Crypto land is on fire
Another historical week for Bitcoin ETFs
We’ve had the strongest week in records for the Bitcoin ETF s. Daily volumes clocked in their first, second, third, and fourth biggest day in just one week. On its highest day, volume amounted to nearly $6 billion, which is way higher than the volume traded during the first day of trading of ~$2.4 billion (an historical number at the time).
To put things in perspective, ETFs traded more last week than their entire first month on the market. Is it an anomaly or a new trend? Time will tell but one thing is for sure: Bitcoin is generating a lot of hype.
Moreover, Blackrock has also joined the 10 billion in AUM (Asset Under Management) club this week with its ETF $IBIT. Out of 3,400 ETFs, only 152 are in this club .
So the TL;DR is simple: TradFi is buying all our magic internet money like there is no tomorrow.
MicroStrategy - Soon in the S&P 500?
By now, MicroStrategy needs no introduction. Founded by Michael Saylor (a true OG in the Bitcoin community), this company evolved into a leading player in enterprise software. However, it completely shifted gears in 2020 (when Michael Saylor got “oranged-pill”) and became one of the first big companies to incorporate Bitcoin on its Balance Sheet at scale. A bold move which has proved to be worth it. As of writing, they hold approximately 193,000 BTC acquired at an average price of $31,544 (and they are planning to continue buying Bitcoin).
Its incredible performance this year is bringing them close to being eligible to join the S&P 500 index, which requires that its constituents carry a market cap of at least $15.8 billion (MicroStrategy has a current market cap of 18,32 billion USD).
If this happens to be the case, this could be bullish for Bitcoin and initiate a positive feedback loop:
- Inclusion in the S&P 500 could bring in a tsunami of new demand from passive SPY investors not even actively seeking Bitcoin exposure.
- This could increase Microstrategy market value, which could make them prone to issue more shares and use the proceeds to buy more Bitcoin.
- Value of Bitcoin rises which raises the value of Microstrategy. And the cycle goes on and on.
Furthermore, this could potentially inspire more businesses to adopt a similar approach, making the “Bitcoin Standard” on company Balance Sheet something mainstream (that your grandkids may learn in their undergraduate degree).
Major crypto macro index are bullish
We are in a full-fledged bull market. As Bitcoin is rapidly approaching ATH (all-time-highs), different macro models show that the market is bullish.
First, when we look at Capriole’s Bitcoin Macro Index , we see that Bitcoin is currently in expansion mode.
Another macro chart from Plan B , the creator of the famous Stock-to-Flow model, is also pointing to “bull market” for the first time since 2021.
The case for Bitcoin - A quick monetary debasement story
Suppose that you and your friend each have $50 in a $100 total supply of money. This means that you each own 50% of the money.
Now imagine that a guy comes in, creates $300, gives $50 to you, $50 to your friend, and keeps $200 for himself.
There is now $400 total supply of money:
- You have $100 (25% of the money supply)
- Your friend has $100 (25% of the money supply)
- The guy has $200 (50% of the money supply).
You had free money, you must be better off, right? Right? Well, the truth is…not at all.
While not a single dollar has been directly taken from you, half of your money has been stolen (you used to own 50% of the money supply and now you own 25%).
Do you support the guy?
If you’ve answered no, then why do you support central banks? Because retrospectively, they are doing much about the same thing.
Looking at the Fed:
- In 1959, there was 289 billion dollars in circulation.
- In July 2023, there was 20,902.7 billion dollars in circulation.
Similar to the example, new money created needs to go somewhere.
So where does the central bank's new money actually go?
The answer is: To a minority of asset holders. For every $100 the Federal Reserve creates, $56 goes to the top 1%, while $0.60 goes to the bottom 50%. This means that the top 1% of the country receives 93x more of the new money than the bottom 50% .
While no money is actually taken out of their hands, their value is being eroded by new supply of money coming into the system and always going to the same hands.
And guess what, this is exactly why Bitcoin has been created. Satoshi was an artist and his masterpiece Bitcoin represents hope to escape the monetary debasement trap set by Central Banks. This is the case for Bitcoin.
Something to keep in mind
Even if we think that this bull market still has a long way to go, things never go up in a straight line. At some point, there is a high likelihood that we are going to witness some volatility and drawdowns.
Historically we saw high volatility just below ATH , which is often a significant psychological resistance, especially with funding >5x normal levels.
Therefore, it is important to keep in mind that a short term drawdown should not be seen as something negative. In contrast, it should be seen as something healthy and could provide a good dips buying opportunity before another strong uptrend into price discovery.
Our Long-Term in-House View
- 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.
On a longer time horizon, this is often bullish for risk assets as they recover and benefit from a revival of economic conditions as well as support from the Fed.
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