Feb 21, 2024

James Butterfill, head of research at CoinShares, joins "First Mover" to discuss his outlook on bitcoin price and spot bitcoin ETF inflows in the rest of the year.

Video transcript

Bitcoin price will continue to rise. We we almost definitely will likely uh test all time highs and many might attribute it to the halving. I'd say it's perfectly known information and therefore shouldn't or have a an impact impact on price. But yeah, testing all time highs is a good one. It's gonna be a volatile ride upwards though. Welcome to first mover on coin desk on this show, you get all of your top news headlines, deep dives into specific topics and interviews with industry heavy hitters. Let's get right into it today. We're gonna dive into NFTS and how they might evolve. Analysts and market watchers say NFTS aren't dead, but the next wave of successful NFT products will likely look different than what's been deemed successful in the past. Here are three use cases to watch. In 2024. Dynamic NFTS are described as an iteration of NFTS as we know them today, except these NFTS react to external data and systems and evolve. When something happens. Chain link gives an example in an article about dynamic NFTS. Imagine having a limited edition digital soccer card. Then when that soccer player scores a hat trick your NFT upgrades to feature the latest player stats next NFTS that offer direct value creation rather than speculation. We've already seen experiments with mass market nfts as digital collectibles from the likes of Nike Reddit and Starbucks. If these are any indication of how brands might incorporate nfts into their strategies in the future, we can expect NFTS to be mass produced, affordable and targeted at a broad consumer market. In many cases, consumers might not even know about the underlying crypto rails and NFTS for event tickets, ticketmaster has experimented with NFTS tied to tickets on the flow Blockchain. NFTS could start to solve challenges in ticketing like scams or predatory secondary sales. As ticket authenticity is verifiable on blockchains. NFTS could also serve as an alternative method of fan engagement and loyalty by allowing NFT holders access to perks, rewards and future events. This spot Bitcoin ETF update is presented by gray scale, the world's largest crypto asset manager spot Bitcoin ETF S have stolen the spotlight in 2024 coins shares. Head of research, James Butterfield joins us now to share his perspective on the ETF narrative. Moving forward, James. Welcome to the show. Hi, great to be on the show. Great to have you here. Now, what do you make of the spot ETF performance so far? Really impressive. I mean, I think it initially started off being a little bit disappointing in with regards to the price movement, but it's quickly became clear that a lot of buying for the seed capital for the newly issued funds like ishares and Fidelity happened prior to the actual launch day while Grayscale was selling quite a lot. And so, in essence, we saw that negative price pressure, but what we're seeing since then is the gray scale outflows sort of slow right down and the inflows are sort of picking up a little bit now um for the U SS newly issued ETF S. And so we, we're at a situation now where we're at $4 billion of net inflows since launch, which is way better than say, ishares gold products, which in 2003 had 100 and 25 million. Is this what we expected to see or have there been some surprises in the past month or so? I think it generally was expected, it was quite difficult to, I think really put a proper number on how big the inflows really would be. Um uh I I think on reflection, perhaps it's starting to be a little bit better than expected, given just how popular and how strong the inflows have been. Let's talk about the future. Now, you know, from your perspective, how much do you expect to see flow into the ETF S throughout the rest of the year? That again, I think it's really difficult to quantify this number. Um You could annualize the current numbers and it would break all records um including for any ETF launch if that happens. So I think it's perhaps a bit dangerous to annualize at this point. You know, it's quite rational to say sort of, well, if you look in 2021 we saw $10 billion worth of inflow. So it's quite rational to say we, we, we could hit that sort of point and that would have quite a pros positive effect on price. II, I suspect it would, we would definitely beat the all time highs as uh 69,000. What do you think some of the driving factors are here? What, why do you think we're seeing so many inflows? Yeah, I mean, it's, it's, it's not. So the ETF S do have an effect on price for now, but that will calm down. And I think what we start settling back on to his market fundamentals and the fundamentals are quite constructive. So a big one is Fed policy. Um, it looks like they will cut rates this year and perhaps a little bit too late to cut rates. And so they might more aggressively cut rates than expected. I definitely think that's going to drive prices. We've got the halving, which at least historically is seen price rises. And I'm a little bit skeptical because, um, uh, after the halving in 2020 a lot of the price rises perhaps were due to COVID stimulus checks. But, um, I think loose monetary policy, the Fed's in a difficult situation. If they decided to hike rates, it would cause real problems in the banking sector which are already happening. And again, if you look at New York Bank Corp, for instance, the bank there is, is in real trouble. So there's plenty of supportive uh factors for Bitcoin prices. That's interesting. You say you're a little bit skeptical if we look at 2020 data, unpack that a little bit more for us. What do you expect to see happen to the price of Bitcoin after the having