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This week's topics
- Monumental failure of the SEC
- bitcoin ETF Multiple
- German economic update
- Elections in Taiwan and China's response
The failure of the SEC's 2FA
bitcoin is a great teacher. Many of us have learned a lot from studying and following bitcoin over the years, not only about money but also about life. Once again, bitcoin gives us a teachable moment in the SEC's X/Twitter account hack. First, even if you are a normal person and supporter of heavily regulated markets, this event should open your eyes to the fact that regulators themselves have become a systemic risk. They are a risk to the investors they are supposed to protect. The SEC is even in a battle in the Battle in the Supreme Court on its internal semi-judicial system.
Second, this scandal happened because the SEC did not use 2FA, months after warning everyone about using 2FA. This shocking incompetence could wake many up and spread the use of 2FA, something that should have been done a long time ago.
The total damage based on the SEC's failure was $30 billion wiped from market capitalization with $90 million in open positions liquidated. Of course, the SEC did not apologize for its failure and will likely face legal consequences. Taken spicy, this bitcoin-inspired scandal could result in not only us getting ETFs approved, but also the SEC going down a notch.
![](https://technicalterrence.com/wp-content/uploads/2024/01/What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
bitcoin Market Cap Multiple Entries
Estimates of inflows in the first days of trading for the bitcoin ETF are expected to be huge. The issuers have publicly declared so far they are contributing $312.9 million to their funds. These are commitments by private actors to immediately create shares to generate liquidity. This does not include other money from regular trading.
The fee structures unveiled this week by issuers have provisions for introductory periods based on the influx of assets under management. For example, ARK offers a 0.0% management fee for the first 6 months or up to $1 billion in assets under management. Invesco offers 0.0% for 6 months or $5 billion in assets under management. This means they expect those time frames and AUM to be a practical expectation. Adding up all of these special rate discounts, we arrive at $13 billion of expected AUM growth in the first 6-12 months from just 5 issuers. That doesn't exactly mean inflows because bitcoins purchased earlier will appreciate adding AUM.
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982089_332_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: @JSeyff
The initial funds pale in comparison to the issuers' total assets of $25 trillion. If 1% went into bitcoin ETFs over the first 12 months, that would be $250 billion.
Back in 2021, near the ATH, Bank of America published a study that said bitcoin had a bitcoin-s-price-by-1″>118x multiplier on market capitalization entry. So for every $1 million in new purchases, the market cap would increase by $118 million. That multiplier depends on many different factors, such as entry speed, the number of bitcoins available on exchanges, and the block reward. Bank of America made its estimate when it had bitcoin-exchange-balance-total”>2.7 million btc on exchanges, today there is only 1.8 million – or 607,000 if you consider only the major US exchanges, Coinbase, Gemini and Kraken. In other words, this time the multiplier could be greater than 118x.
The largest ETF launch in history saw inflows of $2 billion. The bitcoin ETF event promises to be bigger than that because it is a group of 11 ETFs and it is a new asset class. Therefore, $2 billion is a conservative figure, but we will use it here for our purposes. 2 billion dollars multiplied by 118 means a market appreciation of 236 billion dollars on the first day. The market cap at the time of writing is $900 billion, which means the first day move could be ~25%, which would take us to $58,000.
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982089_689_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
German deindustrialization
People think it can't happen, that's why it's happening. Some Germans are beginning to understand the effect of deglobalization on their economic model and the effect that communist climate policies will have on heavy industry. Large companies such as BASF, Linde and Volkswagen have plans to leave Germany. Energy-intensive industrial production is the most affected. 2024 will be a year of massive recession worldwide.
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982089_462_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: Financial times
The latest figure for November showed the sixth consecutive month of industrial production, the worst stretch since the Great Financial Crisis.
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982090_177_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: Bloomberg
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982090_167_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: @SoberLook
Taiwan elections and China's economic disaster
One of the most important elections this year it will take place on Saturday in Taiwan. As things stand, it is a three-way presidential race, with the more anti-China Democratic Progressive Party, Lai Ching-te, the favorite. He is friendly to the United States and will be a thorn in the side of the PCC. China has certainly invested a lot to stop it and spread propaganda inside Taiwan. Despite this, the anti-China candidate remains the favorite.
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982090_858_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: NHK Japan Broadcasting Corporation
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982090_206_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: Fulcrum Asset Management
This choice has global consequences as you can imagine. In an article Yesterday on Bloomberg they highlighted the possibility that Lai's election could lead directly to a conflict with China and potentially cost the global economy $10 trillion.
This is also happening as the Chinese economy crumbles. His stocks-hit-5-year-lows-on-taiwan-us-tensions-124010900009_1.html”>frontline stock market The CSI 300 recently hit 5-year lows, in stark contrast to the US stock markets rally to near ATH.
![](https://technicalterrence.com/wp-content/uploads/2024/01/1704982091_92_What-to-expect-from-the-launch-of-the-Bitcoin-spot.jpg)
Fountain: stocks-slump-5-low-094618791.html”>Yahoo Finance
Last but not least, the foreign direct investment (FDI) figures for 2023 are out and they are a total disaster. Money is fleeing China at the fastest rate in modern history. All of this means that elections in Taiwan and economic pressures in China could bring the world closer to conflict over Taiwan.
Fountain: @Geo_papic