Offchain: Can We Get Much Higher?

Offchain: Can We Get Much Higher?

A new Bitcoin ATH has arrived, way ahead of schedule. So, what’s going on?

Normally, in these newsletters, when I’m admonishing you to remember that “history doesn’t repeat” it’s to remind you all to rein in your expectations because there’s no guarantee that just because something went 10x last time doesn’t mean it’s going to happen again and that when it comes to investing you should always be prepared for Bad Things to happen.

Well, now I get to say it because a Good Thing has happened instead. Two days ago, Bitcoin sauntered up to and then briefly surpassed its 2021 all-time high, a mighty $69,000 All American Dollars.

What was notable about the achievement wasn’t that it happened – hitting new ATHs is pretty much what Bitcoin is programmed to do – but that it happened now, a month-and-a-half before the Halving. In previous cycles, Bitcoin has typically arrived at the Halving around 50% off its previous highs, leading into half-a-year of mind-numbing “will it, won’t it” market uncertainty before it finally Leeroy Jenkins itself into the troposphere.

To arrive now, before the full force of the Halving has even had time to make itself felt, well, something’s going on. And, hey, that’s just peachy with me.


More like exchange traded fun

By this point you’re probably all like, “Well, duh, Luke, them ETFs been going bang bang.” And you’re not wrong, although your grammar leaves something to be desired. 

In a little over 7 weeks of operation, the BlackRock Bitcoin ETF has amassed more than US$10 billion in Bitcoin, by far the fastest an ETF has ever hit that mark – back in 2004 the SPDR Gold Shares ETF took 2 years to hit 10 billy. Hell, on Tuesday, when prices reached an all-time high and then delivered a savage lesson in leverage management, the ETFs did more than US$10 billion in a single day. Already the total assets under management of all the Bitcoin ETFs combined is around 50% of that held by gold (which, not incidentally, Bitcoin is cannibalising).

It’s almost like those fellas over at BlackRock knew what they were doing when they took a punt on this “crypto thing” last year. When that news dropped, the price was US$25k and the only bullish narrative in sight revolved around Russia needing to use Bitcoin to avoid sanctions. Now when we talk about the Flippening we’re talking about the moment when Bitcoin might one day eclipse gold

Bulls gonna bull

But the more pertinent question is why. Why is so much money pouring into Bitcoin? Why is this untameable, volatile asset, despised by regulators and law enforcement alike, seeing historically unprecedented levels of investment inflows, while interest rates remain high and macroeconomic and political conditions simmer away a few degrees off “rollicking boil”.

At a basic level, well, it’s a bull market. Everyone’s getting ready for interest rates to drop and as a result stock indices are clocking all-time highs everywhere you look. Resource prices are turning the corner and even gold just hit its own ATH. Bitcoin is a globally traded commodity: it makes sense to join the party.

But I suspect there’s something deeper here as well. Bitcoin, by virtue of being uncontrollable and unownable, by being entirely programmatically driven, could be coming into its long-promised own as a hedge against instability. 

Asset prices are high, but so is the expectation that the world is going to hell in a handbasket. It’s a strange mix and one that adventurous entities could seek to mitigate against with the one truly supranational asset. This used to be gold’s thing, but gold is forever marked by history and global political currents. Bitcoin is new and everyone’s on an even playing field.

While this brand of independence has always been part of Bitcoin’s promise, it was never going to happen without the OG crypto’s formal installation as a piece of the global financial firmament. The gatekeepers needed to let Bitcoin in. Now they’re going to learn how difficult it is to control.

Luke for CoinJar

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