and it flows into the ETF after the having? Yeah, I think the Bitcoin price will continue to rise. We, we almost definitely will likely uh test all time highs and many might attribute it to the halving. I'd say it's perfectly known information and therefore shouldn't or have a an impact impact on price. But yeah, I testing all time highs is a good one. It's gonna be a volatile ride upwards though. But yeah, let's say if we had a 10% of inflows of assets, time management, that's about $14 billion of inflows, that would be a record that could push Bitcoin prices over 100,000 coming back to the ETF. Now, are there any asset managers that you expect to stand out from the bunch? So if we look, let's say a year into the future, what asset managers do you think are going to have uh the most funds under management in these uh spot ETF products. Which asset managers? Oh, certainly. If you look at an ass manager who has an inc strong team, a deep set of client relationships, they're the kind of asset managers that are going to do really well in this environment. And it is testament now, you just have to look at Blackrock ishares and they're doing incredibly well. And I think it was indicative of their strong client relationships and the massive sales department and those smaller products which perhaps don't have that same ability, same marketing ability, I think will, will struggle with that said, I mean, uh all of them are doing pretty well and are well past the kind of um marginal costs of, of running the ETF themselves. I mean, if we look at gold, they all could continue to do pretty well, right? They could all be winners in their own, right? A year from now, there doesn't have to be a stand out. Yeah, there does seem to be that narrative at the moment of uh Bitcoin cannibalizing gold. It does. Well, I just tweeted this morning exactly that point. Um Not all of the outflows from gold are going into Bitcoin. Um There's a lot more outflows in gold that is than inflows into Bitcoin. So it could be uh very supportive. Um You know, just if you, if I was, you know, some people might think saying 100,000 Bitcoins a bit crazy, but if you were to sort of readjust that narrative and say, well, you know, gold could take 17% or Bitcoin could take 17% of gold's market share. That is a uh a price of 100,000 for Bitcoin. And in that respect, in that context, it sounds quite reasonable. Blackrock and Fidelity are two of the uh standout asset managers in the Spot Bitcoin ETF game right now. They also both have spot E ETF applications. Do you think there's a potential that we'll see an approval on that spot? E ETF this year? Our head of compliance. So and um product is skeptical, it will be May, I think there's a lot of hopes pinned on May. Um I don't think we're quite in the depths of the details of some of the people. Certainly, some of the Bloomberg analysts are coming up with May, I think it's May the 23rd. It's, it's, it's quite possible. Um The fed could delay it a bit longer. Um That might lead to disappointments. Don't forget last September when very people were very hyped about the Bitcoin ETF launch and it didn't happen. Um The SEC has a bit of a track record of disappointing. Um but I think it, it that there are, I can't see any roadblocks to it not happening eventually at some point this year, perhaps Q three. And what about other assets like XRP or soul? There's some chatter that, you know, once we get an E ETF we could see other assets um become ETF S. Do you think that's possible? I think it's harder there, partly because of well launching an ETF you need a deeply liquid market. And as soon as you step outside of the realms of Bitcoin and Ethereum, suddenly the liquidity is a lot, lot lower. So it's a lot harder to scale a product like that. Um And, and also I think the SEC from a regulatory standpoint have been talking about everything other than Bitcoin and Ethereum. Those two have mysteriously been, they've been quite quiet on in terms of ST Y in terms of um uh staking and it being a security, there's still those question marks over the Howie tests for many of the old coins other than Ethereum. Um And so for that reason, I think it might take a little while longer before we see ecfs in those products, James, we got a wrap there. But thanks so much for joining the show today and providing that insight on what might happen with ETF as we move into 2024. My pleasure. Thank you. It's time now to take a look at the chart of the day. The chart of the day is presented by crypto.com, the leading crypto platform trusted by over 80 million users. Worldwide. Excitement has been high across the crypto industry since the SEC approved 11 spot, Bitcoin ETF S in the United States. But data shows that us based ETF S make up only 10 to 15% of the total Bitcoin spot trading volume across global centralized exchanges and only 3% of outstanding Bitcoin supply, which is around 650,000 Bitcoin. This is why a report from Coinbase institutional believes institutional investors have over indexed the short term impacts of these products and quote market players may be missing out on other opportunities and themes that could be relevant in the post spot Bitcoin ETF environment and quote. The report says Coinbase Institutional believes the search for yield will rejuvenate interest in defi in 2024. And that there's room for to play catch up to its peers in the first half of the year. That's a wrapper first mover. Thank you so much for watching and thank you to our guests today. As a note, we sometimes edit interviews on this show for length and clarity. If you want to get more news headlines, head on over to Coin desk.com. Thank you again so much for watching. I'm Jensen Asi. This is first mover. We'll see you next time.

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