Bitcoin - The Four Pillars Of The Next Bull Run

Bitcoin is gaining momentum and four factors make us very optimistic for the coming months.

BlackRock Still a Fan of Bitcoin

The largest investment fund in the world continues to reinforce the bullish sentiment. Its latest report “Bitcoin: A unique diversifier” reminds us that it has outperformed all major asset classes in seven of the last ten years. Its annualized return was over 100% per year.

And after a very good 2023 (+147%), the 2024 “Halving” vintage looks promising. In fact, BTC is up 56% since January 1st.

The report argues that Bitcoin is a safe haven against disruptive geopolitical events. This comes at an opportune time since we are on the brink of a nuclear war…

BlackRock believes that “Bitcoin, the first finite, decentralized, and stateless monetary alternative to be widely adopted globally, does not present any counterparty risk, does not rely on any centralized system, and is not dependent on the fate of any particular country.”

For the fund, Bitcoin’s adoption trajectory is tied to growing concerns about global monetary instability and geopolitical disagreements. American monetary hegemony will be an important factor in the equation:

“Growing concerns in the United States and abroad about deficits and public debt have increased the appeal of alternative reserve assets as a potential hedge against potential dollar setbacks.”

The fund believes that Bitcoin is “an emerging technology that is just beginning and could become an international payment currency as well as a store of value.”

The Banking Barrier is Breaking Down

Last week, the oldest American bank BNY Mellon obtained an exemption from the SEC’s (SAB 121) stringent rules on Bitcoin custody. The end of the banking anathema is good news for the millions of individuals who, burned by scandals like FTX, prefer to wait for their bank to offer it to them.

For Michael Saylor, multinationals like Google, Microsoft, Amazon, or Apple are also waiting for big banks to be authorized to hold bitcoins on behalf of their clients.

“Multinationals will not adopt Bitcoin as a treasury asset until they can transfer a billion dollars a month to the City, Bank of America, or JP Morgan”, he said on the microphone of Saifedean Ammous.

Michael Saylor is redefining corporate finance through his company MicroStrategy. His reasoning is as follows:

“Meta is about to buy back its shares for 55 billion dollars. What if they bought bitcoins instead? The stock would then become a bitcoin derivative. Some will say that the 55 billion goes to bitcoin and is taken away from Meta’s stock value. But that’s not true. Professional investors will wonder what percentage of the stock value is guaranteed by bitcoin. If Meta buys bitcoin, its market capitalization will probably increase by 200 billion dollars.

Apple would be worth a trillion dollars more if they had bought 20 to 30 billion dollars worth of bitcoins per year instead of buying back their shares. They would buy an asset that appreciates more than 40% per year instead of less than 4% per year [Treasury Bonds with yields below inflation]. This strategy would give a boost to the S&P and NASDAQ.”

Trump Card

The U.S. presidential election in November could be another bullish catalyst. Standard Chartered bank analyst Geoff Kendrick predicts a “bitcoin at $200,000 by the end of next year, regardless of the next occupant of the White House”:

Like Saylor, Mr. Kendrick expects the arrival of American banks to be a turning point. He predicts that ETFs will attract substantial new capital after a rather quiet summer.

For him, a Trump victory would be the most bullish scenario. Indeed, let’s remember that the Republican candidate has promised to create a strategic bitcoin reserve at the Bitcoin Conference in Nashville.

In truth, he mostly committed not to sell the 200,000 BTC that the U.S. government already holds. However, he hinted that he could also buy more. In this regard, Senator Cynthia Lummis has prepared a bill to purchase one million bitcoins.

It is not certain that the senator will succeed in convincing the U.S. Congress, nor that Donald Trump will win in November. Nevertheless, what progress has been made…

As the CEO of Vaneck said, “if Bitcoin becomes an integral part of the monetary system as an international reserve currency, one BTC will be worth millions. […] It will exceed $350,000 as soon as it reaches half of gold’s market cap.”

Money Printing Press

The Fed has cut its benchmark rate by 0.50%. This is the first cut since 2020. According to central bank projections, rates are expected to drop by another 0.50% before the end of the year. And by an additional 1% in 2025.

The impact on money creation will be significant. When interest rates rise, the cost of borrowing discourages potential borrowers. The amount of new loans does not compensate for repayments and leads to a reduction in the money supply.

Conversely, lowering rates allows a larger portion of the population to borrow, increasing the money supply.

The M2 money supply aggregate effectively measures the liquid quantity of money likely to increase demand. It is a good proxy for anticipating consumer price inflation and asset price inflation:

Global M2 money supply just reached an ALL-TIME HIGH.

The money printers are back on. 🚀 pic.twitter.com/OYkkXx704T

— JAN3 (@JAN3com) September 20, 2024

The fiat system is a Ponzi scheme by definition. For reasons explained in this article, the amount of money must constantly increase for the system to stay afloat.

This system is neither good nor bad. Simply, it is absolutely necessary to grow the economy to ensure that wages follow and the standard of living rises. That is, energy is needed to transform matter and transport it to supermarkets.

Unfortunately, cheaply extractable fossil energy resources are dwindling, making it increasingly difficult to generate the growth and productivity essential for rising wages.

Here’s the trend for the old continent:

-Maximum energy import: 2007
-Maximum weight loaded in trucks: 2007
-Maximum square meters built per year: 2007
-Maximum disposable income: 2010

What happened in 2007? The peak of conventional oil. In 2023, the European Union consumed 17% less energy than in 2006. Hence the inflation that is starting to sting seriously on the old continent.

The double-digit inflation of the past two years is a reminder not to let your savings sit in the bank. Bitcoin, a currency existing in a fixed quantity, is a much better store of value.