What to Expect From Bitcoin in 2024

Optimism
regarding
a
spot
bitcoin
ETF
application
approval
ignited
an
almost
49%
gain
in
BTC’s
price
since
October.
It
is
likely
that
the
Securities
and
Exchange
Commission
approves
or
denies
multiple
applications
simultaneously
for
logistical
and
consistency
reasons.
(Figures
cited
are
as
of
Dec.
18
unless
noted
otherwise.)

Spot
BTC
trading
is
concentrated
on
several
exchanges:
Coinbase,
Binance,
Bybit
and
OKX.
They
account
for
about
65%
of
spot
BTC
trading.
Binance
accounts
for
35.5%,
while
Bybit,
OKX
and
Coinbase
account
for
11.3%,
9.2%,
and
8.9%,
respectively.

The
average
BTC
order
size
has
been
decreasing
since
early
2021
and
is
about
$1,652.
While
smaller
order
sizes
are
associated
with
retail
customers,
many,
if
not
most,
institutions
divide
trade
orders
into
smaller
orders
to
minimize
slippage.
It
would
be
imprudent
to
suggest
retail
customers
were
primarily
responsible
for
recent
trading
patterns
in
BTC
based
on
order
size
analysis
alone.

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Coinbase’s
third-quarter
2023
trading
summary
suggests
declining
volume
in
three
of
the
past
four
quarter-over-quarter
measures.
Volume
among
retail
and
institutional
traders
has
fallen
at
a
similar
pace
over
the
course
of
the
past
year,
with
retail
and
institutional
customers
trading
about
$4.2
billion
and
$24.7
billion
in
the
third
quarter,
respectively.

Figure
1.
Source:
CoinBase,
Path
Digital
Advisors

CME
Group’s
BTC
futures
open
interest
reached
$4.55
billion,
accounting
for
about
25%
of
total
BTC
open
interest.
Current
open
interest
reached
a
level
last
seen
in
the
second
quarter
of
2022.

Figure
2.
Source:
CME
Group,
Path
Digital
Advisors

The
majority
of
CME
BTC
futures
positions
are
held
by
asset
managers
and
leveraged
funds,
with
the
former
exhibiting
a
long
bias
and
the
latter
showing
a
short
bias.
This
appears
intuitive
as
asset
managers
tend
to
approach
investing
with
a
longer
time
horizon
relative
to
other
buy-side
customers.
Conversely,
hedge
funds
and
commodity
trading
advisers,
or
CTAs,
tend
to
trade
with
a
shorter
time
horizon
and
engage
in

basis

trading
and

hedging.

Institutional
investors
are
becoming
more
active
in
the
crypto
space.

CME
Group
notes
that
“average
large
Bitcoin
open-interest
holders,
with
at
least
25
contracts,
hit
an
all-time
high
the
week
of
November
7,
2023.”

The
funding
rate
aligns
the
perpetual
futures
price
to
the
spot
price.
When
the
funding
rate
is
positive,
long
contract
holders
pay
the
funding
fee
to
the
short
contract
holders,
and
vice
versa.
The
funding
rate
has
trended
higher
with
the
spot
price
of
BTC,
suggesting
bullish
sentiment
and
bias.

The
historical
relationship
between
BTC
prices
and
consumer
interest
has
decoupled
recently.
If
the
antecedent
that
consumer
interest
is
solely
driven
by
retail
customers
is
true,
then
it
appears
that
either:

The
sentiment
among
institutional
investors
appears
to
be
constructive.
The
parallel
upward
shifts
of
the
futures
curve
in
each
month
of
the
fourth
quarter
of
2023
suggest
bullish
activity
and
a
long
bias
among
institutional
investors.

The
ETF
approval
is
sufficiently
baked
into
bitcoin
prices
such
that
positive
momentum
from
the
announcement
may
be
offset
by
traders
taking
profits
off
the
table.
This
suggests
a
possible
reversion
to
the
mean
in
the
days
after
the
announcement.
Thereafter,
the
market
will
likely
recalibrate
its
focus
to
the

halving
in
April.

Figure
3.
Source:
Bloomberg,
Path
Digital
Advisors
LLC