Bitcoin: To infinity and beyond?
$100,000 in 5 years?
I love Buzz lightyear. The unfettered optimism. The solid belief that he can fly. The way his friends love him even though he is completely deluded. But then, when the chips are down, he turns up.
To infinity and beyond. Well this image of Buzz comes to mind when I read a Bloomberg Intelligence piece on Bitcoin where they project Bitcoin to $100,000 in 5 years. That's right, $100,000. What piqued my interest was that this was not a 'crypto nut' piece. You know the sort of thing, 'crypto is the new salvation financial product that will end the world's woes'.Always leaves me cold that sort of thing.The piece had a number of key points. Here are a few key ones I found persuasive
- Limited Bitcoin supply on favourable macroeconomic environment (low rates, QE etc)
- The lowest volatility ever vs the Nasdaq 100 index indicates that Bitcoin is ripe to rise from the one-to-one price to index ratio entrenched for three years. The chart below shows the ratio of Bitcoin's 260 day volatility to that of the Nasdaq reaching a new low. Bitcoin's price first matched the Nasdaq index value in 2017 at about $6,200. It revised the level in March and has nearly doubled since then with volatility declining for Bitcoin vs it rising for the stock market. Risk is improving for Bitcoin.
- Bitcoin supply is limited and declining on an annual percentage. The market cap is $190 billion, so too small for large investors However, if the cap increases then it can become more like a 'digital gold', Gold cap is around $9 trillion.
- As stocks underperform that encourages more QE and rising debt to GDP ratios. Tail winds for gold and bitcoin
- Rapid rise in the market cap of stable coins indicate that central bank digital currencies are just a matter of time. In this 'digitial currency' market who is the king pin? Bitcoin. The digital version of gold.
- There are favourable trends in decentralised finance (DeFi) and exchanges (DEXs)
- About 90% of the 21 million Bitcoins that will ever be mined, have been
- Bitcoin is correlating more closely with gold. On a 52 week basis Bitcoin is the most correlated to the metal in the Bloomberg Intelligence's data base since 2010. When futures were launched in 2017 the Bitcoin to gold relationship was closer to zero vs about 0.44 now.
- Bitcoin looks to be the leader in a paradigm shift towards digital money and stores of value. It may fail, but the Intelligence piece see this as unlikely as On-Chain indicators show a solidifying foundation. Read here to understand On-Chain metrics. The Bitcoin has rate continued to increase and has reached new highs
Looking at the technical there are a few key points ahead. However, the break of the monthly trend line would be a great sign for Bitcoin bulls.