Bitcoin - The Bull Run Takes Over

The second quarter was not great for bitcoin, but the outlook is clearing. The $100,000 still in sight by the end of the year.

FUD is fading

Bitcoin retreated by 25%, falling from $71,000 to $53,000. In percentage terms, this is the largest decline since February.

After a 69% increase in the first quarter, bitcoin fell by 13% in the second. Despite this correction, it remains at the forefront of all asset classes since the beginning of the year (+55%).

The fourth halving was the highlight of the quarter, and its impact was positive on the market. The impact was obviously not immediate. Nevertheless, in the long run, its impact is equivalent to the daily purchase of 450 BTC that will never be sold.

As we wrote recently, bitcoin sales linked to the German government as well as Mt. Gox have prompted traders to cover. The shift in market sentiment was very noticeable at the ETF level.

The following chart shows that net flows into ETFs moderated in the second quarter, to $2.5 billion compared to $12.1 billion in the first quarter.

We can observe net outflows starting from the beginning of June. That is, when the old issue of Mt. Gox resurfaced, accompanied by the German government:

Investissements cumulés vers les ETF #Bitcoin américains pic.twitter.com/15hL7ttqIG

— Nicolas Teterel (@NTeterel) July 17, 2024

With the German government sales completed (50,000 BTC), net inflows into ETFs have turned positive again. Cumulative investments in ETFs have returned to an all-time high.

As anticipated, redistributions in the Mt. Gox bankruptcy case (142,000 BTC) did not hammer the market. More than 65% of creditors have already been repaid without observing massive sales. About 90,000 BTC still need to be redistributed according to Arkham, roughly $6 billion.

China, the United States, and Bitcoin

The outlook is clearing, and the upcoming US presidential election is already a very good sign for bitcoin.

Once sceptical, the former US president has finally changed his stance. The price of bitcoin even jumped nearly 10% following the assassination attempt over the weekend.

His speech at the Bitcoin conference in Nashville, which will take place from July 25-27, promises to be explosive!

Also of note, his running mate James Vance revealed in 2022 that he held between $100,000 and $250,000 in bitcoins…

Another reason to be optimistic is that the CEO of BlackRock – the world’s largest investment fund – continues to praise bitcoin.

“I did my homework. The opinion I had of bitcoin five years ago was not the right one. I now think that bitcoin is legitimate […]. It is a legitimate financial instrument […]. It is an instrument one invests in when fearful, when their country devalues money due to excessive budget deficits. It allows investing in something outside the control of your government. I firmly believe that bitcoin has a place in a financial portfolio. […] I see bitcoin as digital gold”, he said to CNBC.

JUST IN: Larry Fink on CNBC says #Bitcoin “gives you an opportunity to invest in something that is outside your country’s control, then you can have more financial control” 👀 pic.twitter.com/pbDbvHZk7O

— Simply Bitcoin (@SimplyBitcoinTV) July 15, 2024

All that remains is to convince Xi Jinping of its merits. This will be difficult as long as China refuses to lift its capital controls. Indeed, no one can prevent bitcoin transactions.

We could imagine that the United States might accept bitcoin becoming the international reserve of value if China agrees to open its financial borders. There would then be no reason to maintain the stigma on bitcoin.

The authorization of bitcoin-backed ETFs in Hong Kong is an optimistic sign.