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⚡Bitcoin ETFs and $155 Billion Injection♾️

Croxroad

19 Oct 2023 — 5 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

🔯 $1 Trillion Gain with ETF Approval

If Bitcoin spot exchange-traded funds (ETFs) get the green light, it could be a game-changer for the crypto market. According to a report by CryptoQuant, Bitcoin's value could balloon to a staggering $900 billion, and the overall cryptocurrency market could surge by a jaw-dropping $1 trillion. What's interesting is that the initial wave of institutional interest in Bitcoin between 2020 and 2021 mainly involved institutions adding Bitcoin to their own reserves. But now, we might be on the brink of a new wave, where financial institutions enable their clients to access Bitcoin through these ETFs. In other words, it could open the door for a much broader group of people to get in on the cryptocurrency action.

A handful of major financial institutions are in the process of seeking approval for spot Bitcoin exchange-traded funds (ETFs) in the United States, and we could see these approved as early as March 2024. The potential impact of these ETFs is substantial, potentially overshadowing the amount of money that flowed into the Grayscale Bitcoin Trust (GBTC) during the previous bull market cycle. GBTC, the world's largest cryptocurrency fund, currently manages around $16.7 billion in assets and is overseen by the Digital Currency Group, which is also the parent company of CoinDesk. CryptoQuant's analysis suggests that if these ETF issuers allocate just 1% of their Assets Under Management (AUM) to these new ETFs, it could inject approximately $155 billion into the Bitcoin market. This amount accounts for nearly a third of Bitcoin's current market capitalization. In a hypothetical scenario where this unfolds, Bitcoin's price could potentially reach a range between $50,000 and $73,000.

In previous bull markets, Bitcoin has shown a tendency to see its market capitalization grow by 3 to 5 times more than its realized capitalization, indicating that for every $1 of new investment entering the Bitcoin market, the overall market capitalization could surge by $3 to $5, as per CryptoQuant's analysis. This observation sheds light on how Bitcoin's market behaves during these upward trends.

An interesting anecdote is that Bitcoin recently experienced a significant spike to $30,000, driven by a false report about the approval of a spot Bitcoin ETF published by Cointelegraph. This unexpected surge, although based on inaccurate information, seems to have created a bullish atmosphere in the market, potentially deterring bearish activity for some time. Markus Thielen, head of research and strategy at Matrixport, commented that "nobody will dare to short BTC now for the foreseeable future," highlighting the current enthusiasm and optimism in the market. This sentiment is further evident in the narrowing of the GBTC discount to its lowest point in almost two years. It's worth noting that the total crypto market capitalization surpassed the $1 trillion mark in January 2021, and at present, it stands at approximately $1.13 trillion, with Bitcoin accounting for over 50% of this total.

👬 Tesla's Bitcoin Resilience

In its most recent financial report for Q3 2023, Tesla revealed that it hasn't made any changes to its significant Bitcoin holdings, marking the fifth consecutive quarter of holding steady. As of September 30, the company still had approximately $184 million worth of Bitcoin, which is part of the $1.5 billion worth it acquired back in March 2021. This means that Tesla hasn't made any new Bitcoin purchases or sales since the substantial sell-off of over 30,000 BTC in Q2 2022, which fetched them $936 million. Instead, in this latest quarter, Tesla has chosen to channel its resources towards increasing its computing capacity, especially in the realm of artificial intelligence, indicating a focus on technology development and innovation.

Conversely, Tesla announced a significant expansion in its computing power, more than doubling its capacity for artificial intelligence (AI) projects. This move was driven by the need to handle a growing training data set and a shift in training methodology for its humanoid robot, Optimus, from traditional coded software to AI-based methods. Elon Musk's company is taking AI development seriously, having even commissioned one of the world's largest supercomputers to accelerate their AI endeavors, making this a substantial leap compared to the capacity in the previous quarter. While this is an exciting step forward in Tesla's tech innovation, the company's Q3 earnings didn't quite meet Wall Street expectations, reporting total revenues of $23.35 billion. Although this marked a nearly 9% increase from the same period the previous year, it fell short of Zacks Investment Research's projected estimate of $24.38 billion.

Tesla not only fell short of revenue expectations but also missed projected profits, reporting earnings per share (EPS) of $0.66 compared to the estimated $0.72 EPS by Zacks Investment Research. In terms of expenses, the company saw a significant rise, with total operating expenses for the third quarter amounting to $2.41 billion, marking a more than 13% increase from the previous quarter and a substantial 42.5% increase from the same period the previous year. Tesla's research and development expenses also surged to $1.16 billion during the quarter, which represents a remarkable 58% increase from the previous year. The company attributed these cost increases to its investments in projects like the Cybertruck, artificial intelligence (AI), and other research and development initiatives.

📐 Descending Triangle

A descending triangle is a pattern in technical analysis that signals a bearish continuation, essentially the opposite of an ascending triangle. It materializes when the price of an asset consistently forms lower highs and lower lows over a period. This pattern typically acts as a sell signal, indicating that a bearish trend is likely to persist. To recognize a descending triangle, there are a few key characteristics to watch for. First, you'll notice that the asset's price forms these lower highs and lower lows, creating a visible downtrend. Additionally, within the pattern, you'll observe a horizontal support line that acts as the base of the triangle. In essence, it's a strong indication that the market is currently favoring a bearish sentiment, and the price is likely to continue its downward trajectory.