Apollo crypto, a renowned name in the field of cryptocurrency analysis, has recently published a comprehensive report predicting a significant rise in the price of bitcoin, which could reach $200,000 in the current cycle. Written by Henrik Andersson, the report delves into various factors that could contribute to this notable growth.
A key aspect of the report is the early approval of the first spot bitcoin exchange-traded fund (ETF) in the United States. Bloomberg Senior ETF Analyst Eric Balchunas is quoted as saying: “There is a 90% chance of approval before January 10, 2024.” This development is considered a major factor for the rise in bitcoin price.
The report details the interest of prominent asset managers in bitcoin spot ETFs and states: “In our view, the SEC is not likely to give preferential treatment to a single ETF issuer; therefore, several of them are likely to obtain approval at the same time.”
bitcoin ETF Inflow Estimation and Multiplier Effect
A key element in Apollo crypto's analysis is the potential inflow of new money into bitcoin ETFs. The report estimates this considering the total size of US stock holdings at $64.7 trillion.
It is assumed that 10% of these investors would allocate 1% to bitcoin ETFs, generating an estimated inflow of $65 billion. This figure is cross-referenced to the total US ETF market size of $6.5 trillion, where bitcoin ETFs are expected to capture 1%, in line with the entry estimate of $65k. millions of dollars.
The concept of the “bitcoin multiplier” is also central to the report's analysis. This refers to the effect of each dollar inflow on bitcoin's market capitalization. The report cites the upcoming btc halving in April 2024, which will reduce new btc supply, as a factor that could increase the multiplier effect.
Referring to a Bank of America report titled “bitcoin’s Dirty Little Secrets,” Apollo crypto notes: “For example, we estimate that a net inflow of just $93 million would result in 1% price appreciation.” From this, they deduce a multiplier effect of 114x as an upper limit, but apply a more conservative estimate of 50x for their scenario.
Combining the input estimate and the multiplier effect, the report concludes that bitcoin could reach $200,000 per coin in this cycle:
Putting it all together leads us to believe that we could see $65 billion in inflows into bitcoin ETFs in the next cycle. Applying a 50x multiplier effect leads to a market capitalization increase of $3.25 trillion, in which case we would see bitcoin trading at $200,000 per coin. We realize that this is a bold estimate with a lot of uncertainty.
Flow effect in ethereum
The report does not stop at bitcoin. It also analyzes the performance relationship between bitcoin and ethereum during the last bull market, using a specific period from September 2020 to November 2021.
During this phase, the report notes, “bitcoin increased 4.8 times while ethereum increased 9.8 times; ethereum rose twice as much as bitcoin during this time.” This historical data is crucial as it indicates that ethereum tends to have a higher beta or sensitivity to bitcoin market movements.
Based on this relationship, the report projects that if bitcoin's price were to quintuple (as its $40,000 to $200,000 forecast suggests), then based on past market behavior, ethereum could see a parallel and steeper rise.
The report estimates: “If the ratio holds over the next cycle and bitcoin increases 5x, then ethereum would reach $22,000.”
At the time of publication, btc was trading at $43,371.
Featured image from Shutterstock, chart from TradingView.com
