The Bitcoin network has recently achieved a big milestone by surpassing 65 million Ordinals inscriptions, a development that comes just before the much-anticipated Bitcoin halving event. Meanwhile, the upcoming halving event has the crypto community buzzing about its potential impact on Bitcoin's price and miner revenue. Venture capitalist Tim Draper predicts a Bitcoin boom to $250K, buoyed by factors like the rise of Bitcoin ETFs and the halving's supply squeeze. Bitcoin ETFs, particularly favored by retail investors, have seen significant inflows. Additionally, the Grayscale Bitcoin Trust (GBTC) has reported record low outflows, suggesting a possible stabilization in investor sentiment.
Bitcoin Surpasses 65 Million Ordinals Inscriptions
The Bitcoin network achieved a major milestone by surpassing 65 million Ordinals inscriptions, just days before the very eagerly awaited Bitcoin halving event. This achievement was reached in less than a year and three months since the launch of Ordinals in January of 2023. Ordinals are unique in that they reside solely on the Bitcoin blockchain. This contrasts with most of today's popular NFT collections, which rely on centralized servers for hosting their metadata, thus introducing potential points of vulnerability.
The timing of this milestone is pretty notable, considering it happened just before the Bitcoin halving scheduled for around Apr. 19 or 20, which will see block rewards cut from 6.25 BTC to 3.125 BTC. This event has huge implications for Bitcoin miners, especially considering that Ordinals have generated more than $458 million in network fees to date, according to data from Dune Analytics. These earnings are crucial for mining firms, especially as they face reduced block rewards post-halving.
According to Mithil Thakore, CEO of Velar, the popularity of ordinals not only demonstrates the increased utility and interest in these digital assets but also signals a need for Bitcoin L2 solutions. These solutions would offer the programmability required to support smart contracts and bring both Ordinals and Bitcoin to the decentralized finance (DeFi) sector.
The concept of BTCFi, or Bitcoin decentralized finance, is a new paradigm that plans to integrate DeFi capabilities with the Bitcoin network. Many people believe that, given the current rate of adoption and development, BTCFi could rival the innovation and complexity of Ethereum-based DeFi in the future.
Nash Lee, co-founder of MerlinSwap, pointed out the market's appetite for platforms that can handle the growing volume and expectations, suggesting that DeFi is uniquely positioned to support Bitcoin's evolving use cases. This dynamic points towards a potential future where Bitcoin DeFi could match or even surpass the developments seen in Ethereum's DeFi ecosystem.
Tim Draper Predicts Bitcoin Boom to $250K
BTC’s price could also receive a huge boost fueled by the halving. Renowned venture capitalist Tim Draper made a bold prediction about Bitcoin's value, anticipating a massive increase in 2024. Speaking at Paris Blockchain Week, Draper shared his optimism for Bitcoin, suggesting it could reach $250,000 by the year's end. This forecast is driven by several factors, including the inflow of capital into spot exchange-traded funds (ETFs) and the anticipated impact of the upcoming Bitcoin halving.
The approval and introduction of spot Bitcoin ETFs in the United States have played a crucial role in attracting new investment into Bitcoin. These financial products have made it easier for investors interested in Bitcoin but hesitant about self-custody to invest in the cryptocurrency. Draper believes that Bitcoin ETFs not only provide a safer investment option for those wary of holding Bitcoin directly but they also serve as a hedge against the depreciation of fiat currencies like the dollar and euro.
Draper also commented on the finite supply of Bitcoin and its growing acceptance as a payment method, factors he believes will further boost the crypto king’s appeal. He critiqued the decreasing value of fiat currencies, which are at the mercy of political and economic decisions, suggesting that Bitcoin offers a much more secure alternative amidst inflationary pressures.
Furthermore, Draper shared that he sees the Bitcoin halving as a pivotal event. This event is expected to have a profound impact on the market by decreasing supply while demand continues to rise, a fundamental economic principle that should lead to an increase in Bitcoin's price.
What are Bitcoin Spot ETFs?
