$100,000 BTC? Don’t undervalue Bitcoin ETF influence, says Adam Back
The COVID-19 pandemic, rampant inflation and regional conflicts directly influenced Bitcoin’s (BTC) drop in value over the past two years. However, 2024 promises to be a resurgent period, according to Blockstream CEO Adam Back.
The cryptographer, who pioneered the proof-of-work algorithm applied in Bitcoin’s protocol, tells Cointelegraph that the preeminent cryptocurrency is trailing below the historical price trend line of previous mining reward-halving events.
“Biblical” events hurt Bitcoin
Back weighed in on the potential price action of Bitcoin as the next halving, which will see Bitcoin miners’ block reward reduced by 6.25 BTC to 3.125 BTC, looms in April 2024. Block rewards halvings are programmatically hardwired into Bitcoin’s code, taking place after every 210,000 blocks are mined.
Back says that the overlaid averages of the previous market cycles and halvings indicate that Bitcoin’s relative value is trailing behind widely accepted projections. Multiple events have played a role in driving the price of BTC down, which has also been seen across conventional financial markets:
“The last few years were like biblical pestilence and plague. There was COVID-19, quantitative easing, and wars affecting power prices. Inflation running up people, companies are going bankrupt.”
The impact has keenly affected markets and portfolio management according to Back. Investment managers have had to manage risk and losses over the past few years which has necessitated the sale of more liquid assets.
“They have to come up with cash and sometimes they’ll sell the good stuff because it’s liquid and Bitcoin is super liquid. It used to happen with gold and I think that’s a factor for Bitcoin in the last couple of years,” Back explains.
Bitcoin would have hit $100,000 already
As 2023 comes to a close, many of these macro events that Back cited have wound down while more industry-specific failures have also been resolved. This has been reflected in Bitcoin’s recent price surge from Nov. 2023 onwards.
“The wave of the contagion, the companies that went bankrupt because they were exposed to Three Arrows Capital, Celsius, BlockFi and FTX – that’s mostly done. We don’t think there are many more big surprises in store,” Back said.
Related: Blockstream targets continued Bitcoin miner surplus with Series 2 BASIC Note
The Blockstream CEO predicted that Bitcoin would hit $100,000 in the following market cycle earlier this year and referred back to this point. He believes BTC would have hit this mark already if not for the factors highlighted in conversation with Cointelegraph.
Back also referred to the Bitcoin “stock-to-flow” model created by pseudonymous former institutional investor PlanB as a reference point for the potential upside for Bitcoin in 2024.
If you want to know more about bitcoin Stock-to-Flow:
* This is the original 2019 article:https://t.co/n5P5uMCKHT
* Or watch this YouTube video:https://t.co/3SGMU1Ln00 pic.twitter.com/Qp8SjqtXIB— PlanB (@100trillionUSD) December 5, 2023
Back explains that PlanB’s model and heuristics suggest that savvy Bitcoin investors historically bought BTC six months before a halving event and sold into significant surges in price that have occurred in the 18 months following the drop in mining rewards:
“People thought it was a bit of a crazy assertion that we might get to $100,000 pre-halving because I said it when the price was around $20,000.”
He adds that Bitcoin’s price hitting $44,000 multiple times in Dec. 2023 suggests that his prior prediction might not be so far-fetched.
The Bitcoin ETF effect
Prominent investors and market analysts have also highlighted the effect of the potential approval of several spot Bitcoin exchange-traded fund (ETFs) applications by the United States Securities and Exchange Commission (SEC).
People asking me if we changed odds. No, we still holding line at 90% odds of approval by Jan 10 (aka this cycle), the same odds we’ve had for months (before it was cool/safe). What we watching for now: more amended/final filings to roll in and clarity on in-kind vs cash creates https://t.co/uiWgfxOfzz
— Eric Balchunas (@EricBalchunas) November 29, 2023
Senior ETF analysts Eric Balchunas and James Seyffart have touted these applications to get the green light in early 2024. Galaxy Digital’s co-founder Michael Novogratz has also predicted mass inflows of institutional investment into the BTC-back products, a point which Back echoes:
“I think Bitcoin could get to $100,000 even before the ETF and before the halving. But I certainly think the ETF shouldn’t be undervalued in its influence.”
