s price declined. Although its 71-day streak of consecutive inflows ended, IBIT is still on track to become the largest spot Bitcoin ETF, with over $17 billion in assets.
Given this context, here are several factors that could make Bitcoin or crypto ETFs a smart investment choice.
1. Bitcoin Halving to Boost Prices
A significant factor behind Bitcoin’s recent price volatility was the halving event in April. This event, which occurs every four years, reduces the reward for mining new blocks by half, effectively decreasing the supply of new Bitcoins. With Bitcoin’s supply capped at 21 million, reduced availability typically drives up demand and prices. While some analysts argue that halving effects are often priced in, the reduced supply can still contribute to upward price pressure.
2. Bitcoin ETFs Enhance Stability
Since the launch of the first Bitcoin ETFs on January 11, the asset has risen over 50%, reaching nearly $74,000 at one point. Bitcoin ETFs mark a significant milestone by providing both retail and institutional investors with a regulated, accessible way to invest in Bitcoin. This increased liquidity and investor participation help stabilize prices and add credibility to the market.
3. Bitcoin as an Inflation Hedge
Bitcoin is frequently promoted as a hedge against inflation due to its fixed supply. Unlike traditional fiat currencies, which central banks can print in unlimited quantities, Bitcoin’s limited supply helps preserve its value during inflationary periods. While the crypto market is highly volatile, many view Bitcoin as a store of value that can protect wealth when inflation erodes the purchasing power of fiat currencies.
4. Wealth Creation through Crypto
Cryptocurrencies have garnered attention for generating significant wealth for early investors. According to a study, crypto windfalls have increased household consumption by $30 billion over a decade, with each unrealized dollar of crypto wealth translating to nine cents of spending. This is nearly double the spending impact compared to stock-market returns. Additionally, sudden wealth from crypto investments has boosted real estate markets in crypto-friendly regions.
ETFs to Watch
In light of these factors, investors should consider tracking the following ETFs:
- Grayscale Bitcoin Trust (GBTC)
- iShares Bitcoin Trust (IBIT)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- ARK 21Shares Bitcoin ETF (ARKB)
- Bitwise Bitcoin ETF Trust (BITB)
