Bitcoin, ready to lead the change

This week, Grayscale has urged the #SEC to approve all bitcoin #ETFs simultaneously, in order to avoid discrimination and allow all funds to have an equal opportunity. They fear that if one ETF is approved ahead of others, it could attract a large number of clients, leaving the other funds with no chance to offer this investment vehicle. However, what I want to convey in this article are some clear points about how I interpret the upcoming events.

Firstly, it is important to clarify that the number of approved ETFs will not significantly influence the price of bitcoin. Whether 10, 20, or 30 bitcoin ETFs are approved, it won’t lead to more people interested in buying bitcoin. Investors from Grayscale, BlackRock, or Fidelity Investments will distribute their investments among themselves. The total purchases that these entities will have to make to satisfy their ETFs will remain the same. For example, if customers demand a total of 1 million bitcoins, all the entities managing the ETFs will collectively make that purchase, regardless of the number of ETFs. This only affects the amount each entity buys, but the total demand remains fixed at 1 million bitcoins.

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I believe that the approval of the first bitcoin ETF is likely to have a positive impact on the price of bitcoin. However, I must be realistic and acknowledge that the current price of bitcoin already reflects the anticipation of this event.

What I find tremendously important and noteworthy is the recent statement from BlackRock, suggesting that an ideal portfolio with risk tolerance should allocate 80% of its weight to bitcoin. For a more conservative portfolio, a 9% allocation to bitcoin was considered appropriate. If all funds start following this advice, the inflow of money into bitcoin would be unprecedented, akin to oil flowing through pipelines. I have no doubt that this influx of money will occur gradually, coming from various regions like the #United #States, #Europe and #Asia.

#MICA, which stands for “Markets in Crypto-Assets Regulation” is expected to be a turning point for our European continent once it comes into effect next year. From that point on, investment funds will be able to decide whether to include bitcoin in their higher-risk portfolios, allocating a percentage ranging from 1% to 5% or even more. This gradual inclusion of bitcoin in investment portfolios will lead to a draining of bitcoins from the market, making it even scarcer than during the halving events.

Apart from the speculative and investment aspect, I will closely monitor the evolution in the management of traditional funds, especially to observe the moment when some funds miss out on this opportunity and how they will be portrayed.

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When a traditional equity fund decides to invest in bitcoin, it does so not to stand out but rather to perform better than the average. When other funds realize that the risk lies in not having bitcoin in their portfolios, that will be the true turning point when the cumulative effect on the price of bitcoin will be significant, as many forces of accumulation come together.

Regarding bitcoin mining, the last point I wanted to address in this article, mining companies are preparing to face the challenge of the upcoming halving event in April 2024. They aim to remain profitable while mining only 3,125 BTC per block. To achieve this, these companies are moving their operations not only where energy is cheaper but directly to the sources of energy generation, such as near dams or volcanoes. Countries like #Paraguay and #El #Salvador are emerging as leaders in hosting this multi-million-dollar industry, evident in the strategic movements being observed.

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To give you an idea, during the halving event, the block reward automatically reduces by half, while the costs nearly double. In this scenario, bitcoin’s price must increase significantly, or mining companies must have multiple contingency plans in place. Under these circumstances, the fees collected in each mined block become increasingly important and relevant. These fees indirectly help to cushion the rising costs of mining per block. In the future, when mining rewards drop below one bitcoin per block, these fees will play a crucial role in sustaining and maintaining interest in mining, as miners become more selective about which blocks to mine based on the fees involved.

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You will start hearing and reading headlines claiming that bitcoin mining will not be profitable, and it will enter a death spiral. This is nothing new; similar headlines have flooded the media and social networks after the last three halvings. Every four years, these headlines aim to misinform and create Fear, Uncertainty, and Doubt (FUD), attempting to buy extra time before the inevitable post-halving price surge of bitcoin.

As a closing statement, here are five key points to consider about bitcoin, whether you’re a novice or a seasoned participant in the ecosystem:

  1. Long-term perspective is crucial, there is no alternative. Dollar-Cost Averaging (DCA) leaves no room for error. Allocate a monthly budget and average your purchases over the next six years.

2. Bitcoin’s security and reach are continuously improving, let it do its job while you focus on your daily life.

3. The Lightning Network is at the heart of banking, its future and continuity are assured.

4. Bitcoin’s processes are fast and have no counterparty risks, the continuous bankruptcy of banks confirms its position as a safe-haven asset.

5. Institutional interest in Bitcoin is growing rapidly, let them figure it out and join later than you. Bitcoin is a disruptive force, and many institutions are yet to realize its potential.