A key reason cited by the Bitcoin advocate is that whole segments of traditional markets, including major fund managers like BlackRock and Fidelity, are simply not allowed to invest directly into assets like Bitcoin.
Related: Bitcoin ETFs will drive institutional adoption in 2024 — Galaxy Digital’s Mike Novogratz
“If they’re managing a mutual fund they have rules, either externally imposed or as part of their fund, that they can only buy things like public stocks and ETFs. They can’t buy into startups, they can’t buy precious metals physically. They can’t do any of that stuff,” Back highlights.
This remains a pertinent reason why a spot Bitcoin ETF could drive major capital inflows into the space. Back adds that the investment vehicle opens access to Bitcoin exposure for many types of funds, particularly in the U.S., that are more inclined to do so through Fidelity or BlackRock than with a cryptocurrency exchange.
Magazine: ‘Elegant and ass-backward’: Jameson Lopp’s first impression of Bitcoin
Rachel Reeves is fighting claims that she “lied” to the public about the state of the finances in the run-up to last Wednesday’s budget – in which she raised £26bn in taxes.
It follows a letter published by the Office for Budget Responsibility (OBR), the official watchdog which draws up forecasts for the Treasury, published on Friday.
In it, OBR chair Richard Hughes (who is already under fire for the leak of the budget measures) said he’d taken the unusual step of revealing the forecasts it had submitted to Rachel Reeves in the 10 weeks before the budget, and which is normally shrouded in secrecy.
The OBR sent this table revealing its timings and outcomes of the fiscal forecasts reported to the Treasury
Sir Keir Starmer congratulates Rachel Reeves after the budget
The letter reveals this timeline, which has plunged the chancellor into trouble:
17 September – first forecast
At this point, it was already known that the UK’s growth forecast would be downgraded. The chancellor was told that the “increases in real wages and inflation” would offset the impact of the downgrade. The deficit forecast by the end of the parliament was £2.5bn.
20 October – second forecast
By this point, that deficit had turned into a small surplus of £2.1bn – i.e. the productivity downgrade has been wiped out and “both of the government’s fiscal targets were on course to be met”.
31 October – third forecast
The final one before the Treasury put forward its measures. The finances were now net positive with a £4.2bn surplus.
But the accusation is that Rachel Reeves was presenting an entirely different picture – that she had a significant black hole which needed to be filled.
13 October
Ms Reeves tells Sky’s deputy political editor Sam Coates the productivity downgrade has been challenging but added: “I won’t duck those challenges. Of course we’re looking at tax and spending.”
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27 October
With the Treasury now aware the deficit had been wiped out, the Financial Times was briefed about a “£20bn hit to public finances.”
4 November
Ms Reeves gave a dawn news conference in Downing Street, setting the stage for tax rises. She says she wants people “to understand the circumstances we are facing… productivity performance is weaker than previously thought”, adding that “we will all have to contribute”.
10 November
Ms Reeves tells BBC 5Live that sticking to Labour’s promises not to raise taxes would require “things like deep cuts in capital spending”. The stage seemed set for the nuclear option – the first income tax rise in decades.
13 November
After headlines about a plot to oust Prime Minister Sir Keir Starmer, the Financial Times reported that the chancellor had dropped plans to raise income tax because of improved forecasts [which we now know hadn’t changed since 31 October], putting the black hole closer to £20bn than £30bn.
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Budget 2025: ‘It’s sickening’
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‘You’ve broken a manifesto pledge, haven’t you?’
The prime minister’s spokesperson has insisted Ms Reeves did not mislead voters and set out her choices, and the reasons for them, at the budget.
But the issue has had enormous cut-through, with newspapers giving it top billing.
The Sun’s Saturday front page headline – “Chancer of the Exchequer – fury at Reeves ‘lies’ over £30bn black hole” – will not have been pleasant reading for ministers.
She now has questions to answer about the chaotic run-up to the budget – of briefing and counter-briefing, which critics say now makes little sense.
Tory leader Kemi Badenoch said on Saturday: “We have learned that the chancellor misrepresented the OBR’s forecasts. She sold her ‘Benefits Street’ budget on a lie. Honesty matters… she has to go.”