A spot Bitcoin ETF is an innovative financial product that grants investors the ability to gain exposure to Bitcoin's price movements without the need to own the cryptocurrency directly. Unlike its counterpart, the Bitcoin futures ETF, which is based on futures contracts, a spot Bitcoin ETF is backed by actual Bitcoin holdings. This setup offers a straightforward and regulated pathway for mainstream investors to tap into the digital currency's potential, through their conventional brokerage accounts, mitigating the need for them to engage directly with the complexities of crypto exchanges and wallet management.
The operational framework of spot Bitcoin ETFs involves the secure storage of Bitcoin in digital vaults managed by registered custodians. The ETF's goal is to reflect Bitcoin's market price as accurately as possible, achieved by issuing shares that represent a certain quantity of the underlying Bitcoin. These shares are then traded on traditional stock exchanges, allowing investors to buy into the Bitcoin market as they would with any other stock or ETF, benefiting from the liquidity and efficiency provided by market makers.
Spot Bitcoin ETFs also employ a mechanism of creation and redemption to maintain the alignment between the ETF's share price and the actual price of Bitcoin. This process, facilitated by authorized participants, ensures the ETF's share price closely tracks the real-time value of Bitcoin.
Retail Investors Leading the Charge with Bitcoin ETF Inflows
Bitcoin ETFs have seen massive capital inflows throughout 2024. Jan van Eck, the CEO of the investment management firm VanEck, shared his own thoughts on the issue during Paris Blockchain Week, pointing out that the retail sector has been the predominant contributor to the influx of funds into these spot Bitcoin ETFs in the United States.
According to van Eck, the ETFs have experienced days where billions of dollars flowed in, exceeding initial expectations. Despite this success, he noted that the participation of traditional finance (TradFi) players remains minimal, attributing about 90% of the investments to retail investors. Some Bitcoin whales and institutions with prior Bitcoin exposure have also contributed, yet no major investments have been observed from traditional banks or institutional investors. Van Eck is also still optimistic that the upcoming month might bring about major institutional investments, though he believes the Bitcoin ETF landscape is still nascent, with much room for growth and technological development.
The allure of Bitcoin ETFs over direct purchases of Bitcoin lies in the convenience, safety, and affordability they offer to investors. Van Eck pointed out the drawbacks of direct crypto transactions, like high spreads on exchanges like Coinbase, and also highlighted some of the benefits of ETFs, which include lower fees and simpler transaction processes.
Record Low Outflows for GBTC
The Grayscale Bitcoin Trust (GBTC) has seen a dramatic decrease in outflows, hitting a record low almost 90% lower than the previous day. This significant shift occurred on Apr. 10, with outflows amounting to $17.5 million, a stark contrast to the $154.9 million outflows seen on Apr. 9. This change aligns with a recent uptick in Bitcoin's value. Over the past 24 hours of trading, the price of Bitcoin was able to climb by 2.86%. As a result, BTC was worth about $70,746.42 at press time.
The recent outflow reduction in GBTC has sparked discussions among crypto enthusiasts, with some suggesting that it could signify the beginning of a slowdown in the outflows that have totaled $16 billion since the trust was converted into a spot Bitcoin ETF in January. Thomas Fahrer, the CEO of the crypto-focused reviews portal Apollo, highlighted the significant decrease in outflows, noting that the Apr. 10 figures represent roughly 250 Bitcoin, an almost 95% decrease from earlier in the week. Just a few days prior, on Apr. 8, Grayscale witnessed outflows equivalent to 4,288 Bitcoin, totaling $303 million.
This latest outflow figure is the lowest since Feb. 26, when GBTC saw outflows of $22.4 million. The average daily outflow over the past four months has been $257.8 million. Meanwhile, other Bitcoin funds have reported inflows, with the Fidelity Wise Origin Bitcoin Fund, BlackRock’s iShares Bitcoin Trust, the Bitwise Bitcoin ETF, and the ARK 21Shares Bitcoin ETF seeing substantial investments.
