Bitcoin in 2024: Predictions and Expectations

• Bitcoin ETF Application Sparks 49% Price Rise for BTC
• Spot BTC Trading Dominated by Key Exchanges
• Changes in Average BTC Order Size
• Coinbase Q3 2023 Trading Summary
• Bitcoin Futures Markets
• Positioning Trends among Asset Managers and Leveraged Funds
• Institutional Investment in Crypto Space on the Rise
• Funding Rate and BTC Spot Price
• Bitcoin Outlook

Bitcoin ETF Application Sparks 49% Price Rise for BTC

Positive anticipation surrounding the potential approval of a spot bitcoin ETF application has incited nearly a 49% surge in BTC's price since October. The Securities and Exchange Commission is expected to either approve or reject multiple applications concurrently, prompted by logistical considerations and the need for consistency. Data referenced is as of Dec. 18.

Spot BTC Trading Dominated by Key Exchanges

Spot BTC trading is primarily distributed among several exchanges, with Coinbase, Binance, Bybit, and OKX collectively accounting for approximately 65% of activity. Breaking down this percentage, Binance leads the pack with 35.5%, followed by Bybit at 11.3%, OKX at 9.2%, and Coinbase at 8.9%.

Changes in Average BTC Order Size

The average BTC order size has seen a downward trend since the start of 2021, now standing at roughly $1,652. Despite smaller order sizes typically being linked with retail customers, it is common for institutions to break down trade orders into smaller pieces to limit slippage. Consequently, it would be inaccurate to attribute recent trading patterns in BTC predominantly to retail customers based solely on order size analysis.

Coinbase Q3 2023 Trading Summary

Coinbase's third-quarter 2023 trading summary indicates a decrease in volume in three of the four most recent quarter-over-quarter measurements. Both retail and institutional traders have seen a similar decline over the past year, with retail and institutional customers recording approximately $4.2 billion and $24.7 billion in trades in the third quarter, respectively.

Bitcoin Futures Markets

Open interest in BTC futures provided by CME Group has reached the $4.55 billion mark, accounting for roughly 25% of overall BTC open interest. The current open interest mirrors the level seen in the second quarter of 2022.

Positioning Trends among Asset Managers and Leveraged Funds

The majority of CME BTC futures positions are held by asset managers and leveraged funds. The former tend to exhibit a long bias, whereas the latter lean towards a short bias. This trend makes sense when considering asset managers' typically longer investment horizons compared to those of other buy-side customers. In contrast, hedge funds and commodity trading advisers, or CTAs, often engage in basis trading and hedging and follow shorter time horizons.

Institutional Investment in Crypto Space on the Rise

Institutional investors are showing increasing engagement in the crypto sector. According to CME Group, average large Bitcoin$42,260 -0.64% open-interest holders, with at least 25 contracts, hit an all-time high the week of November 7, 2023.

Funding Rate and BTC Spot Price

The funding rate bridges the gap between the perpetual futures price and the spot price. When the funding rate is in the positive, holders of long contracts cover the funding fee for those holding short contracts, and vice versa. The funding rate has been tracking with the BTC spot price, suggesting bullish sentiment and bias.

Bitcoin Outlook

The traditional correlation between BTC prices and consumer interest has recently diverged. If consumer interest is exclusively driven by retail customers, it implies that either retail customers are trading without comprehensive research, or institutional investors are significantly influencing prices.

Among institutional investors, the sentiment appears positive. Consecutive upward shifts of the futures curve in each month of the fourth quarter of 2023 suggest bullish activity and a long bias among this group.

Regarding the ETF approval, it is believed that the potential impact is already reflected in bitcoin prices, which could see positive momentum offset by profit-taking traders following the announcement. This may lead to potential mean reversion in the days following the announcement. Subsequently, the market is expected to shift its focus to the halving scheduled in April.

Edited by Jonathan Stoker