Economist Paul Johnson, former director of the respected Institute for Fiscal Studies (IFS), told The Times the chancellor’s 4 November news briefing “probably was misleading. It was clearly intended to have an impact and confirm what independent forecasters like [the National Institute of Economic and Social Research] and the IFS had been saying”.
“It was designed to confirm a narrative that there was a fiscal hole that needed to be filled with significant tax rises. In fact, as she knew at the time, no such hole existed.”
Read more on budget fallout:
Reeves accused over forecasts
Hospitality ‘needs a lifeline’
Ms Reeves is doing a round of morning interviews on Sunday in which she’ll be grilled over which of her budget measures will generate economic growth (which the government claimed was its number one priority), why they have been unable to tackle rising welfare spending and now about why markets and voters were left confused by dire warnings.
She may claim that she never personally said there was a specific £30bn black hole or that the extra headroom generated by the tax rises will ensure she does not have to come back for more next year.
In an interview with The Saturday’s Guardian, Ms Reeves said she had “chosen to protect public spending” on schools and hospitals in the budget.
She confirmed an income tax rise had been looked at, and insisted that OBR forecasts “move around” after the Treasury has submitted its planned measures. There are plenty more questions to come.
Meanwhile, Sir Keir will use a speech on Monday to support Ms Reeves’ budget decisions and set out his long-term growth plans.
He will praise the budget for bearing down on the cost of living, ensuring economic stability through greater headroom, lower inflation and a commitment to fiscal rules, and protecting investment and public services.
Sir Keir will say “economic growth is beating the forecasts”, but that the government must go “further and faster” to encourage it.
Politics
Lammy says justice reforms will reduce victims’ suffering – as right to jury trial set to go in some cases
Victims will be put “front and centre” in reforms to be announced this week, the justice secretary has said, amid reports jury trials will be scrapped in some cases.
Sky News understands ministers have already been briefed on the changes, which would see a judge decide most cases on their own except for murder, rape or manslaughter – or those in the “public interest”.
The Ministry of Justice (MoJ) said the reforms would speed up justice and save victims from “years of torment and delay”.
Nearly 80,000 cases are currently waiting to be heard in crown courts, but a bid to limit the right to jury trial is likely to be divisive.
Shadow justice secretary Robert Jenrick said Mr Lammy should “pull his finger out” to cut the backlog rather than “depriving British citizens of ancient liberties”.
“The right to be tried by our peers has existed for more than 800 years – it is not to be casually discarded when the spreadsheets turn red,” said Mr Jenrick.
Full details are expected in the coming days, but in a statement today Mr Lammy said he had “inherited a courts emergency; a justice system pushed to the brink”.
“We will not allow victims to suffer the way they did under the last government, we must put victims front and centre of the justice system,” he added.
Mr Lammy said thousands of lives were on hold due to the case backlog, a “rape victim being told their case won’t come before a court until 2029. A mother who has lost a child at the hands of a dangerous driver, waiting to see justice done”.
He said he wanted a system that “finally gives brave survivors the justice they deserve”.
The justice secretary will reportedly go further than a review recommended. Pic: PA
.However, it’s been reported Mr Lammy will go further than a review conducted by Sir Brian Leveson.
The retired judge backed the move for juries only in the most serious cases, but also proposed some lesser offences could go to a new intermediate court where a judge would be joined by two lay magistrates.
The Times said Mr Lammy had suggested in an internal memo he would remove the lay element from many serious offences that carry sentences of up to five years.
There are fears such a move could increase miscarriages of justice and racial discrimination.
Read more from Sky News:
Reeves fighting ‘lie’ claims as Starmer set to back budget
Your Party co-founder refuses to enter conference hall
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Work and pensions secretary speaks to Sky about justice reforms
Speaking to Sky News’ Politics Hub programme this week, work and pensions secretary Pat McFadden did not deny the changes were on the way.
The MoJ has laid the ground for the reforms by saying the court backlog could hit 100,000 by 2028 under the current system.
It said just 3% of cases are currently decided by a jury, with more than 90% already dealt with by magistrates alone.
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