As you can see from past cycles, it takes about 9 months for bitcoin to take off post-halving. While we are in general agreement with the data, know that now there are more avenues for institutional players to front-run retail and push the price up sooner. We advise deploying capital earlier if possible and using the summer months to allocate any dry powder.
While TradFi will benefit from this offering, crypto-native investors will maintain a distinct advantage over their counterparts who hold the derivative. Native ETH can be staked, earning holders an additional annual yield of around 3.5%. Issuing firms amended their ETH offerings to exclude staking because they fear that the SEC will view staked ETH as a security, with the staking rewards representing dividends. So, ETH ETF holders will miss out on the additional staking yield that our clients and all native ETH holders can earn. Also, an ETH ETF is a security, whereas native ETH is not. That means wash rules still do not apply to native Ethereum, making it a much more efficient investment from a tax perspective. Additionally, spot Ethereum can be transacted 24/7, whereas ETFs can only be bought or sold during relatively limited traditional market hours. Another advantage glossed over is that any airdrops are automatically credited to ETH holders with an actual ETH address. This was a benefit to ETH holders in previous cycles and will not be available to ETF holders.
Finally, because the ETH ETF has been approved, don’t expect the floodgates to open to other coins. The SEC has generally been one of the slowest and most reactive regulatory bodies. For example, Bitcoin and Ethereum futures began trading in 2017 and 2021, respectively. This paved the way for spot ETFs to be offered. Currently, BTC and ETH are still the only crypto futures contracts offered by the CME. Since the SEC tends to follow, not lead, we don’t see a spot Solana ETF until Solana futures are available to TradFi investors. And if a Solana ETF is a long way away, so are DOGE, PEPE, MATIC, XRP, and other crypto ETF offerings. If you want to take advantage of a post-halving crypto bull run, keep your money in the real thing, not an ETF.
We’re currently at around 95% of addresses in profit. During the peak of the past bull runs, more than 99% of all addresses have been in profit for a prolonged period. This makes sense since these periods coincided with bitcoin regularly reaching new all-time highs. Since bitcoin is digitally scarce and has a diminishing supply schedule, long-term holders will naturally dominate over time. But this metric can still be instructive. We think monitoring how long it stays above 99% will be something to keep in mind this cycle.
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