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$100K BTC? Don’t undervalue Bitcoin ETF influence, says Adam Back

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The COVID-19 pandemic, rampant inflation and regional conflicts directly influenced Bitcoin’s (BTC) drop in value over the past two years. However, 2024 promises to be a resurgent period, according to Blockstream CEO Adam Back.

The cryptographer, who pioneered the proof-of-work algorithm applied in Bitcoin’s protocol, tells Cointelegraph that the preeminent cryptocurrency is trailing below the historical price trend line of previous mining reward halving events.

“Biblical” events hurt Bitcoin

Back weighed in on the potential price action of Bitcoin as the next halving approaches, which will see Bitcoin miners’ block reward reduced from 6.25 BTC to 3.125 BTC. Block reward halvings are programmatically hardwired into Bitcoin’s code, taking place after every 210,000 blocks.

Bitcoin’s supply issuance is hardwired into its protocol, with BTC mining rewards halving every 210,000 blocks. Source: bitcoinblockhalf.com

Back says that the overlaid averages of the previous market cycles and halvings indicate that Bitcoin’s relative value is trailing behind widely accepted projections. Multiple events have played a role in driving the price of BTC down, which has also been seen across traditional financial markets:

“The last few years were like biblical pestilence and plague. There was COVID-19, quantitative easing and wars affecting power prices. Inflation running up people, companies are going bankrupt.”

The impact has keenly affected markets and portfolio management, according to Back. Investment managers have had to manage risk and losses over the past few years, which has necessitated the sale of more liquid assets.

“They have to come up with cash, and sometimes they’ll sell the good stuff because it’s liquid and Bitcoin is super liquid. It used to happen with gold, and I think that’s a factor for Bitcoin in the last couple of years,” Back explains.

Bitcoin would have hit $100,000 already

As 2023 comes to a close, many of these macro events that Back cited have wound down, while more industry-specific failures have also been resolved. This has been reflected in Bitcoin’s recent price surge from Nov. 2023 onwards.

“The wave of the contagion, the companies that went bankrupt because they were exposed to Three Arrows Capital, Celsius, BlockFi and FTX — that’s mostly done. We don’t think there are many more big surprises in store,” Back said.

Related: Blockstream targets continued Bitcoin miner surplus with Series 2 BASIC Note

The Blockstream CEO previously predicted that Bitcoin would hit $100,000 in the next market cycle and referred back to this point. He believes BTC would have hit this mark already if not for the macro factors highlighted before.

Back also referred to the Bitcoin “stock-to-flow” model created by pseudonymous former institutional investor PlanB as a reference point for the potential upside for Bitcoin in 2024.

Back explains that PlanB’s model and heuristics suggest that savvy Bitcoin investors historically bought BTC six months before a halving event and sold into significant surges in price that have occurred in the 18 months following the drop in mining rewards:

“People thought it was a bit of a crazy assertion that we might get to $100,000 pre-halving because I said it when the price was around $20,000.”

He adds that Bitcoin’s price hitting $44,000 multiple times in Dec. 2023 suggests that his prior prediction might not be so far-fetched.

The Bitcoin ETF effect

Prominent investors and market analysts have also highlighted the effect of the potential approval of several spot Bitcoin exchange-traded fund (ETF) applications by the United States Securities and Exchange Commission (SEC).

Senior ETF analysts Eric Balchunas and James Seyffart have touted these applications to get the green light in early 2024. Galaxy Digital’s co-founder Michael Novogratz has also predicted mass inflows of institutional investment into the BTC-backed products, a point echoed by Back:

“I think Bitcoin could get to $100,000 even before the ETF and before the halving. But I certainly think the ETF shouldn’t be undervalued in its influence.”

A key reason cited by the Bitcoin advocate is that whole segments of traditional markets, including major fund managers like BlackRock and Fidelity, are simply not allowed to invest directly into assets like Bitcoin.

Related: Bitcoin ETFs will drive institutional adoption in 2024 — Galaxy Digital’s Mike Novogratz

“If they’re managing a mutual fund, they have rules, either externally imposed or as part of their fund, that they can only buy things like public stocks and ETFs. They can’t buy into startups, they can’t buy precious metals physically. They can’t do any of that stuff,” Back said.

This remains a pertinent reason why a spot Bitcoin ETF could drive significant capital inflows into the space. Back adds that the investment vehicle opens access to Bitcoin exposure for many types of funds, particularly in the U.S., that are more inclined to do so through Fidelity or BlackRock than with a cryptocurrency exchange.

Magazine: ‘Elegant and ass-backward’: Jameson Lopp’s first impression of Bitcoin