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As Bitcoin (BTC) nears the $70,000 mark, the crypto community is buzzing with predictions of a possible $100,000 rally, coinciding with an important altcoin season. Amid this enthusiasm, crypto analyst Axel Bitblaze provided an analysis on X, examining whether the necessary capital and catalysts are there to propel Bitcoin to such heights.
Bitblaze emphasizes the important role of liquidity in the crypto market. Drawing parallels with past bull runs, he notes, “Our environment is driven by just one thing, namely, Liquidity.” He points to the bull markets of 2016 and 2020, both of which were heavily fueled by money growth. In this case, the question is whether similar or larger liquidity events are imminent to increase the value of Bitcoin.
#1 Bitcoin Surge Is Set to Be Incorporated by Stablecoins
The basis of Bitblaze’s analysis is the current state of the stablecoins market. He describes stablecoins as a “gateway to the crypto industry,” emphasizing their importance in the crypto ecosystem. The total market capitalization of stablecoins increased to $173 billion, reaching the highest level since the collapse of TerraUSD (UST).
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Tether (USDT) remains the dominant player, accounting for 69% of the $120 billion stablecoin market. Bitblaze highlights the historical correlation between BTC prices and USDT market capitalization, saying, “Between March 2020 and November 2021, USDT MCap increased by 17x while BTC price increased by 16.5x. “
However, as of March 2024, despite USDT’s market cap continuing to rise, the price of Bitcoin remains stagnant. “This indicates that there is a lot of money waiting on the sidelines for BTC and crypto to come in. I think they will start shipping soon, right?” said the analyst.
#2 Changing the FASB Rule
Another important factor is the upcoming change in accounting standards by the Financial Accounting Standards Board (FASB). Currently, publicly listed companies face challenges in holding Bitcoin due to negative treatment methods.
Bitblaze explains, “Let’s say a company bought 100 BTC for $67,000 each. If BTC drops to $60,000 and pumps up to $68,000, the company still needs to report it at $60,000… it will have to show it as a loss even though it made a profit.” This results in misleading earnings reports and negatively affects stock prices, discouraging companies from investing in Bitcoin despite its potential as a commodity.
The upcoming FASB rule change, which will take effect in December 2024, is poised to address this issue. Under the new guidelines, companies will be able to report the fair value of their Bitcoin assets based on market prices at the end of the reporting period. Bitblaze suggests that this regulatory change could encourage more companies to accept Bitcoin as part of their balance sheets.
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He cites MicroStrategy as an example, noting that as of August 2020, the company has accumulated 252,220 BTC worth $ 17.4 billion, currently seeing a profit of 7.4 billion. With S&P 500 companies collectively holding nearly $2.5 trillion in cash and cash equivalents—assets vulnerable to inflation—Bitcoin presents itself as an attractive, inflation-resistant alternative.
#3 Increasing the M2 Money Supply
Bitblaze also examines the macroeconomic environment, particularly the M2 money supply, which includes cash, checking deposits, and other convertibles near cash. Currently, the M2 currency stands at $94 trillion, about 39 times the value of the crypto market capitalization.
Bitblaze refers to an analysis that shows that “for every 10% increase in the M2 money supply, BTC pumps 90%. Despite the M2 money supply being about 3% higher than the previous peak, Bitcoin has not surpassed its peak in 2021, suggesting that sufficient liquidity remains untapped.
“Currently, M2 currency is about 3% higher than the last peak, while BTC is still below its 2021 high. With Global deflation happening and QE, fiat will be a very bad investment. As Ray Dalio said, #Cash is Trash,# and now this massive money supply will find its way into different asset classes, including crypto; said the commentator.
#4 Shift From Money Market Funds To Bitcoin
As of November 2021, money market funds have grown to $6.5 trillion as investors seek the safety of Treasury bills amid rising interest rates. However, with the Federal Reserve beginning rate cuts and further hikes to come, T-bill yields are expected to decline, potentially triggering large outflows from money market funds.
Bitblaze predicts, “This will cause a large outflow of money market funds as the yield of T-bills will decrease,” suggesting that investors will seek higher returns in risky assets such as Bitcoin and other cryptocurrencies. He calls these digital assets the “fast horses” in the QE environment, predicting that this change could bring a lot of money to the crypto markets.
In order to estimate the potential liquidity, Bitblaze includes the available sources of liquidity: M2 money supply of $94 trillion, money market funds of up to $6.5 trillion, holdings of S&P 500 companies up to $2.5 trillion, and the stablecoins market is $173 billion. This brings the value to about $103.17 trillion, which is 43 times the current value of the crypto market capitalization.
He also addresses the skeptics, concluding: “To get 200 billion dollars, only 0.19% of this account is needed to invest in crypto. For those who think this is impossible and 200B is too big, BTC ETFs have had over $20B in revenue despite sideways price action, no devaluation, and no QE.”
At press time, BTC traded at $66,944.
The featured image was created with DALL.E, a chart from TradingView.com
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