Bitcoin Investors Eye Front-Running Strategy Ahead of Spot ETF and 2024 Halving

By Tsunami 09/26/23 8:15 AM

In recent times, Bitcoin has witnessed a rollercoaster ride, encountering a new technical correction while still managing to surge by an impressive 58 percent since the conclusion of the 2022 bear market. With these tumultuous fluctuations in mind, investors are now casting their gaze on two pivotal macro events that could have a profound impact on the cryptocurrency landscape: the forthcoming spot Exchange-Traded Fund (ETF) and the eagerly anticipated halving event scheduled for spring 2024.

According to a CryptoQuant report, the chances of a Bitcoin ETF becoming a reality in late 2023 have been given a substantial boost. Bloomberg’s Eric Balchunas weighed in on the matter, asserting that there is now a 75 percent likelihood of a Bitcoin ETF launch this year, up from the previous estimate of 65 percent. Balchunas cited Grayscale’s victory as a key factor influencing this adjustment.

As the ETF appears to draw closer to fruition, the concept of “front-running” is gaining prominence as one of the most conspicuous trading strategies for late 2023 and early 2024. Bitcoin’s current fair value, as indicated by the CryptoQuant report, stands at $45,159, serving as a plausible target price for investors. What makes this strategy all the more intriguing is the clear value gap that emerges post-ETF launch, with the spot price at $26,093, signifying a staggering growth potential of 73 percent.

The launch of the spot ETF has the potential to trigger a reflexive phenomenon, wherein investors rush to purchase Bitcoin in anticipation of its value skyrocketing. This surge in demand can have a snowball effect, further lifting Bitcoin’s value. The concept of reflexivity, famously championed by George Soros, explores how positive feedback loops can greatly influence investor expectations and, in turn, market realities. This divergence between expectations and equilibrium prices can lead to significant price trends.

In conjunction with the imminent ETF approval, Bitcoin is also benefiting from the 2024 pre-halving accumulation cycle. These four-year cycles are a fundamental aspect of the Bitcoin ecosystem and can serve as valuable indicators for interpreting price movements. Drawing from the most recent halving event in 2020, we observe that Bitcoin’s spot price increased by an astonishing 1,263 percent between the halvings of 2016 and 2020.

The mechanics of halving events are relatively straightforward: they halve the block reward paid to miners. In 2020, this reward dropped from 12.5 Bitcoin units to 6.25. Likewise, the upcoming halving event in 2024 will again halve the block reward, reducing it to 3.125. This reduction in supply often has a profound effect on Bitcoin’s price, historically driving it upward.

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