Prediction of the highest and lowest values of Q1 Bitcoin and Ethereum price research in 2024

Why is BTC the darling of institutions?In the contemporary financial system, the central bank is the source of liquidity in the financial market. When the central bank begins to release/contract liquidity, the changes in liquidity will be reflected in real-time in the price changes of bonds, commodities, foreign exchange, and financial derivatives, as well as in the changes in stock indices

Why is BTC the darling of institutions?

In the contemporary financial system, the central bank is the source of liquidity in the financial market. When the central bank begins to release/contract liquidity, the changes in liquidity will be reflected in real-time in the price changes of bonds, commodities, foreign exchange, and financial derivatives, as well as in the changes in stock indices. Bitcoin has not been a new member of the 'macro club' for long. However, the US government holds the largest amount of Bitcoin; And the number of ETFs that include Bitcoin in their investment portfolios is gradually increasing, with top asset management institutions such as Fidelity among the issuers of these ETFs.

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Bitcoin ETF 2023 7 17

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Due to BTC being a product of the Cyberspace, the liquidity manipulation magic of the central bank is ineffective against it. The US dollar price of BTC may vary, but 1BTC is always 1BTC. Native crypto investors use BTC as an investment product and value storage tool to combat inflation under the fiat currency standard.

For fund managers from Wet market, they pay more attention to the role of BTC in risk diversification. The price performance of BTC and gold has never reached a "strong correlation" level, and its correlation with the US stock index also dropped to around 0 in 2023. Meanwhile, as BTC belongs to a completely different category of assets, this means that BTC can to some extent diversify the overall risk of the investment portfolio. The compliance of BTC has also been widely recognized; This greatly reduces the legal risk of investing in BTC.

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Changes in the 90 day price correlation between BTC and gold from July 2020 to present.

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The correlation between BTC prices and the US stock index from January 2021 to present.

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BTC price changes from January to July 2023. Note the purple section in the figure, which corresponds to the banking crisis in March, the Federal Reserve's interest rate hike in May, and the submission of BTC spot ETFs around July.

Comparison between the BTCDVOL volatility index and the realized volatility level from May 2021 to present. Source: AmberdataDerivatives

It is not difficult to find that the volatility index of BTC is more sensitive to macro fluctuations.

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Comparison between the BTCDVOL volatility index and the "volatility of volatility" level in August 2022. Source: AmberdataDerivatives

Compared to volatility, BTC's volatility changes more quickly and sensitively.

In a word, BTC meets the requirements of almost all investors of different types in terms of functions, compliance, risk management, liquidity and trading, whether they are crypto believers, fund managers in Wet market or traders in macro hedge funds. It is difficult to have macro targets that can meet these needs at once; In other words, BTC is a natural macro trading target.

ETH: A "software company" with a P/E ratio of 312.58

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In fact, some researchers and traders are already interpreting ETH using a framework based on corporate finance:

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ETH ETH Sam Andrew EthereumEthereumP/E Ratio

ETH PoS 2022 2023 Ethereum3,959*1,301+79,210*1,589+227,147*1,861= 553,735,916 738,314,555

The average spot price of ETH (July 17th) is approximately $1920;

The real-time supply volume of ETH (July 17) is approximately 120201013 units;

Therefore, ETH's P/E ratio is 1920/(738314555/120201013)=31.58.

312.58! This is a very surprising P/E ratio number. We have attached the P/E ratio of Magnificent7 (the seven largest technology stocks by market value) in the US stock market as a comparison *:

AAPL: 32.38

AMZN: 164.24

ETH: 31.58

GOOGL: 27.93

META: 38.32

MSFT: 36.92

NVDA: 207.62

TSLA: 82.76

*All stock P/E ratios are calculated based on the closing price on July 14th. ETH's P/E ratio is calculated based on the daily average price on July 17th.

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To go our separate ways

Under the narrative of "Encryption 3.0", where will BTC and ETH go?

BTC: CryptoIsMacro

Undoubtedly, the price of BTC will depend on macroeconomic conditions and changes in the internal macroeconomic conditions of the crypto market. Therefore, for BTC, interest rates and market share will be important influencing factors. Interest rates affect earnings expectations, while market share affects market capitalization.

From the perspective of the interest rate market, the Federal Reserve will not cut interest rates in the next six months; The European Central Bank will not show weakness under the threat of high inflation. The above situation means that high interest rates will continue to suppress the performance of BTC. However, some potential positive factors are also supporting the price of BTC, such as the possible listing of BTC spot ETFs.

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The latest possible interest rate path for the Federal Reserve, as of July 17, 2023. Source: CMEGroup

In addition, the internal allocation of liquidity in the crypto market can also affect the price and market value of BTCs. From the beginning of 2021 to the end of 2022, influenced by the bull market and the "copycat season", the market share of BTC gradually decreased from over 60% to between 40% -45%. Subsequently, benefiting from the institutional buying trend and the return of liquidity, the market share of BTC began to rebound from January 2023. By July 2023, the market share of BTC will be around 50%.

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The market share of mainstream Cryptocurrency has changed as of July 17, 2023.

When the interest rate is 0%, the total market value of the crypto market is around $3 trillion. At an interest rate of 5.25%, the total market value of the crypto market is approximately $1.2 trillion - approximately 40% of its peak. Between November 2021 and March 2022, the crypto market lost approximately $1 trillion in market value due to the Federal Reserve's expected management. In March, the Federal Reserve raised interest rates by 25 basis points, at which point the total market value of the crypto market was approximately $2 trillion -67% of its peak.

