Crypto investors are awaiting Security & Exchange Commission (SEC) approval for a spot bitcoin ETF, which could unlock a surge of capital investment in the crypto space. However, this isn’t the first time that crypto news created a stir of hype around digital assets, but is this time truly different? Markus Thielen, DeFiResearch.com Head of Research, joins Yahoo Finance to discuss what this ETF approval could mean for bitcoin and the crypto space, and why he feels that if approved, it could potentially reach a high price target. “I think, to put it in numbers, there’s around $120 billion US dollars in precious metals ETFs in the US, so that means in gold and in silver, and if you just move 10-20% of those and shift them over into bitcoin you have certainly sort of something in the range of like $25 billion of inflow,” Thielen says. “And we calculated this might have an impact of every $1 billion dollars of 4% impact on the price , so we might actually see kind of a price towards $57,000.” For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live. Video Transcript – Bitcoin prices are falling this morning. The cryptocurrency briefly touched an 18-month high last week, bouncing back from a sell off after the CEO of crypto exchange, Binance, pled guilty to money laundering charges. Our next guest says even with the negative binance news it’s, quote, “inevitable the cryptocurrency will rally above $40,000 by year end.” Joining us now is Markus Thielen, defiresearch.com Head of Research and author of “Crypto Titans.” Thank you for joining us this morning. So give us some context here because we do tend to see bitcoin rallying at year end. How much of that then is tied to perhaps bitcoin shrugging off some of these binance concerns versus sort of this seasonality? MARKUS THIELEN: Yeah. Thanks for having me. I think the market took the binance news quite well. I think the market has actually been waiting for this news for at least a year, we can argue. And I think the rumor was that Binance would have to pay 10 billion. We heard some other news that they tried to negotiate for 8 billion, and 6 billion, and finally they settled with the DOJ for 4 billion. And of course, 4 billion sounds a lot better than 10 billion, so I think the market took it for that reason as pretty good news. – So is this finally removing that overhang? I mean, you heard Brian Armstrong from Coinbase say that the industry can finally turn the page as a result of what’s played out with Binance among many other issues. Is it as simple as that? MARKUS THIELEN: Well, it’s not as simple as that because we still have the SEC outstanding with 13 potential penalties, so the SEC was not part of this deal. That’s certainly like an overhang, but nevertheless, I think the industry looks through it. And the industry has gone through various crypto exchanges really, from Mt. Gox to Bitfinex to Bitmex to FTX and so on. So it’s not going to be a big headwind. I think really the tailwind that we’re going through as we mentioned just briefly earlier is December tends to be a positive month, so average returns for December tend to be plus 12%. Q1 seems to be a little bit more struggling, but of course, we’re having these macro tailwinds of when the fed stops or pauses interest rate hikes that bitcoin tends to rally. We have seen this in January to July 2019 after we had the successive rate hikes in 2018, and then bitcoin rallied over six, seven months by 300%. Of course, we’re not projecting a 300% rally, but nevertheless, when the fed pauses after an extensive rate hiking cycle, bitcoin tends to rally. And of course, the other comparison here is also when the CME future were announced that they’re going to be launched in– they’re launched in December 2017, but we got the green light on October 31st. So doing this two months window, bitcoin prices rallied 182%. So from the moment the SEC might approve a US bitcoin ETF based on the spot bitcoin, we might actually see an extensive rally then, and that makes us quite bullish into next year. – Now, Markus, this isn’t the first time that we’ve been waiting for this– a big catalyst for bitcoin. And as you talk about the spot, Bitcoin, ETF, other countries that have launched it didn’t see a massive rally. Why will this time be different? MARKUS THIELEN: Well, the US is, of course, the largest pool of capital, and of course, etfs are only really established in the US. We have seen this a long time– in Asia how Asia tried to establish etfs, but people don’t really use them. And I think this is because the investor base is very different for the US market than anywhere else. And the us is really dominated by a lot of institutions, and those institutions are using etfs really in their