The News Block #29 (03/19/24)
JP Morgan Analysts Predict $280k Bitcoin, Bull Market Dips Below $63k, More Companies Accept Bitcoin, Yellen Admits Inflation Wasn't 'Transitory'
Listen to the latest episode of the News Block below. 👇
The Bitcoin Bull Market Cools Off
After hitting a new all-time high, Bitcoin euphoria appears to be taking a breather. In the last week, the price has dropped nearly 15% to below $63,000.
It’s important to remember that pullbacks like this are normal during bull markets. Bitcoin does not go up in a straight line.
Head of Research at Galaxy Digital, Alex Thorn, highlighted this when he showed how Bitcoin experienced thirteen 12% drawdowns from the lows in January 2017 to the all-time highs made in December of that year.
This trend held true for Bitcoin’s next bull cycle as well. Thorn showed that Bitcoin experienced – once again – thirteen 10% drawdowns from the lows in March 2020 to the all-time highs made in April 2021.
Moral of the story? Larger price drawdowns than the one we are experiencing are par for the course. For investors with high conviction, price dips like this are great to scoop up more sats before the bull market marches on.
MicroStrategy Stacks More Sats
And there may not be a bigger Bitcoin bull on the planet than MicroStrategy’s Michael Saylor. Over the last couple of weeks, we’ve covered how Saylor is raising cash to the tune of hundreds of millions of dollars through both the equity and debt markets to buy more bitcoin.
Saylor didn’t wait long to tap the debt markets once again, announcing late last week another $525 million raise. This Tuesday, it was announced that MicroStrategy acquired another 9,245 BTC with the money. You might not be stacking this dip, but Saylor is!
This strategy has contributed to an absolute surge in trading volume for MicroStrategy’s stock. Last week, MicroStrategy’s stock traded more than Amazon’s, according to Bloomberg Senior Analyst Eric Balchunas.
Along with MicroStrategy, BlackRock continues to gobble up sats at an impressive pace. Although this is not a true apples-to-apples comparison, given that MicroStrategy actually owns its Bitcoin, whereas BlackRock manages an ETF that holds bitcoin on behalf of its customers, it’s still true that these entities appear to be in a race to see who can acquire the most bitcoin.
Last week, BlackRock’s ETF surpassed MicroStrategy and now holds more than 230,000 bitcoin to Microstrategy’s 214,246. It’s worth noting that both corporations are still behind Grayscale’s ETF, which holds 380,000.
Last month, a BlackRock quant analyst gave a presentation at an exclusive event to top clients and said that a 28% allocation to Bitcoin was “not unreasonable.” Some clients may have taken that recommendation to heart. In addition, BlackRock recently announced that it will include its Bitcoin ETF in multiple funds, including its $18 billion Global Allocation Fund and $36 billion Strategic Income Opportunities Fund.
These are LARGE passive funds, and this news hints at the next evolution for these Bitcoin ETFs – issuers including them into more and more of their passive funds, which will create a continuous flywheel of demand for Bitcoin.
The end result? Number go up.
Traeger Grills to Accept Bitcoin
A common narrative during the last bull market was that corporations would follow the MicroStrategy playbook, and we would see a large wave of corporate demand that would drive Bitcoin’s price higher. But unfortunately, this has yet to materialize in a big way. Why?
For starters, it’s rare for a leader to have control over the voting rights of a large corporation, such as is the case with Saylor and MicroStrategy. This gives Saylor the power to steer the ship and execute a Bitcoin strategy without much opposition. Other corporations don’t have the same corporate governance structure.
Secondly, a lack of clear accounting rules made it challenging for corporations to put Bitcoin on their balance sheets. This changed earlier this year when new accounting rules were approved by FASB that will make it easier than ever before for corporations to buy bitcoin.
And we are already beginning to see more evidence of corporations embracing Bitcoin. One story that went under people’s radars last week was when Traeger Grills, a popular grilling company with more than $600 million in annual revenue, announced that it will begin accepting Bitcoin as a form of payment – and here was the key point – they “may or may not liquidate the bitcoin upon receipt.”
The wording here suggests that Traeger is not only interested in accepting bitcoin for payment but will also consider holding onto the bitcoin if they do receive it.
Whereas the last cycle could be viewed as a disappointment when it came to corporate Bitcoin adoption, this cycle is shaping up to be different. It’s just another reason to be bullish for the next couple of years and maybe consider a Traeger Grill for the backyard.