Considering that the Federal Reserve is not expected to adopt the unlimited quantitative easing policy from 2020 to 2021 in the coming years, the maximum change in the total market value of the crypto market due to expected changes will not exceed $1 trillion.

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The total market value of the crypto market has changed as of July 17, 2023.

Let's expand on the above logic:

Considering the current lack of external liquidity entry in the crypto market, we assume that the future price of BTC depends entirely on changes in interest rates and market expectations, and is reflected in changes in market share.

In the context of high interest rates of 5.25% and a lack of external liquidity entry, it is difficult for the total market value of the crypto market to significantly increase before January 2024. Even if 'expectations come first', in the most optimistic scenario, the expected internal market value growth in the encryption market will not exceed $500 billion.

The total supply of BTC is approximately 19.43 million pieces, and there will be no significant change of more than 5% in the total supply within a year.

Simply consider three situations:

1. Investors do not have more expectations, and the internal market value growth of the crypto market is limited. The total market value of the encryption market will remain stable between $1.2 trillion and $1.4 trillion, and the market share of BTC will not change significantly, maintaining around 50%. This means that the market value of BTC will fluctuate between $600- $700 billion, and the price will fluctuate between $30880- $36026;

2. The passing of BTC spot ETFs brings good expectations to investors. The market value of the encryption market has rebounded to around $1.5 trillion to $1.6 trillion.

-If the market share of BTC does not increase, the market value of BTC will stabilize at around 750 billion to 800 billion US dollars, and the highest price may reach 41173 US dollars; Even if the rebound is not severe enough, the price of BTC will still be higher than $38500;

-If the spot ETF leads to an increase in BTC market share to 60%. In the best case, BTC's market value will reach $960 billion, with a unit price exceeding $49400; Even if the overall rebound in the encryption market is not strong enough, BTC's market value will rebound to $900 billion, with a unit price of $46300.

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-If the market share of BTC does not increase, the market value of BTC will reach over 850 billion US dollars, and the price will rebound to over 43700 US dollars;

-If the market share of BTC increases to 60%, the market value of BTC will reach over $1.02 trillion and the price will reach around $52500.

In short, macro factors are relatively favorable for BTC, and the level that BTC prices can ultimately reach depends on interest rates and market expectations.

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ETH: "How to become a more profitable company"

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Simply consider three situations:

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1. Ethereum Layer2 Ethereum Layer2 Ethereum 50%

-Assuming there is no significant change in the ETH P/E ratio, investors' strong expectations drive the P/E ratio to remain around 300. In 2023, Q2's net income was $423 million, Q3's net income was $635 million, and Q4's net income was $953 million. In this scenario, ETH Network's total revenue for 2023 will reach $2.137 billion. Considering that ETH deflation will cause the total supply of ETH to drop to 120 million units, the average price of ETH at the beginning of 2024 may exceed $5300 and exceed $9700 in the first quarter after the upgrade in Cancun.

-Assuming that investors' expectations are relatively neutral, causing the price to earnings ratio of ETH to fall back to around 150 (close to comparable companies such as AMZN), in this scenario, the average price of ETH will reach around $2670 in early 2024 and approach $4900 in the first quarter after the upgrade in Cancun.

2. Ethereum 25% 2023 Q4 50%

-Assuming there is no significant change in the ETH P/E ratio, investors' strong expectations drive the P/E ratio to remain around 300. In 2023, Q2's net income was $423 million, Q3's net income was $529 million, and Q4's net income was $661 million. In this situation, ETH Network's total revenue for 2023 will reach $1.739 billion, and ETH's average price at the beginning of 2024 may exceed $4300, and it will exceed $6500 in the first quarter of 2024. If the P/E ratio falls back to around 150, the average price of ETH at the beginning of 2024 may be around $2150 and exceed $3200 in the first quarter of 2024.

3. EthereumQ3Q4 20%15%

-Assuming there is no significant change in the ETH P/E ratio, investors' strong expectations drive the P/E ratio to remain around 300. In 2023, Q2's net income was $423 million, Q3's net income was $508 million, and Q4's net income was $584 million. In this situation, ETH Network's total revenue for 2023 will reach $1.641 billion, and ETH's average price at the beginning of 2024 may exceed $4100, and it will exceed $5400 in the first quarter of 2024. If the P/E ratio falls back to around 150, the average price of ETH at the beginning of 2024 may be around $2050 and exceed $2700 in the first quarter of 2024.

In summary, the development of ETH is highly correlated with its own profitability. The combination of narrative support and sustainable and growing profitability is the key to driving up ETH prices - this is completely different from BTC.

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Junction

To go our separate ways BTC ETH 2023 BTC ETH BTC BTC ETH XRPLTCBNB ADA CRV Ethereum

As the correlation between currencies continues to weaken, the analysis logic and trading strategies that were previously fully or partially reusable have become ineffective. Paired transactions no longer have the ideal correlation regression, and the universal investment framework based on market value and track is no longer applicable to some extent - this means that further analysis based on the fundamental aspects of the project itself has become more important.

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Changes in the correlation between BTC and other major Cryptocurrency except ETH, as of June 2023.

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Changes in the correlation between ETH and other major Cryptocurrency except BTC, as of July 2023.

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