Bitcoin: Race To The Bottom

Summary Bitcoin has proven itself as a hedge and store of value, outperforming traditional assets during market volatility and monetary debasement. Institutional adoption is accelerating, with surveys showing a growing allocation to Bitcoin in diversified portfolios globally. The macro environment of rising debt and currency debasement makes Bitcoin the best asset to hold for the next decade. While short-term cycles matter, the real risk is not owning Bitcoin as its long-term trend remains strongly upward. Thesis Summary Bitcoin ( BTC-USD ) is breaking out again, showing that it could potentially be ready for another big run-up. In the last year, Bitcoin has set itself apart from other risk assets, showing that it is in a league of its own, and that it is not just a speculative bet, but is increasingly being considered by the market like a hedge and store of value. I estimate Bitcoin’s value based on three different approaches: Market cap, the Stock-to-Flow Model and Technical Analysis. But while I remain bullish on Bitcoin, the four-year cycle that has played out in the past also suggests we could be getting close to a top, and investors should have an exit strategy in place once euphoria sets in. Just Buy Bitcoin The appeal for Bitcoin has never been more undeniable, and as we rally into new all-time highs, more and more people are beginning to realise this. The last few months have proven that Bitcoin is more than a speculative asset. While the major stock indexes plummeted in April, Bitcoin outperformed on the way down, and it is now outperforming on the way up. You just can’t ignore the facts, and even major fund managers are being forced to admit that Bitcoin has a place in a well-diversified portfolio. A June survey found 67% of institutional investors believed digital assets had a role in a portfolio , with 69% planning to increase allocation. Another survey showed 59% of institutional investors were planning to allocate at least 5% of their portfolios towards digital assets Race To The Bottom The evidence for owning Bitcoin is overwhelming right now, and this can be proven in just one chart. DXY (TV) The dollar has seen one of its worst six months in decades, and this is simply pricing in the reality that deficits are going to keep increasing and being monetised by the Fed. The latest Big Beautiful bill will increase the deficit by trillions Trump has officially talked about wanting a dovish Fed, and he will likely get his wish next year. More importantly, though, this is a global phenomenon. Global debt (IIF ) Global debt is 333% of GDP. This is not getting paid back with austerity. This is only getting paid back in debased currency, and the best hedge against debasement has been proven over the last few years to be Bitcoin. Debasement is going to be the defining macro factor of the next 10 years. Institutions know it, and they are gearing up for it. How High Can We Go? With the latest evidence from institutional surveys, it’s clear that Bitcoin is going to make its way into most portfolios around the world. This gives us an easy way of calculating the price of Bitcoin. Let’s take the survey above that suggests 5% of institutional portfolios will go into Bitcoin. That’s 5% of a total global asset base of around $175 trillion as of a year ago. That’s around $8.75 trillion in market cap that could flow into Bitcoin, with a maximum of 21 million in circulation. That yields a price of $416,667. With that said, this is likely a longer term target, which could take some time to play out. More immediately, I am looking at the $150,000 area. Btc Price TA (Trendspider) This is the next key fib level from the bear market low, and would complete a five wave impulse nicely. The Real Risk Is Not Owning Bitcoin The way I see it, the real risk right now is not having any exposure to Bitcoin. Everything right now suggests it’s the best asset to hold during a debasement. In fact, this is a strong argument to also hold stocks and gold too. Bitcoin is likely the best option going forward since it is still in its early phase of adoption and has a much more global appeal. Does that mean we go up in a straight line? Of course not. Bitcoin, like other assets, is still subject to the business cycle. It’s going to come down at some point, but the overall trend is going to be up. If you really wanted to time a short-term top, then we’d have to look at things like global liquidity trends and macro indicators like the ISM. But for now, these metrics still suggest we are going higher. Liquidity is on the up, and the economy remains strong. Risks Although I am bullish given the liquidity outlook, plenty of events could derail this. Geopolitcs, a recession or the return of inflation are all possible headwinds. Bitcoin is volatile, so investors should be ready for large corrections at any given time. Takeaway The last year has been very important for Bitcoin. It has shown, with price action, that it is a hedge against monetary debasement. Coincidentally, at the same time when the US has shown that more debt and debasement is indeed the way forward. Cash in the bank is going to lose value. The least you can do is hold financial assets like stocks. And in my view, the best thing you can do is hold Bitcoin right now.

Source: Seeking Alpha