SwissBorg MacroScope - February 12th
Is Momentum finally back on Crypto?
Institutional adoption is coming
Last week was one of the strongest in terms of net inflow of capital to the different ETFs with over $1 billion in net inflow. It seems that the short term selling pressure from Grayscale has finally been absorbed and that demand is finally coming into the different ETFs.
Looking at the assets held by different ETF one month post launch, we see that Bitcoin ETFs are in first and second place respectively. Hence, it is fair to argue that this represented the biggest ETF launch in history. This figure is impressive and shows that Bitcoin is finally being adopted on Wall Street.
Now if we look at the daily fund flows for the first month of trading of GLD, the first spot Gold ETF in the US, we see that the demand was nothing compared to the current demand for Bitcoin, with more than 11 days with zero flows. This reinforces that the true potential of Bitcoin ETFs is still underestimated.
Another important event of the week is Fidelity’s adding a 1% allocation to its Conservative All in One ETF, in Canada. This is a significant milestone as one of the biggest TradFi institutions is now acknowledging the merit of an allocation to Bitcoin in one’s portfolio.
As more and more asset managers follow, we are likely going to witness a big surge in buying pressure for Bitcoin and a shift in investor perception.
US Equities are flying - Will crypto follow?
Taking our focus outside of crypto for a bit, it is worth appreciating the strong performance of US equities in recent months. Last week, the S&P 500 touched the $5,000 levels for the first time in its history, up 40% from its October 2022 low.
The Nasdaq is also in the same situation and shows even greater strength, up 68% since its 2022 lows.
This acts as a great reminder that there is a big difference between the truth that we find in price actions and the current sentiment around fundamentals. Hence, even though the sentiment throughout 2023 (and still today), was around a recession in the US, strong interest rates, and a worrying inflation, stock had a phenomenal performance. If investors made their decision solely based on what they thought of the economic outlook, they would have missed big.
The same logic applies to the crypto market and if we solely look at the total crypto market cap, ignoring everything else, it feels that we are only in the beginning of a new cycle where the biggest opportunity is still ahead of us.
Chart of the week
This chart shows the relationship between Bitcoin and global liquidity (monetary debasement). We note a clear trend: crypto is the best asset class to own against the debasement of fiat currency.
As Raoul Pal likes saying, even though we love to overcomplicate things, maybe the case for crypto is that simple: a hedge against the inevitable fiat debasement that is happening.
Our In-House View
SHORT TERM VIEW: What might happen in the next 2 weeks?
- After more than 2 months of sideway actions, it seems that momentum is finally restarting on crypto.
- If Bitcoin continues to maintain the 48k levels, we could expect this trend to continue and break the 50k levels. This is a significant level for Bitcoin and given that different catalysts are in front of us, this could kickstart a strong reflexivity in price.
LONG TERM VIEW: Where are we in the cycle?
- We are in a bull market and we expect to see BTC > $100k, ETH > $10k and SOL > $500 as new ATH in the next leg of the cycle.
- A dovish stance is starting to appear on central banks sides and global liquidity is in positive territory. Long term, this is bullish for crypto assets.
- We believe in ETH as the superior asset to Bitcoin for the next decade. Further, our view is that SOL has the biggest potential for consumer app adoption.
- Our favourite altcoins thematics for the next upleg are Socialfi, Gamefi, DePIN, AIfi & Infrastructure for scalability.
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