7 December 2023
Apollo Crypto, a renowned name in the field of cryptocurrency analysis, has recently released a comprehensive report predicting a significant surge in the Bitcoin price, potentially reaching as high as $200,000 in the current cycle. Authored by Henrik Andersson, the report delves into various factors that could contribute to this remarkable growth.
A pivotal aspect of the report is the anticipated approval of the first spot Bitcoin Exchange-Traded Fund (ETF) in the United States. Eric Balchunas, the senior Bloomberg ETF analyst, is quoted saying, “There is a 90% chance of an approval by January 10, 2024.” This development is seen as a significant driver for Bitcoin’s price increase.
The report elaborates on the interest from prominent asset managers in Bitcoin spot ETFs, asserting, “In our view, it is likely that the SEC won’t give preferential treatment to a single ETF issuer; therefore several of them are likely to get approval at the same time.”
Bitcoin ETF Inflow Estimate And Multiplier Effect
A key element in Apollo Crypto’s analysis is the potential new money inflow into Bitcoin ETFs. The report estimates this by considering the total size of US holdings of equities at $64.7 trillion.
It assumes that 10% of these investors would allocate 1% to Bitcoin ETFs, leading to an estimated inflow of $65 billion. This number is cross-referenced with the total US ETF market size of $6.5 trillion, where Bitcoin ETFs are expected to capture 1%, aligning with the $65 billion inflow estimate.
The concept of the ‘Bitcoin multiplier’ is also central to the report’s analysis. This refers to the effect of each dollar inflow on Bitcoin’s market cap. The report cites the next BTC halving in April 2024, which will reduce the new supply of BTC, as a factor that could increase the multiplier effect.
Referring to a Bank of America report titled “Bitcoin’s dirty little secrets,” Apollo Crypto notes, “For example, we estimate that a net inflow of just $93 million would result in price appreciation of 1%.” From this, they deduce a 114x multiplier effect as an upper bound but apply a more conservative estimate of 50x for their scenario.
Combining the inflow estimate and the multiplier effect, the report concludes that Bitcoin could reach $200,000 per coin in this cycle:
Putting it all together leads us to believe that we could see $65 billion in inflow to Bitcoin ETFs in the coming cycle. Applying a 50x multiplier effect leads to an increased market cap of $3.25 trillion in which case we would see Bitcoin trading at $200,000 per coin. We realize this is a bold estimate with a lot of uncertainty.
Flow-On Effect On Ethereum
The report doesn’t stop at Bitcoin. It also analyzes the performance relationship between Bitcoin and Ethereum during the last bull market, using a specified period from September 2020 to November 2021.
During this phase, the report notes, “Bitcoin increased 4.8x while Ethereum increased 9.8x; Ethereum increased twice as much as Bitcoin during this time.” This historical data is crucial as it indicates that Ethereum tends to have a higher beta, or sensitivity, to Bitcoin’s market movements.
Building on this relationship, the report projects that if Bitcoin’s price were to quintuple – as suggested in their forecast from $40,000 to $200,000 – then based on the past market behavior, Ethereum could potentially experience a parallel and more pronounced surge.
The report estimates, “If the relationship holds for the coming cycle and Bitcoin increases 5x, then Ethereum would reach $22,000.”
At press time, BTC traded at $43,371.