A hedge fund sees Bitcoin at $90,000 in April. Here are five factors driving gains

April is looking good for Bitcoin.

After a volatile month saw Bitcoin’s price reach new all-time highs, plunge 14%, and rise back again to $64,500, the top cryptocurrency will benefit from a few tailwinds.

90-day due diligence

Demand for Bitcoin is likely to pick up soon, Coinbase analysts David Duong and David Han wrote in a recent report.

That demand will be driven in part by Wall Street institutions, which will soon finish conducting their due diligence on the new Bitcoin spot exchange-traded funds and make the products available to their clients.

“This could yet unlock significant capital for US based spot Bitcoin ETFs over the medium term,” the report said.

Many brokerage firms employ a 90-day review period, Coinbase said. Since the ETFs were approved on January 10, that review period will end on April 10.

Other kinds of institutions, like money managers, will likely open up to the ETFs as well.

LPL Financial, a firm with $1.4 trillion in assets under management, said in February that it will take three months to conduct its due diligence.

Bitcoin halving

The so-called Bitcoin “halving” is another catalyst. Estimated to occur on April 19, the fourth halving will automatically cut in half the amount of new Bitcoin created by the network — thereby reducing Bitcoin’s supply.

The last three halvings were characterised by drastic reductions in Bitcoin selling, which in turn propelled Bitcoin’s price.

“Bitcoin ripping beyond your best estimates over the next month into the halving will be so obvious in hindsight,” Quinn Thompson, founder of crypto hedge fund Lekker Capital, posted on X.

Thompson said that Bitcoin could rise to $90,000 in the course of the month.

‘Unfazed’ ETFs?

The way Bitcoin spot ETFs closed the last week of March was also bullish, crypto market maker Wintermute wrote in a Monday report.

As the first financial quarter of the year drew to a close, Wall Street institutions “likely engaged in portfolio rebalancing,” Wintermute said.

For example, if an asset, like Bitcoin, was supposed to occupy 5% of a manager’s portfolio, but its price performance made it grow into 10% of the portfolio’s holdings, then the firm may trim its Bitcoin position until it reaches 5% again.

But the fact that the Bitcoin spot ETFs did not suffer any significant outflows last week suggests two scenarios, Wintermute said.

One: funds want a higher percentage of their assets to be held in Bitcoin. Another is that demand from retail investors is “overshadowing the effects of institutional rebalancing.”

Either way, it’s a good sign.

“Unfazed ETF inflows suggest a promising short- to mid-term market outlook,” Wintermute said.

Good omens in Bitcoin derivatives

Bitcoin derivatives showed positive signs as well.

While open interest in Bitcoin futures reached an all-time high of almost $40 billion during the quarter, perpetual futures trading volume did not surpass its own all-time high.

This discrepancy between the the reflection of total outstanding futures contracts and relatively lower volume “suggests a holding pattern rather than short-term trading activity,” Wintermute said.

Futures contracts allow traders to buy or sell the asset at a predetermined price at a specified date. Perpetuals are a type of futures without any expiry date.

Meanwhile, over $15 billion in open interest expired on Deribit, including $9.5 billion in Bitcoin options and $5.7 billion in Ether options. More than 41% of the Bitcoin options and 45% of the Ether options closed in the money — meaning in profit.

“The minimum downward price impact during a large options expiry, coupled with significant options expiring in the money, could bolster upward momentum,” Wintermute said.

Grayscale diminishing

Finally, while the new ETFs have been massively supportive for Bitcoin’s price overall — hauling in a net $12 billion since their launch — Grayscale’s Bitcoin Trust has put significant downwards pressure on the asset.

The fund, which held almost $29 billion in assets upon conversion, has experienced more than $14.7 billion in outflows since then.

But GBTC won’t be able to keep bleeding flows at that pace forever, Wintermute said.

“If Grayscale continues to reduce its Bitcoin holdings at the rate observed [up until now], its influence on the market’s net flow dynamics is expected to diminish by the end of the next quarter,” it wrote.

Tom Carreras is a markets correspondent at DL News. Got a tip about crypto markets? Reach out at tcarreras@dlnews.com