TECHNOLOGY & OPERATIONS
While observers wait ( there was no word as of mid-November ), in the meantime the SEC has approved ether futures ETFs , and a smattering of new products have joined the already available bitcoin futures ETFs on the market . The anticipation has extended to a spot ether ETF as well that would follow in the wake of the spot bitcoin product .
Edelman noted that the price of bitcoin has increased dramatically — having risen by 77 % over the 12 months preceding his blog post ; it had more than doubled in price over the 12 months ended November 11 , from $ 16,778.10 to $ 37,086 . Some think bitcoin may also have benefitted from the outbreak of war in the Middle East and what some see as its role as digital gold in an unstable world .
Edelman ’ s not alone in his enthusiasm . A week before his post , Morgan Stanley Wealth Management also weighed in , declaring that crypto winter was likely over . However , the bank offered different reasons in its October report , called “ Will Crypto Spring Ever Come ?”
Morgan Stanley described the crypto winter as a period in which investors have sold their tokens to lock in gains , which caused prices to drop and scared off new investment . The “ spring ” will come about in part because of a crypto shortage , caused by a phenomenon called “ halving .”
Bitcoin miners are rewarded for producing the tokens , but after a set number of transactions are recorded in the blockchain , these rewards are cut in half — and thus so are the number of new bitcoins being created . Halving cycles will continue in bitcoin until there are 21 million tokens in existence , at which time no more of the coins will be mined . Halving tends to occur approximately every four years ; the last time was in May 2020 .
“ By intentionally limiting the supply of new bitcoin , the shortage caused by the halving can affect the price of bitcoin to potentially spur a bull run ,” Morgan Stanley ’ s analysts write . “ There have been three such runs on bitcoin since its inception in 2011 , each lasting 12 to 18 months after the halving .”
A predictable cycle in token prices occurs with a halving event — a trough usually follows 12 to 14 months after a peak , and winter ’ s end is usually marked by a 50 % increase in price from the low . With the next halving event predicted to occur in April 2024 , the bank argues we may already be in a crypto spring marked by recovering prices but weak investor interest . The next bull run could come after the halving , when “ crypto summer ” would begin .
Halving cycles will continue in bitcoin until there are 21 million tokens in existence , at which time no more of the coins will be mined .
Of course , since there have been only three halving cycles — and three crypto winters — so far , Morgan Stanley also cautions against relying too heavily on past events to predict the future course of token prices .
Global investment manager VanEck is another firm waiting for the approval of a spot bitcoin ETF . Its CEO and namesake , Jan van Eck , echoed Edelman ’ s and Morgan Stanley ’ s arguments in a recent podcast , saying that bitcoin ’ s halving event , coming at the same time as a possible slew of nine ( or more ) spot bitcoin ETFs onto the market , make for “ a very exciting spring ” for cryptocurrency investors .
The spring fever around token prices , ETFs and halving may brighten sentiment toward cryptocurrencies , but it leaves unanswered the most pressing concerns of financial advisors , including the ways cryptocurrencies are best accessed and safely custodied , and how the various forms of income and returns available from digital assets will be taxed — not to mention whether advisors should recommend digital assets to clients in the first place .
36 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2023 WWW . FA-MAG . COM