Are we in a Bitcoin bubble?

Mark Jeftovic, the Bitcoin Capitalist, helps us make sense of some of the clamor happening this week.

Our inbox began blowing up this week with messages about a Bitcoin boom, with mention of prices ‘skyrocketing’ and going ‘parabolic.’ To get a handle on what was going on and why, we checked in with our favorite Bitcoin Capitalist, Mark Jeftovic. He explained how a confluence of events is coming together right now to drive the Bitcoin price higher.

Mark says Bitcoin is not a bubble, it’s a hard asset.

Here’s how he explains the sudden price rise:

Bitcoin Spot ETFs in the US confer legitimacy and "regulatory clarity" on Bitcoin as an asset class. Before this, many large pools of capital (e.g., pensions, endowments, etc.) were precluded from allocating to Bitcoin. Now that there is a regulated, clear path to Bitcoin ownership via ETFs, institutional funds are clear to allocate to it.

I've been saying the "1% allocation" rule will become a kind of mantra throughout the investing world. Anybody can take a 1% hit if it all goes to zero, but the asymmetric upside of Bitcoin is too compelling to not put at least 1% in. Even conservative ETFs (i.e. Fidelity's Conservative fund) are calling a 1% allocation part of the mix.

There’s a market cap of barely over $1 trillion now, and somewhere north of $200-$300 trillion of assets that may allocate 1% to 3% to Bitcoin (on the low end). That means anywhere from $2-$9 trillion inbound, with only 30% of the coins in existence for sale (70% of the coins have not moved in over a year, signaling customers with long term hold intent). Yes, that will come down as prices ascend, but some make the mistake of dividing capital inflows by the 19 million BTC in existence to glean price targets. They should really be dividing by something like 5 million.

There is also about $10 trillion in gold investment that has basically done nothing for over a decade, at least compared to Bitcoin. So some money is already moving to Bitcoin (if we look at ETF inflows and outflows we can clearly see it).

That, combined with the halving in April: every 210,000 blocks (approximately four years) the block reward cuts in half — from 6.25 BTC now, to 3.125 BTC after — usually on its own, causing a "supply shock" through the system and driving the price higher. We're less than 60 days out from that now.

Collapse Life also asked Mark what the massive inflow of investors to Bitcoin means for the stock market. Here’s what he said:

We've been watching over the last year how Bitcoin — which was heavily correlated with the stock market, the Nasdaq in particular — started to decouple.

The original correlation was part of "The Everything Bubble" where the mantra was "it's all one trade" and it was all being driven by rampant money-printing under COVID.

Then the interest rate hikes kicked in and hit the brakes.

I've long said on the next cycle up there will be a sector leadership change and that Bitcoin, digital assets, crypto would be among the new leaders. That is playing out in spades since December 2022.

Mark suggests there are two milestones to look out for on the horizon: 1) Bitcoin hitting new all-time highs and eventually surpassing the coveted $100,000 mark; and 2) Bitcoin vying for a slice of the $10 trillion gold market.

Read more from Mark at The Bitcoin Capitalist, and be sure to watch (or rewatch) our interview from a couple of weeks ago, where he gives advice for investors seeking to better understand Bitcoin and crypto and diversify their portfolios. And for what it’s worth, the day we interviewed Mark (January 19, 2024), Bitcoin sat at $40,500; as of publishing this update, Bitcoin is at $61,266.

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