On the Future of Bitcoin
On February 12, Anthony Pompliano, the founder of Pomp Investments, joined CNBC’s “Squawk Box” to share his insights on the burgeoning spot Bitcoin ETF market and the broader state of Bitcoin. Speaking with the show’s co-anchor, Andrew Ross Sorkin, Pompliano delivered a compelling analysis that not only underscores Wall Street’s growing infatuation with Bitcoin but also heralds a bullish future for the world’s premier cryptocurrency.
Wall Street’s Infatuation with Bitcoin
Pompliano’s discussion kicked off with a bold declaration: “Wall Street doesn’t just like Bitcoin, they love Bitcoin.” This statement is backed by the success of recent spot Bitcoin ETF launches, with BlackRock and Fidelity’s funds each amassing $3 billion in record time, marking a historic first in the ETF landscape. The significant inflows into these funds, according to Pompliano, are a testament to Bitcoin’s undeniable allure among institutional investors.
The Demand-Supply Discrepancy
Pompliano made was regarding the demand-supply imbalance in the Bitcoin market. With daily net inflows into Bitcoin ETFs reaching $500 million, and considering the daily incoming supply of Bitcoin is capped at 900 BTC (equating to roughly $40 to $45 million), there’s an overwhelming demand outstripping the new supply by over 12.5 times. This discrepancy, Pompliano argues, is a clear indicator of Bitcoin’s scarcity and its bullish implications for the cryptocurrency’s price.
Bitcoin’s Tradable Supply: A Closer Look
Pompliano shed light on a fascinating aspect of Bitcoin’s market dynamics: 80% of all Bitcoin in circulation hasn’t moved in the last month, indicating a highly illiquid market where only a fraction of the total supply is actively traded. This scenario, where $2 trillion worth of Bitcoin is essentially off the market, underscores the asset’s growing appeal and retention among investors, further fueling its scarcity and potential for price appreciation.
The Future of Bitcoin According to Pompliano
Looking ahead, Pompliano is unequivocally bullish on Bitcoin’s trajectory. He posits that if the current demand continues unabated, especially with the halving event on the horizon—which will further reduce Bitcoin’s daily production—the cryptocurrency is poised to revisit and potentially surpass its all-time highs.
Jamie Coutts on Bitcoin’s Potential
On February 10, 2024, Jamie Coutts, a distinguished freelance blockchain strategist and former analyst at Bloomberg Intelligence, shared his optimistic perspective on Bitcoin’s ability to achieve new all-time highs (ATH) before the upcoming halving event. Coutts’ evaluation, infused with deep technical and market knowledge, makes a strong argument for a bullish outlook on Bitcoin.
Post-Q4 Market Adjustment and Leverage
Coutts initiates his analysis by pointing out the notable decrease in market leverage and speculative bets that marked the latter part of the previous year. This period of “cleansing,” characterized by a 40% reduction in options open interest and a decrease in the exuberance of futures funding rates, indicates a move towards a healthier market environment. The elimination of excessive leverage could diminish Bitcoin’s susceptibility to abrupt market movements, setting the stage for more sustained growth.
ETFs’ Buying Pressure Versus Bitcoin Supply
A pivotal element of Coutts’ argument is the significant demand from spot Exchange-Traded Funds (ETFs) investing in Bitcoin, which far exceeds the supply, maintaining a purchase ratio of at least 2:1. This demand-supply mismatch becomes even more critical as the halving event nears—an event that historically cuts the production rate of new bitcoins in half, further limiting supply. Coutts interprets this dynamic between ETF demand and Bitcoin supply as a positive indicator for Bitcoin’s price potential.
Navigating Through Resistance Levels
Furthermore, Coutts applies technical analysis to evaluate Bitcoin’s price trends, observing that a mere 10% of trade volume has been executed at levels above the current price. This indicates scant overhead resistance should Bitcoin surpass the $48.2k threshold. Resistance levels, in technical analysis, represent price points at which an asset may face selling pressure. The minimal resistance anticipated above $48.2k suggests that Bitcoin could ascend with relatively little opposition to higher valuation tiers.
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