#1292 Mitchell Askew | Will Bitcoin ETF or Bitcoin Halving Be More Impactful?
Jan 9, 2024
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Guest Mitchell Askew, head analyst at Blockware Solutions, discusses topics such as bitcoin ETFs, institutions, miners, and bitcoin halving. They talk about the impact of ETFs on institutional access to bitcoin, the behavior of bitcoin holders, and advancements in mining hardware and energy efficiency in mining operations.
Institutional investors entering Bitcoin through ETFs are expected to hold onto their investments for the long term, reducing sell pressure and minimizing bear market drawdowns.
The introduction of ETFs will make it easier for institutional investors to gain exposure to Bitcoin, as they can purchase shares representing a fraction of a Bitcoin at a lower price point, making it more psychologically appealing for potential investors.
Deep dives
Head Analyst Predicts End of Massive Bear Market Drawdowns
The head analyst at Blockware Solutions believes that the era of massive 50% plus bear market drawdowns in Bitcoin is over. He attributes this belief to the influx of sticky capital from institutional investors, such as pension funds and retirement accounts, who have a long-term investment horizon and are unlikely to sell. He does note that a FOMO-induced blow-off top followed by a drawdown could still occur, but overall he expects the types of investors coming into Bitcoin through ETFs to hold onto their investments for the long term, reducing the sell pressure that leads to massive bear markets.
ETFs Expected to Increase Bitcoin Accessibility and Adoption
The head analyst discusses how the introduction of ETFs (Exchange-Traded Funds) will make it easier for institutional investors to gain exposure to Bitcoin, leading to increased adoption. He highlights the concept of unit bias, where some potential investors view the high price of Bitcoin as a deterrent. With ETFs, investors can purchase shares representing a fraction of a Bitcoin at a lower price point, making it more psychologically appealing. He also speculates that ETF competition will likely focus on transparency and low fees, with some ETF providers even offering on-chain addresses to prove the Bitcoin backing their shares, further boosting investor confidence.
Transaction Fees and UTxO Management in a Higher Fee Environment
As Bitcoin transitions into a higher fee environment, the head analyst discusses the rising transaction fees and the importance of UTxO (Unspent Transaction Output) management. He explains how the cost of transactions in Bitcoin is based on the amount of data in a transaction rather than the amount of Bitcoin being sent. Therefore, managing UTxOs is crucial to optimize transaction fees. He recommends maintaining a mix of different-sized UTxOs, keeping a minimum UTxO size while balancing fee optimization and privacy. He also notes the potential for transaction fees to surpass the block subsidy after the halving, indicating a shift towards fees playing a larger role in miner revenue.
Mining Outlook and Potential Profitability in Bitcoin
The head analyst delves into the mining sector and highlights its potential profitability in the future. He expects mining to be a lucrative opportunity, especially if Bitcoin's price reaches significant heights. With the cost of producing Bitcoin through mining potentially lower than buying on the spot market, miners can achieve a favorable cost basis and benefit from the appreciation of their mining hardware alongside the increase in Bitcoin's price. He also notes that the upcoming generation of ASICs (Application-Specific Integrated Circuits) and the migration of mid-generation machines to low-cost energy sources contribute to the positive outlook for mining profitability.
Mitchell Askew is the head analyst at Blockware Solutions. In this conversation, we talk about volatility, bitcoin ETFs, institutions, inscriptions, miners, bitcoin halving, and more.
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