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⚡Gold's 250% Surge🪙

Croxroad

31 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:

🦍 Comparing Gold and Bitcoin

In 2023, Bitcoin's price has already seen a significant 110% increase, and one of the major driving forces behind this surge is the possibility of Bitcoin-denominated Spot Exchange Traded Funds (ETFs) getting approved. Looking back at the history of Gold's price after the approval of the first Gold ETF, there's an optimistic view that Bitcoin might experience a similar trajectory. If the Spot Bitcoin ETFs get the green light for trading on traditional stock exchange platforms, there's speculation that Bitcoin could potentially surge another 200%, possibly reaching new all-time highs.

The anticipation of Spot Bitcoin ETFs, submitted by major players like BlackRock and Grayscale, has ignited hopes for Bitcoin to reach a new all-time price peak. To assess these prospects, market experts have been delving into history, particularly to November 2004 when the first spot gold ETF, SPDR Gold Shares, received approval for trading on the New York Stock Exchange. This groundbreaking Gold ETF provided investors with a straightforward way to access the precious metal without the need to buy physical gold bars. Examining the historical data, we can see how Gold prices responded positively to the introduction of the SPDR Gold Shares ETF. This historical precedent is one of the driving factors behind the optimism for Bitcoin's future potential with the introduction of Spot Bitcoin ETFs.

Gold's price (XAU) stood at $700 when the first Gold ETF, SPDR Gold Shares ($GLD), was introduced in November 2004. Impressively, by August 2011, the price of Gold had surged by a remarkable 254%, reaching a new all-time high of $2,450.

It's worth noting that while Gold is known for its stability compared to Bitcoin's high volatility, investors are speculating that if the same level of capital inflow occurs in the Bitcoin market, it could lead to exponential price growth, potentially outpacing the surge seen in Gold during the mid-2000s. This optimism is based on the idea that Bitcoin, as a digital asset, has the potential to experience more rapid and substantial price movements when compared to traditional assets like Gold.

In straightforward terms, an Exchange-Traded Fund (ETF) is a financial tool that mirrors the price of an asset, allowing traders to gain exposure to it without needing to physically own the asset.

Pending approval, the introduction of Bitcoin Spot ETFs by major players like BlackRock and Grayscale would enable Bitcoin to be traded on traditional stock exchanges alongside regular shares and index funds. This development is expected to attract a significant influx of capital into the world of Bitcoin. As a result, experts have cautiously predicted that the price of Bitcoin could potentially double and reach a new all-time high of $80,000. It's worth noting that Bitcoin is also approaching its next halving event around April 2024, which could contribute to the price surge due to the halving's deflationary impact, assuming the Spot Bitcoin ETF applications are given the green light.

Several key statistics support the idea that Bitcoin ETF approval could propel BTC prices to this new high. For instance, when the first Gold ETF, SPDR Gold Shares, was introduced in November 2004, Gold's price was around $700, and it surged by 250% to hit a new all-time high of $2,450 by August 2011. Additionally, the total market capitalization of the U.S. stock market stands at a whopping $40.5 trillion, which is over 3,500% larger than the current global crypto market capitalization.

The significant aspect of a spot Bitcoin ETF is that it will make it easier for institutions and traditional investors to invest in Bitcoin as an asset class without the technical complexities of setting up a wallet or exchange account. According to a Bank of America report, a mere $93 million inflow could trigger a 1% increase in Bitcoin prices. So, if a Bitcoin ETF can attract just 1.7% of the total value of the U.S. stock market, which is $40.5 trillion, it could potentially double the current Bitcoin market capitalization of $680 billion. In other words, based on Bank of America's estimates, the price of Bitcoin could increase by 100% if Bitcoin ETFs manage to capture up to 1.7% of the existing capital inflow within the stock markets.

🪖 Binance vs. CME

CME, the Chicago Mercantile Exchange, has been making waves in the world of Bitcoin futures, with its notional open interest now standing at an impressive $3.54 billion, making it the second-largest Bitcoin futures exchange. This remarkable ascent is reminiscent of the early stages of the 2020-21 bull run. While some analysts are debating whether this signifies increased institutional buying, CME's regulated status is attracting considerable attention. Binance, an unregulated offshore exchange, still holds the top spot with an open interest of $3.83 billion, slightly ahead of CME by 8%. The competition between these giants is captivating as CME aims to surpass Binance and become the leader in Bitcoin futures trading.

CME is making significant strides in the Bitcoin futures arena, with open interest in their cash-settled futures contracts surpassing 100,000 BTC for the first time ever. Additionally, CME's share in the BTC futures market has reached a historic high of 25%. It's important to note that CME offers both standard Bitcoin futures contracts, each equivalent to 5 BTC, and micro contracts, sized at one-tenth of 1 BTC. Meanwhile, most open interest in offshore exchanges is concentrated in perpetual futures, which don't have an expiry date and use a funding rate mechanism to stay aligned with the spot price.

The rise of CME is seen by some as a sign of an institutional-led rally in the market. Bitcoin's recent 27% price increase this month, driven by ongoing macroeconomic uncertainty and optimism surrounding spot ETFs, reinforces this idea. Retail investors have also played a significant role, as evident in the increased interest in futures-based ETFs. Notably, the five-day volume for ProShares' bitcoin futures ETF, which invests in CME's Bitcoin futures, surged by an impressive 420% to $340 million last week, showcasing the growing appetite for Bitcoin exposure among both institutional and retail investors.

🪟 Rising Window

The "rising window" is a candlestick pattern in which you have two bullish candlesticks with a noticeable gap between them. This gap results from significant trading volatility and represents a clear space between the high and low points of these two candlesticks. It's a pattern that suggests the market's momentum is strongly in favour of buyers, indicating a continuation of the existing trend with significant buying strength. In essence, it's a bullish signal in technical analysis, signifying that buyers are firmly in control and the upward trend is likely to persist.