Bitcoin's Rally
Has Legs For Many Reasons
Years ago, when PayPal created a method of buying but not selling Bitcoin, I bought the “smoke & mirror” currency. I did well, earning a 4X return. I took the profit and then “stayed away.” I’m back because I believe Trump, the pro-Bitcoin candidate, is going to win.
Bitcoin is once again on the “rise”, posting a 10% increase in the last week and trading around $64,000. Several factors are driving this surge, from macroeconomic changes to shifts in market sentiment.
Rate Cuts and Inflation Hedging
The recent 50 basis point rate cut by central banks has impacted markets. Bitcoin is benefiting from a weaker dollar and loose monetary policy, according to Bernstein. Like gold, it’s seen as a non-sovereign asset. It gains appeal in times of fiscal excess, especially with U.S. debt levels reaching $35 trillion. Year-to-date, Bitcoin is up 45%, compared to gold’s 27% rise.
Growing Bipartisan Support for Crypto
Crypto is gaining political traction with bipartisan backing gaining steam. Although Trump is Bitcoin’s best friend, Vice President Harris recently has signaled support for digital assets during a New York City event, marking the administration’s first explicit crypto endorsement. A Trump victory will accelerate pro-crypto policies. Institutional interest in major assets like Bitcoin will remain strong regardless of who wins.
Bitcoin ETF Momentum
Institutional flows into Bitcoin ETFs have remained very robust. In the last 10 days, Bitcoin ETF clocked $800 million of “inflows”, despite choppy price action. Morgan Stanley will soon launch a Bitcoin ETF. This will probably drive further positive price movements as advisors solicit clients.
Miner Stability Post-Halving
Bitcoin miners have adjusted to the April 2024 “halving” event, stabilizing operations. Network hash power has rebounded, signaling miner resilience & further solidifying the foundation.
Reduced Selling Pressure
Major Bitcoin sales by the U.S. and German governments, as well as big distributions from Mt. Gox, have been absorbed by the market, says the firm. MicroStrategy raised $2.1 billion to buy more Bitcoin, pushing its holdings to 252,220 BTC, or 1.3% of the total supply.
There are more reasons than those mentioned above. Regardless of what you believe, “smoke & mirrors,” is changing. Remember, where there is “smoke,” there is “fire.”
Way back in the early 1970s, Deep Purple released “Smoke On The Water”. Funny, I do not think they had any idea what Bitcoin was. If they released that song today, we all would interpret it differently. Timing is everything. Where this is “smoke,” there is “fire,” especially for an investment that is, at best, “smoke & mirrors.” I’m not a true fan of Bitcoin, but when the reasons to act suggest something different than what I’m to believe, I listen. I think Bitcoin is going much higher. How about you?