Large Financial Institutions Growing Increasingly Bullish
One consequence of the success of these ETFs is that large financial institutions appear to be getting increasingly bullish on Bitcoin.
Global banking giant Standard Chartered recently increased its Bitcoin price prediction for the end of 2024 from $100,000 to $150,000 and also updated its price prediction for 2025 to $250,000.
It’s not just Standard Chartered either. A recent JP Morgan Securities report estimated that $220 billion could flow into the Bitcoin ETFs over the next 3 years and that this could be – quote – “quite impactful to Bitcoin’s price given the multiplier on capital.”
So what exactly do they mean by “multiplier on capital?” This alludes to the idea that Bitcoin’s price historically has been extremely sensitive to new dollar inflows. In 2021, a Bank of America study estimated that it only took $93 million of new inflows to move Bitcoin’s price by 1%.
To put this into perspective, the same Bank of America study found that it took more than $2 billion of inflows to move the price of gold by 1%.
This recent JP Morgan report estimates the current multiplier on capital in Bitcoin below Bank of America’s at 25x – meaning for every new dollar that flows into Bitcoin, it adds 25 dollars to its market cap.
So if JP Morgan’s analysis is correct here, and $220 billion flows into the Bitcoin ETFs over the next three years, then these flows alone could increase Bitcoin’s price to $280,000 per coin.
Yellen Says She Regrets Calling Inflation “Transitory”
Shifting gears over to the fiat world, Treasury Secretary Janet Yellen made headlines last week when she admitted in an interview with Fox Business that she regrets calling inflation transitory.
Listen to the clip:
“Transitory” was the messaging from both the Federal Reserve and Treasury when it came to inflation and they turned out to be very, very wrong. Now, after years of Americans suffering from the rising cost of living, Yellen is backtracking on her previous statements.
Although inflation has come down, CPI still remains above 3%, and core CPI – which subtracts food and energy – remains closer to 4%. Both measures are still well above the Fed’s 2% target and they don’t appear likely to reach that level any time soon.
To anyone who can connect the dots between printing more than $6 trillion and the rise in prices everywhere, the stickiness of this inflation comes as no surprise.
Americans should get used to higher inflation levels considering that our government continues to spend money at a crazy clip. If adopted– and that’s a big if – the new 2025 Biden budget proposal expects to run a nearly $2 trillion fiscal deficit next year.
Larry Lepard is one Bitcoiner who has been hammering the table warning we will never go back to a 2% inflation world. I just had him on Coin Stories, and we discussed his prediction of a multimillion dollar Bitcoin price.
Inflation may not have been transitory, but the Bitcoin bear market certainly was.
Until next week, keep stacking.
- N₿
If you enjoyed reading this post, you should consider subscribing to the News Block.
The News Block is powered by Bitdeer Technologies Group, a publicly-traded leader in Bitcoin mining that stands alone as the only vertically-integrated, technology-focused Bitcoin mining company.
Make sure to listen to some of my latest Coin Stories episodes, including recent interviews with Lawrence Lepard, Michael Saylor, and Lyudmyla Kozlovska.
Listen on Fountain and Earn BTC: Click here
Listen on iTunes: Click here
Listen on Spotify: Click here
Listen on YouTube: Click here
NEW: Larry Lepard: Bitcoin Price Going to 'Multimillion' Per Coin, Don't Sell at $100k!
Larry Lepard founded Equity Management Associates in 2006. EMA is an equity investment management firm investing in growing private and public companies around the world. The competitive CrossFit Masters Athlete and former pilot earned his MBA from Harvard and BA in economics from Colgate.
Coin Stories Promotional Links and Discounts
Bitcoin 2024 by Bitcoin Magazine - Join us July 25-27 in Nashville! Use code “HODL” for 10% off.
CoinKite - Your go-to tech company for top-notch Bitcoin self-custody solutions, including the popular ColdCard wallet. Get 5% off using my link.
Unchained Capital - Buy Bitcoin and secure it through multisig collaborative custody today. Sign up using my link.
The Bitcoin Way - Master Bitcoin Self-Custody and gain peace of mind with the help of The Bitcoin Way.
CrowdHealth - The Bitcoin community’s alternative to health insurance. I now spend just ~$100 a month on my health care. Sign up using my link.
Orange Pill App - Connect with Bitcoiners and Bitcoin merchants wherever you live and travel on the Orange Pill App.