BTC breaks through the $40,000 mark, and the reasons behind it are worth pondering.

Recently, the price of Bitcoin has broken through the $40,000 mark, attracting widespread attention in the market. However, news that a certain cryptocurrency trust may convert to a spot ETF could have an unexpected impact on the price of Bitcoin.

The market has reacted to this news, but we should not overlook the second half of the classic trading rule "buy the rumor, sell the news." Once the news materializes, there may be a significant sell-off in the market, leading to a substantial correction in the price of BTC.

In the long term, the Bitcoin price cycle may repeat. It is worth noting that the launch of ETFs may have a positive impact on cryptocurrency prices in the long run. However, current market conditions are not sufficient to support the outbreak of a new bull market, and we cannot rule out the possibility of experiencing a brief bear market phase before that.

Speculators maximize potential returns by betting on these significant events. Since the beginning of this year, a certain cryptocurrency trust product has attracted billions of dollars in inflows in the secondary over-the-counter market. Therefore, once the ETF is approved and begins trading, both new and old investors may be eager to cash out, which will put immense pressure on the price of BTC.

Analysts Hold a Cautious Attitude

The approval deadline for some ETF applications is in early January 2024, which means we may hear more related news as early as December this year.

A certain large investment bank analyst expects that during the process of converting trust products into ETFs, there could be "at least $2.7 billion in capital outflow." This wave of investor withdrawals may lead to a decline in the price of Bitcoin, returning to cyclical lows, which also aligns with Bitcoin's historical price cycles.

Therefore, the launch of the ETF may not immediately drive up the price of Bitcoin; instead, it may become a "sell the news" event, similar to what we witnessed during the launch of futures products.

In December 2017, a certain exchange launched Bitcoin futures, paving the way for institutional investors to participate in Bitcoin trading. However, this coincidentally marked the peak of the bull market at that time and the beginning of a subsequent two-year bear market.

In September 2019, another exchange launched Bitcoin futures that allowed cash settlement. However, this became another "sell the news" event, and Bitcoin subsequently entered a mini bear market that lasted for several months until major changes in the global economic situation in March 2020.

Currently, multiple funds are applying for a Bitcoin spot ETF. Despite facing political pressure, regulators may have to accept this trend.

The discount rate of trust products has significantly narrowed

Due to a significant discount of up to 48% between a certain trust product and the spot price of BTC, combined with the market's expectation that regulatory agencies may increase the likelihood of its conversion into an ETF, many traders made large purchases of this product in 2023.

Currently, the discount rate of this product has narrowed to around 10%. Since approximately $2.5 billion of funds have flowed into its only trading market, the discount rate has significantly decreased. It is foreseeable that once the ETF begins trading, a considerable portion of these funds may quickly flow out.

Most speculators view it as a major trading opportunity for the year, betting a large amount of funds.

However, the main market event in 2024 may be the Bitcoin halving (and the speculative activities surrounding it). This halving may also be the last significant halving and become a turning point for Bitcoin's price outperformance.

With the launch of multiple spot ETFs, institutional capital inflows may become a key factor driving the price of Bitcoin to break the $100,000 barrier in 2024.

Conclusion

Although the financial industry has shown a strong interest in cryptocurrencies, the adoption of cryptocurrencies in the real world will primarily be determined by the market rather than regulatory bodies.

The market will naturally select the practical use cases and advantages of cryptocurrencies, and end users will determine their utility and value.

The financial sector will focus on Bitcoin's potential as a reliable store of value and the possibility of achieving large-scale applications through layer two network solutions.

In addition to Bitcoin, the financial sector also recognizes the characteristics and importance of other mainstream cryptocurrencies.

Looking to the future, the cryptocurrency market is expected to maintain a good development trend next year, but investors still need to remain vigilant and closely monitor market movements.