Since the crypto bubble of 2017 that brought Bitcoin from under $1,000 to $20,000 in 12 months’ time, investors have been wondering what will catalyze the next rally.
While most have put their faith in the Bitcoin block reward halving, which came to pass early this week, a top commodities analyst says that it is stimulus by central banks that is the “prime catalyst” to start a bull market in both Bitcoin and gold.
Top Commodities Analyst Expects Central Banks to Boost Bitcoin Higher
Both the crypto market and the stock market have recovered strongly since the March lows, but credit markets remain tight. The markets are so tight that to save individuals and corporations across weight classes, so to say, the Federal Reserve and other central banks have stepped in with trillions of dollars worth of stimulus. And more is likely on its way.
In a tweet published May 15th, Bloomberg Intelligence senior commodities analyst Mike McGlone said that while this stimulus will aid equities, it will especially help “quasi-currencies” Bitcoin and gold:
Central-bank liquidity may restrict the equity bear, yet it’s a prime catalyst to relaunch bull markets in quasi-currencies.
Increasing demand vs. declining supply and volatility imply Bitcoin is more likely to sustain higher levels vs. the Nasdaq as a global recession approaches. Central-bank liquidity may restrict the equity bear, yet it’s a prime catalyst to relaunch bull markets in quasi-currencies pic.twitter.com/c8GCqoBLNH
— Mike McGlone (@mikemcglone11) May 15, 2020
McGlone’s assertion has been echoed by other analysts. For one, Teddy Vallee — founder and CEO of Pervalle Global, a global macro hedge fund — recently published the chart seen below.
Although the investor was hesitant to call the chart perfect, he explained that there’s a potential correlation between the total amount of assets held on the balance sheets of the world’s central banks (Federal Reserve, Bank of Japan, etc.) and the value of Bitcoin on a logarithmic scale.
Also making this argument is legendary macro investor Paul Tudor Jones, worth in excess of $5 billion.
Announcing he is allocating personal wealth and capital from his hedge fund into Bitcoin, the Wall Street veteran said last week that to hedge his portfolio against the effects of monetary inflation, he sees value in BTC. Jones specifically cited Bitcoin’s halving mechanism as a reason why it is so powerful as an investment in a world where fiat money is being printed at a record rate.
Not the Only Bullish Catalyst
Although central bank stimulus is core to McGlone’s optimism regarding the future of Bitcoin, it isn’t the only reason why he is bullish.
In a report titled “Bloomberg Crypto Outlook: Bitcoin Demand Exceeding Supply,” the analyst laid out a confluence of reasons why he thinks that the price of BTC is slated to head higher in the coming months.
- The 10-day average of unique addresses used on Bitcoin is “nearing last year’s high.” This is important as the last time the metric exceeded this peak, it “preceded the recovery in the Bitcoin price.” McGlone added that if you plot the number of active BTC addresses over a price chart, the current levels we’re reaching with this on-chain metric suggests a fair price of $12,000 — 20 percent above the current price.
- As evidenced by the increase in the amount of money flowing into the CME’s Bitcoin derivatives market, the cryptocurrency is seeing increased institutional usage over the past few weeks. McGlone thinks that this equates to “maturation, pressure on volatility, increasing adoption, and price support.”