There are five key data points that are positive in our view, many of which we covered in detail in our November 2019 Crypto Trends report, and continue to cover in our ongoing research.
The number of active wallets continues to increase. 10% of these wallets hold at least 1,000 dollars of bitcoin (and 27% hold at least 100 dollars of bitcoin), indicating that a greater number of people are starting to test the water in this digital asset.
Derivative volumes continue to grow at pace. The next issue of CME commitment of trader report will be interesting to analyse, this week, the CME recorded all-time highs in future contract open interests, and record trading volumes on future and option contracts. Last week, Bloomberg published a quote from highly respected investor Paul Tudor Jones, stating he has exposure to bitcoin via CME futures in his hedge fund.
Applications such as Square’s Cash App and CFD Providers in Europe are showing record sales and trading volumes for Q1. Whilst the former represents physical ownership and the latter is more speculative, both present solid evidence the market is showing more and more interest in bitcoin.
Security solution firm, Ledger SAS, has seen steady month on month growth in its product demand since the start of the year.
At the end of Q1, specialised digital asset bank, Silvergate, reported 850 institutional clients and a 75% increase in their transaction volume.
Taking all of these data points together, I believe it shows confidence that this market move is real and not simply people hoarding bitcoin in anticipation of the halving in 3 days.
The question that remains is, what next?
If we navigate the current halving correctly, thereby minimising the impact on mining, and allowing mining pool sizes to stay relatively stable, this may well align a number of catalysts, which, over the next 18 months, will support consistent growth in the value of bitcoin, further consolidating bitcoin’s status as a form of digital gold.
The pre and post Covid-19 economy will undoubtedly have some significant differences. The 33M Americans who have lost their jobs are unlikely to find new ones immediately. Post 09/11, it took 2 years for people to get back on planes. Governments worldwide are now preparing for the biggest recession scenarios fathomable …
Meanwhile the FED is trying to keep the market sentiment positive and has extended its balance sheet by about 2.6 trillion dollars since the end of February. This is the biggest monetary inflation ever witnessed and the market is expecting more fiscal stimulus and bond buying programs to be issued. This is somehow already priced in with Fed fund futures for mid 2021 and end of 2021 price implying negative fed rates. This is a first for the US, but we are in a time of “firsts”. Oil was also not supposed to be able to trade in negative territory…
The rest of the world needs to either keep printing money or see their own currency eroding drastically in front of the unbeatable dollars. Turkey, Brazil, or Argentina are the perfect examples of this.
Consequently, in a world where investors continue to seek protection for their portfolios against the world’s Central Bank’s behaviour, bitcoin, a digital currency whose supply is programmatically defined to reduce until it reaches its maximum supply, would seem to be the perfect hedge for any institutional investor portfolio.
So, my conclusion is, with the courage of my conviction, I am bullish bitcoin.