After cracking AUD$100,000, where to for Bitcoin? Jackson Zeng shares his insights

Recently cracking the US$60,000 mark, Bitcoin (BTC) is experiencing its biggest surge since 2021.

Jackson Zeng, CEO of Caleb & Brown, a leading cryptocurrency brokerage and asset management firm, admits Bitcoin is firmly in the bullish segment of the market cycle, noting Bitcoin’s regular market cycle, market sentiment, regulatory changes, and the wider economy have brought Bitcoin to this moment.

“There are three distinct categories of customers who have pushed Bitcoin to its current price,” said Zeng. “The first category were existing crypto holders who correctly anticipated the impact of the US Securities and Exchange Commission’s (SEC) approval of spot exchange-traded funds (ETFs) for Bitcoin. The ETFs themselves make up the second category and their real institutional adoption has significantly moved the market. Finally, it is the return of retail adoption coming back to the market, who are buying through regular crypto exchanges and crypto brokers.”

First-hand experience of retail coming back was observed by Caleb & Brown recently, with four times the number of customer signups in the first week of March compared with the same week just a month before.

Another factor driving Bitcoin’s price is the upcoming Bitcoin halving event. Occurring approximately every 4 years, a halving event marks a 50 per cent cut in the Bitcoin reward miners receive for mining new blocks and verifying transactions. In effect Bitcoin supply continues to increase, but at a slower rate. With the next event due in April 2024, the knock-on effect can be a steep increase in price, assuming the demand for Bitcoin remains the same or increases after a halving.

“There’s been a mammoth shift in investor focus to the fast-approaching halving event which will cut BTC issuance in half in April,” said Zeng. “New BTC created each day will be reduced from 900 to 450 BTC. “

Institutional interest in the newly approved ETFs has flooded capital into the space with digital asset investment products seeing record weekly inflows of US$2.45 billion, bringing the total inflows this year to US$5.2 billion.  “As it stands, Bitcoin ETFs are taking ten times the amount of BTC off the market than is being minted daily,” said Zeng. “This is set to potentially double after the halving, hinting at the possibility of further supply shock, or shortage.”

Despite price rises, Zeng argues in favour of tempered action by investors, noting misunderstanding and misinterpreting market cycles can regularly hurt crypto investors. “Investors can easily misinterpret the market cycle and expect a continuous upward trend and make impulsive investment decisions,” said Zeng. “Emotional decision-making based on a misinterpretation of market cycles can result in significant losses and missed opportunities.”

Yet, it’s worth noting that cryptocurrencies have consistently shown substantial price rebounds following bearish phases, suggesting that a patient, long-term investment strategy could yield considerable rewards for those who grasp the cyclicality inherent in the market.

Amidst the current interest and speculation surrounding Bitcoin, crypto investors are looking ahead to a possible spot Ethereum ETF in May 2024.

Jackson Zeng believes Ethereum is less likely to be approved because of the cryptocurrency’s complexity. “The SEC doesn’t deem it to be as simple as Bitcoin,” said Zeng. “However, if it does get approved, I think the market is anticipating a significant amount of inflow into Ethereum ETFs.” Ethereum’s underlying fundamentals makes it even more like a traditional asset according to Zeng. “If we now think of Bitcoin as an accepted traditional asset, Ethereum looks even more like a traditional asset as it generates fees that the network receives.”

Regardless, the increase in BTC’s value will see capital flow to other cryptocurrencies such as Ethereum. “Capital flows up the risk spectrum, so it’ll go from Bitcoin to Ethereum, then to altcoins. We’ve seen this in previous cycles. So I think that’s probably what the market is expecting.”