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It feels weird to say this but I have not been this bullish on Bitcoin since 2020.
In fact, I believe Bitcoin is on the verge of a new supercycle (and could create generational wealth).
But bear with me a second.
I don’t want to sound like a charlatan telling you to “Buy this one crypto and retire in 3 months.” This is simply not how it works. No one can predict the future.
Instead, I will simply walk you through my thought process toward why I am bullish on Bitcoin.
We will see that there is a confluence of elements pointing toward the potential start of a new bull market.
Let’s dig in.
1. Many people still think that the bottom is not in
“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” — Sir John Templeton
The first element I want to bring to the table is the excess pessimism still present around Bitcoin.
(I love you Tim, but I don’t agree with you on that one).
Further, if you spend some time on Crypto Twitter, you will see that the market sentiment is still mixed. People change their minds every minute about the direction of the market.
And a lot of people that didn’t catch the bottom are begging that Bitcoin will go lower.
But guess what, this is bullish.
If you wait for everyone to get horny about crypto, it will simply be too late.
As the legendary investor, John Templeton pointed out, bull markets are never born when everyone is optimistic about the future. Because if it’s the case, then everyone would already be positioned and the price would already be higher.
Instead, bull markets are born when the majority of people are still doubtful and pessimistic.
As prices rise, the same people who were pessimistic at the beginning of the uptrend will drive prices up (as they change their minds).
That’s just how market psychology work.
So let me repeat: the first bullish signal is that market sentiment is still mixed.
2. Traditional Finance entering the game:
“I do believe that crypto is digitalizing gold in many ways” — Larry Fink
The second element (and probably the most important one) is that new players are entering this market.
On June 15, Blackrock filed an application for a Spot Bitcoin ETF.
A few days later, we saw a lot of other big names from traditional finance showing a renewal of interest in Bitcoin (and other crypto assets).
Fidelity filed for a Spot ETF, Citadel launched a Crypto Exchange, Santander showed a deep interest in Bitcoin,…
Now, don’t get me wrong. Those institutions still need to face regulatory constraints and nobody knows what the end word of the SEC will be.
But one thing is for sure, this interest from institutions shows that Bitcoin is here to stay (else they won’t have spent millions of dollars trying to get into that space).
It also implies that a completely new class of investors will soon enter the market. This represented trillions of dollars ready to be deployed to this asset class.
Bitcoin (and more generally the crypto market) is really sensible to liquidity.
In short, it represent how much money there is in the system.
More money in the system = Price appreciation (as the currency debase)
Less money in the system = Price collapse
To fight the inflation (or debasement) created by massive money printing during the global pandemic, central banks around the world have put in place really restrictive monetary policies throughout 2022 (by raising interest rates like never before).
This led to a massive crunch in liquidity in 2022 which affected the majority of assets (and Bitcoin was not sparred).
But right now, the worst is behind us (in terms of monetary policy).
My view is that central bank’s action will be looser in the coming month (with one or two 25 bps hikes maximum). This could push liquidity back into the system. And when liquidity changes, everything changes.
Hence, Bitcoin could benefit as we move from restrictive to lax monetary policies.
4. Asia and China adding liquidity:
In addition to new institutions entering the space, we also witnessed the resurgence of crypto in Asia in the past months.
Hong Kong has taken recent steps to emerge as a crypto hub in Asia. As of the 1st of June, they started accepting licenses to run trading platforms and exchanges.
By providing a fertile ground for crypto to develop in Asia, we could witness a new market entering the space.
Further, this move from Hong Kong could be reinforced by the positive growth in M2 (Money Supply) in China. This could create a positive feedback loop on price (remember that Bitcoin is an asset driven by liquidity).
A New and Growing Market entering the space = Bullish
5. The Bitcoin halving is fast approaching:
By design, only 21 million bitcoins will ever exist (and most of them have already been mined). The protocol is built in such a way that every four years the number of bitcoins produced by mining is cut by half.
This is the Bitcoin halving.
Historically the halving has always been bullish for Bitcoin. It is seen as a milestone where the decreasing inflation rate act as a reminder of the scarcity of Bitcoin.
It acts as a supply shock where prices rise if demand stays the same and supply decreases.
Furthermore, it also drives miners’ revenue (in Bitcoin) down in the short term. This incentive innovation and increase competition. Ultimately, it increases the network strength which has an effect on price (as fundamental value increases).
The next halving is due during the beginning of 2023. This could provide rocket fuel for a new bull cycle.
6. The 2024 Election in the United States:
I also believe that Bitcoin (and crypto assets more generally) will definitely be a big subject for the next election.
I am not an expert in US politics by any means but I do believe that heavy crypto regulation could alleviate young voters. Hence, even if candidates as such don’t care about crypto, they will care about the lost vote.
Further, some candidates are also already pro-crypto. For instance, candidates in both parties–like Republican Vivek Ramaswamy and Democrat Robert F. Kennedy Jr.–have expressed great support for Bitcoin.
Greater political support towards crypto in the US space could nurture confidence in the market. This is bullish.
This is more of a long-term catalyst but still, it is still relevant.
In short, de-dollarization is a process by which countries around the world will reduce their dependence on the USD as a medium of exchange, store of value, and unit of account in international transactions.
This change is extremely complex and will not happen overnight (and I don’t want to spend hours talking about it).
The only point I want to make is that Bitcoin could benefit from this macro event.
Why?
Don’t get me wrong, it is unlikely that Bitcoin becomes the next currency of the world.
But as countries reduce their dependence to the dollar, there will be a lot of uncertainties around which currency to choose from. This could increase buying pressure and even a tiny allocation to Bitcoin from bigger Nation States would be really bullish.
Furthermore, the bitcoin network could also be used for global transactions (instead of SWIFT for instance). This will increase the fundamental of the asset (as Bitcoin’s value is partly derived from its network effect) and this will be reflected in price.
Hence, this de-dollarization process could add a bit of spice to Bitcoin in the long run.
Frankly, I have rarely seen such a convergence of elements pointing towards the beginning of a new supercycle on Bitcoin.
I hope you are prepared.
If you enjoyed this story, make sure to follow me.
PS: this article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information is accurate. Consult a financial professional before making any major financial decisions.
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