asset allocation. Of course, we have the Registered Investment Advisor Community, and estimates vary from they managed 5 trillion to even more. But if they move 1% of those 5 trillion, that’s like 50 billion into bitcoin, right? And I think that could have a big impact because we can calculate if the market cap changes what might be the implications for the price of bitcoin. And what has really changed is really that we have certain judges telling the SEC around the Grayscale lawsuit to go back and reevaluate their estimates. We’re having Blackrock, as you know, the largest asset manager in the world also filing for a Bitcoin ETF, so I think the pressure is really building. And then there is an overall sentiment that the market had– that the US regulatory regime is trying to clean up the market. And the last missing piece in this puzzle was, for example, to eliminate an exchange from the US market that has been known and admitted to had illicit trading going on. – Markus, you said even if one of these spot Bitcoin etfs move that could have a big impact. We’re looking at bitcoin roughly at $37,000 right now. What does that move look like? How much higher can it go? MARKUS THIELEN: Yeah. I think we have heard a false rumor that proved not true, where Bitcoin rallied 10% literally in a heartbeat. So we would estimate if a spot Bitcoin ETF would be approved Bitcoin could go up easily 20%. And I think, to put it in numbers, there’s around $120 billion in precious metals etfs in the US, so that means in gold and in silver. And if you just move 10%, 20% of those, shift them over into Bitcoin, now you have certainly something in the range of $25 billion of inflow, and we calculated this might have actually an impact of every $1 billion a 4% impact on the price. So we might actually see a price towards 57,000– we calculated. We can see if they’re in approval for the Bitcoin ETF. – 57,000 in the medium term? MARKUS THIELEN: In the medium term, yes. I mean, it sounds reasonable, right? When you look at– we were just at 25,000 like two months ago, and now, we’re at 37,000. So this is just literally like sort of like 12,000 rally that we had, so another 12,000 point rally. It gets us already like to the 50,000 point area. So I think this can easily happen, and again, as I said, if you put in the macro tailwinds of the fed pausing, if you compare to the 2017 episode when the CME announced the Bitcoin futures, I mean, I think there is just a lot of tailwind, and I think there’s a lot of pent up demand. And don’t forget we have all these ETF providers. They are, of course, doing a lot of marketing. There are a lot of educational, and Larry Fink as the CEO from Blackrock is almost every other day on TV and saying how important a Bitcoin ETF is. So I think there is a coordinated marketing effort now to really bring prices higher. – And Markus just quickly, I want to talk about the domino effect of the repricing of bond yields because you’re saying that in particular second tier tech stocks that correlate with second tier altcoins and crypto should see a benefit there. What are some of the top picks in that space? MARKUS THIELEN: Well, of course, people comparing right now the second tier altcoins– let’s say the Solanas of the world. Might be the Ethereum of this cycle. So I think we’re seeing a lot that the revenues are actually increasing, and there was a big shift since literally a month ago. And the months ago what really happened? It’s becoming inevitable that we’re going to get this ETF now, and I think once we had this false rumor, we had like some other issues as well. We had about Ripple– lawsuits for the executives where like thrown out of the lawsuit that they had. So in the end, I think, there is just like a lot of second order effects because tech stocks and crypto are long duration assets. And if we see lower interest rates, lower bond yields, this is what benefits both. And I think we can look back the last three, four years where we had the rally up and of course the crash down when we had the move in the bond yields. And I think based on our calculations, we’re going to see a lot lower inflation next year. Our model from last year indicated we’re going to be around 3% by now, and we are at 3%. And actually, for next year we’re predicting 1.6%, and this is based on the model we have been using for a long time, so we are really bullish here right now. And I think this is really just a summary of all these calls that we had for this year. – Markus, you’re giving a lot of hope to people who hung on to their crypto assets through the crash. Markus Thielen, defiresearch.com, Head of Research. Good to talk to you today.
Bitcoin may reach $57K over pending ETF approval: Analyst
