Leveled up FOMO - The significance of the bitcoin ETF approval

The US SEC has just approved a number of bitcoin ETFs. Over the next trading days, we will see the beginning of corporations and institutions buying bitcoin. We believe that there will another level of FOMO (fear of missing out).

Corporations exist in an environment of competition. Corporations and its stakeholders are incentivized to beat the competition. It is because of this game theory environment that we believe corporations are just as vulnerable to FOMO as individuals. Corporations will FOMO into bitcoin, and it is noteworthy because of the timing.

We believe that bitcoin is about to enter another phase of parabolic price increases due to the programmed “halving” of additional bitcoin to be supplied by the network. In other words, the supply of bitcoin is about to be cut in half. This reduction in supply was already programmed and scheduled as it happens, roughly every four years. It has nothing to do with a bitcoin ETF. What a bitcoin ETF does is it brings in a lot of institutional demand to buy bitcoin. This makes us anticipate an extremely large increase in demand right as there will be a huge decrease in the supply of bitcoin.

Because bitcoin’s price is on an upward trajectory, the corporations that buy bitcoin ahead of the others will have a short term advantage and enjoy significant appreciation in the bitcoin that they purchase. The corporations that purchase bitcoin later, will see diminished gains in comparison with the corporations that purchased earlier – this will cause a possible attempt to front-run each other.

Another significance of institutional and corporate FOMO is mainly in the size and volume of the assets that they typically purchase. An institutional or corporate treasury purchases in much larger quantities than individuals. Thus the new market participants could eclipse the current market participants in terms of the volume of buying and selling. The limiting feature though on institutional purchasing is that insitutionals and corporations are limited by their internal risk controls. Some risky individual may decide to go “all-in” on bitcoin but it is unlikely that corporate or institutional treasuries will do anything of the sort.

Further, ETF providers will most likely advise their clients that bitcoin is high risk and thus, their allotmets should only be small, relative to their other assets.

Based on the above, we think the BTC price this 2024 and 2025 will rise significantly.