If you want to start buying bitcoin today, read my step-by-step guide on How to Buy Bitcoin & Crypto on CoinSpot, use this link and the code 83T6H2 to open an account on CoinSpot.

GM everyone.

Originally, I wanted to cover how to store your crypto in a cold wallet, which is what I recommend if, like me, you're in bitcoin and crypto to build wealth over the medium to long term. (A minimum of 4+ years, if not longer.)

But bitcoin is on a wild rally.

So, I decided to take a look at what's happening in the market and how things might play out this year. Next Friday, I'll give you a step-by-step tutorial on how to store your crypto in a cold wallet! Stay tuned!

Before we get started, let me remind you that this newsletter is not financial advice. It is general, does not take into account your financial situation, and is for educational purposes only. Always do your own research.

In the interest of transparency, this newsletter contains affiliate links. This means that I may receive a commission from them. But I only choose products that I use myself and that I can recommend wholeheartedly. If I don't like the product, I won't mention it in the newsletter. As simple as that.

Bitcoin ETFs were approved in America on 10 January. So they have been around for about a month now. During this month, bitcoin has gained more than 22%. Things started to change in early February.

So what's driving the price? From what I see, it's mainly three things.

1. Bitcoin ETF Flows

When the Bitcoin ETFs were approved on 10 January, we immediately saw strong inflows.

However, as discussed in this newsletter, Grayscale's GBTC ETF saw strong outflows that offset much of the inflows. GBTC saw outflows because it had been converted from a fund to an ETF and, for the first time in a while, investors were able to cash in. So a lot of them did.

But in the last few days, the outflows in GBTC started to slow down. And inflows into the other nine ETFs began to accelerate.

As you can see in the chart below, as of Tuesday, 13 February, outflows in GBTC have dropped from just under USD6 billion to USD70 million. At the same time, inflows into Blackrock's IBIT ETF have picked up significantly over the past few days, taking in just under USD500 million on Tuesday.

As a friendly reminder, USD500 million is half a billion US dollars. In one day. That's an incredible number. As of Wednesday, IBIT had attracted more than USD5 billion in inflows. That puts it in the top 7% of all existing ETFs in just over three weeks.

TLDR: GBTC outflows are slowing and IBIT and the other bitcoin ETFs are seeing increasing inflows as bitcoin ETF demand appears to be strong.

2. The Halving Is Only Two Months Away

If you don't know what the halving is, I covered it here. It is the most important event in crypto.

Like clockwork, every four years it cuts the mining rewards, the rewards that bitcoin miners get for producing bitcoin, into half. This means that less bitcoin gets produced. Around 18 April, when the next halving takes place, the amount of bitcoin coming into circulation will drop from 900 to 450 per day.

This is significant because historically, about 60 days before the halving, there tends to be a pre-halving rally. It's driven by short-term traders who "buy the hype" to "sell the news" when the halving occurs. We are currently in the pre-halving rally.

A few weeks before the halving, as the short-term traders take their profits, there is typically a pre-halving retracement. In 2016, the pre-halving retrace was about -40%. In 2020, the retrace was -20%. The retrace can last for several weeks.

It's only after the halving that the real rally begins. It is during this phase that bitcoin experiences accelerated and even parabolic growth. It's the green blocs on the chart below.

So stay the course, and don't let a retracement shake you out of the market.

The halving is also significant in the context of strong ETF inflows, as rising demand could meet shrinking supply.

TLDR: The halving in April will cause a supply shock. Historically, bitcoin has rallied to a new all-time high in the following 12-18 months.

3. Interest Rates Will Fall and Global Liquidity Will Rise

In general, financial markets have two drivers.

The first is interest rates. When interest rates are high, money is expensive, which hurts what traditional finance calls "risk assets", such as stocks and crypto. Conversely, when interest rates are low, money is cheap, which drives up the prices of these assets.

After a cycle of rising interest rates to fight inflation, interest rates have now peaked in most economies. Market participants in most major economies expect rate cuts in the second half of the year.

Stock markets around the world are already anticipating these rate cuts and have rallied in recent weeks. The S&P 500, the benchmark for U.S. stock performance, closed above 5,000 last week for the first time in its history.

The second driver of financial markets is liquidity. This is the pool of cash and credit that is being moved around the world.

And global liquidity is increasing.

Michael Howell of CrossBorder Capital expects more liquidity support from central banks in 2024 as more policymakers turn to monetary easing to refinance huge piles of existing debt. The key central bank to watch is, of course, the US Federal Reserve.

Here is what Howell wrote in the Financial Times in January:

TLDR: Money will get cheaper and the prices of risk assets will rise until the cycle of falling interest rates and rising liquidity will peak in late 2025.

Plan accordingly, everyone. And don’t fuck this up.

If you want to start buying bitcoin today, read my step-by-step guide on How to Buy Bitcoin & Crypto on CoinSpot, use this link and the code 83T6H2 to open an account on CoinSpot.

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