As Bitcoin (BTC) edges nearer to the $70,000 mark, the crypto neighborhood is abuzz with predictions of a possible surge to $100,000, accompanied by a major altcoin season. Amidst this fervor, crypto analyst Axel Bitblaze has provided an evaluation on X, inspecting whether or not the required liquidity and catalysts are in place to propel Bitcoin to such heights.
Bitblaze emphasizes the elemental position of liquidity within the crypto market. Drawing parallels to earlier bull runs, he notes, “Our space is fully driven by just one thing, i.e., Liquidity.” He references the 2016 and 2020 bull markets, each of which had been considerably fueled by growing liquidity. This time, the query is whether or not comparable or larger liquidity occasions are on the horizon to drive Bitcoin’s value larger.
#1 Bitcoin Surge Set To Be Fueled By Stablecoins
A cornerstone of Bitblaze’s evaluation is the present state of the stablecoins market. He describes stablecoins as “the gateway to the crypto industry,” underscoring their indispensability to the crypto ecosystem. The whole market capitalization of stablecoins has surged to $173 billion, reaching its highest stage for the reason that collapse of TerraUSD (UST).
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Tether (USDT) stays the dominant participant, comprising 69% of the overall stablecoin market cap with $120 billion. Bitblaze highlights the historic correlation between BTC costs and USDT’s market capitalization, stating, “Between March 2020 to November 2021, USDT MCap rose by 17x while BTC price pumped by 16.5x.”
However, since March 2024, regardless of USDT’s market cap persevering with to rise, Bitcoin’s value has remained comparatively stagnant. “This indicates there’s a lot of liquidity waiting on the sidelines to enter BTC and crypto. I guess they’ll start deploying soon, right?” the analyst states.
#2 FASB Rule Change
Another vital issue is the approaching change in accounting requirements by the Financial Accounting Standards Board (FASB). Currently, publicly listed corporations face challenges in holding Bitcoin resulting from unfavorable accounting therapies.
Bitblaze explains, “Let’s say a company bought 100 BTC at $67,000 each. If BTC drops to $60,000 and then pumps to $68,000, the company still needs to report it at $60,000… they will have to show it as a loss even though it’s in profit.” This leads to deceptive earnings experiences and adversely impacts share costs, discouraging corporations from investing in Bitcoin regardless of its potential as an asset.
The upcoming FASB rule change, set to be applied in December 2024, is poised to deal with this challenge. Under the brand new tips, corporations will be capable to report the honest worth of their Bitcoin holdings primarily based on market costs on the finish of the reporting interval. Bitblaze means that this regulatory shift might incentivize extra companies to undertake Bitcoin as a part of their stability sheets.
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He cites MicroStrategy as a precedent, noting that since August 2020, the corporate has amassed 252,220 BTC price $17.4 billion, presently realizing a revenue of $7.4 billion. With S&P 500 corporations collectively holding roughly $2.5 trillion in money and money equivalents—belongings susceptible to inflation—Bitcoin presents itself as a gorgeous, inflation-resistant various.
#3 Expanding M2 Money Supply
Bitblaze additionally delves into the macroeconomic panorama, significantly the M2 money supply, which incorporates money, checking deposits, and different simply convertible close to cash. Currently, the M2 cash provide stands at $94 trillion, almost 39 instances the overall crypto market capitalization.
Bitblaze references an evaluation indicating that “for every 10% increase in M2 money supply, BTC pumps 90%.” Despite the M2 cash provide being roughly 3% larger than its earlier peak, Bitcoin has but to surpass its 2021 highs, suggesting that ample liquidity stays untapped.
“Currently, M2 cash provide is nearly 3% larger than its final peak, whereas BTC continues to be under its 2021 excessive. With Global fee cuts occurring together with QE, fiat will turn out to be a worse funding. As Ray Dalio stated, #Cash is Trash,# and now this gigantic cash provide will discover a approach into completely different asset lessons, together with crypto; the analyst claims.
#4 Shift From Money Market Funds To Bitcoin
Since November 2021, cash market funds have grown to $6.5 trillion as buyers sought the security of Treasury payments amid rising rates of interest. However, with the Federal Reserve initiating fee cuts and signaling extra to come back, the yields on T-bills are anticipated to decrease, seemingly inflicting a major outflow from cash market funds.
Bitblaze predicts, “This’ll cause a massive outflow from money market funds as the T-bills yield will diminish,” suggesting that buyers will search larger returns in riskier belongings similar to Bitcoin and different cryptocurrencies. He refers to those digital belongings as “the fastest horses” in a QE surroundings, forecasting that this shift might channel substantial capital into the crypto markets.
To quantify the potential influx, Bitblaze aggregates the accessible liquidity sources: the M2 cash provide of $94 trillion, cash market funds totaling $6.5 trillion, money holdings of S&P 500 corporations amounting to $2.5 trillion, and the stablecoins market cap of $173 billion. This brings the overall to roughly $103.17 trillion, which is 43 instances the present whole crypto market capitalization.
He additional addresses skeptics, concluded: “For a $200 Billion inflow, only 0.19% of this account needed to enter crypto. For those who think this isn’t possible and 200B is too much, BTC ETFs had over $20B in net inflows despite sideways price action, no rate cuts, and no QE.”
At press time, BTC traded at $66,944.
Featured picture created with DALL.E, chart from TradingView.com
