The next Bitcoin bull cycle has begun

On October 31, 1517, Martin Luther posted his 95 theses on the doors at the Wittenberg Castle Church, a step that would fundamentally challenge, and change, the Catholic Church and the European political order. 

491 years later, on October 31, 2008, Satoshi posted the Bitcoin white paper, a step with the power to fundamentally change financial markets, money transfer, and the world of fiat money overall. As with Luther’s actions, and as indeed with most historical events, the real magnitude starts to be seen with a bit of distance.

We are only just beginning to see the baby steps of Bitcoin, and the first small effects it has on politics, the economy, and individuals. Give it another 20+ years, and we will look back in awe at how much Bitcoin will have changed the world.

Today's anniversary is reason enough to update my view on Bitcoin. At the end of January, I had already shared my bullish views about Bitcoin. Bitcoin is up almost 50% since my blog post.

Since then, I have just become even more bullish. We are ripe for a new bull cycle, which could take the price of Bitcoin well above $100 thousand. In the medium term I expect Bitcoin prices will soar higher than $1 million.

Here is why: 

1.     ETFs are about to be approved

This will have a massive impact that I think almost every investor is underestimating so far. You would think markets would anticipate this more, but it’s a very common pattern that the impact of massive events, even if foreseeable, only really unfolds after they have happened.

Why ETFS are so crucial: Most crypto native people forget that very few investors – retail and institutional investors alike – have practical access to Bitcoin. It is still just too cumbersome to open a wallet, go through all the KYC, then work out issues with sending fiat etc., etc., etc. Once Bitcoin ETFs become available, every investor will be able to buy those with just one click within their existing trading infrastructure.

Adding up all asset managers that have filed for a Bitcoin Spot ETF, they represent more than $15 trillion assets under management. If just 1% of these assets over time move to Bitcoin, that’s a $150 billion inflow. Today, the Bitcoin market cap is only $650 billion and most of it is held in stable hands (see next point). It’s hard to say exactly what the ‘money inflow vs increases in market cap’ multiplier will be, but I believe it will be VERY impactful.

Also important to note: While I don’t know of any Financial Advisor who actively recommends Bitcoin today, because of fear of liability, once brands like Fidelity and Blackrock get involved, they will start to recommend a certain exposure to Bitcoin to their clients – because of fear of missing out and fear of liability if they didn’t. This will be a snowball effect unlike any other seen in financial markets.

2.     Supply considerations

Two-thirds of all Bitcoin has not moved in over a year - an all-time high. These people owned Bitcoin when Luna and FTX blew up and did not sell. They saw Bitcoin rise more than 100% this year and did not sell. We can therefore assume this group are real “diamond hands”. This means that the real “free float” of Bitcoin is approximately 33%, or about $215 billion. In addition, the number of Bitcoin held in exchange wallets (i.e., “ready to sell”) is at a 5-year low.

3.      The macro-situation

Investors are having a hard time right now in general, and no asset class seems to be a really good pick. Stocks can be dangerous due to the potential upcoming recession, bonds are not catching up with inflation, and real estate has much lower margins (and is also illiquid).

Bitcoin, conversely, is increasingly perceived as a hedge against inflation and not a high-risk investment.

Most importantly: I still believe we will go back to massive money printing soon - not because governments want to print to stimulate the economy but because it is the only way to keep the ‘broken system’ running.

Let’s look just at the US: The national US debt is at record levels ($33.68 trillion) with an annual expense ($6.1 trillion) higher than the annual tax revenue ($4.4 trillion) and the interest paid on the debt has increased from $600 billion to over $1 trillion in 2023. Add in the fact that 45% of the national debt will be renewed in the next three years with much higher interest rates than the ones used in the past, and it is easy to see why the US has no choice but to continue printing money in what looks like a death spiral for the Dollar.

4.     The geopolitical situation

Without wanting to sound cynical, every new geopolitical crisis demonstrates the practical need for Bitcoin. Ukrainian people who held their own currency lost everything. If they had held gold, they would be much better off. However, it’s hard to move gold, which can also be stolen or confiscated. With Bitcoin, you can start a new life in another part of the world immediately. Westerners like me might underappreciate that feature, however people in places like Ukraine, Palestine, Iran, Niger, and Venezuela surely don’t.

5.     The Next Halving is on the Horizon

One of the biggest drivers of the price of Bitcoin looking back has arguably been the block reward halvings that reduce the release of new Bitcoin into the digital currency’s circulating supply.

As a result of the cryptocurrency’s fixed limited supply of 21 million coins and a slowing rate of new coins introduced into circulation, increasing demand for the digital currency has helped the price of Bitcoin to historically experience new all-time highs following each halving event. I fully expect this to occur with the next halving as well, which is expected late April or early May 2024, at which point the block reward will drop from 6.25 to 3.125 Bitcoin per block.

Apeiron Investment Group ’s Bitcoin exposure:

We do most of our crypto and Bitcoin investments via our stock market listed crypto holding Samara Asset Group (German stock exchange: SRAG). Samara’s biggest investment is the HPC data center company Northern Data (German stock exchange NB2), which is both one of the biggest Bitcoin miners globally and one of the leading Gen AI infrastructure companies. Samara owns approximately 2.7 million shares in Northern Data.

Check out this useful article about Northern Data.

Summary:

Bitcoin is many things at the same time: A change of perception of what people deem as a “store of value”, a generational investment opportunity, but most importantly: Bitcoin is freedom.

Don’t miss out!