The Battle Over Bitcoin And The Case For The Bulls
October 1, 2024
Table of Contents
Poised To Top $100,000
Bitcoin is enjoying another strong year with 56.74pc gains thus far in 2024. However, since March, the price action has been choppy, frustrating, and Bitcoin has failed to print a fresh high. Nevertheless, strong evidence is mounting that Bitcoin is ready to breakout into 2025, including:
Bitcoin Monthly Bull Flag Pattern
Though the short-term price action has been challenging to navigate, savvy investors understand the value of zooming out while analysing a chart. Bitcoin’s monthly chart is carving out a picture-perfect bull flag pattern. Should the pattern play out as the technical pattern suggests, Bitcoin should see prices north of $100,000 in the first half of 2025.
Image Source: TradingView
FTX Repayments are a Potential Bullish Catalyst
A massive fraud led to the collapse and subsequent bankruptcy of the FTX crypto exchange in 2022. After a brutal “crypto winter,” FTX clients could not withdraw funds, and many feared they would all be lost. Fortunately, in a twist of fate, Bitcoin and most crypto assets have appreciated handsomely since the 2022 FTX collapse, and clients are expected to get their funds paid back in total, with interest. Former FTX clients will receive approximately $16bn in funds as soon as December. As FTX victims (who likely assumed their funds were gone for good) receive repayment, it could spark a rally in Bitcoin as some of them reinvest their funds.
Bitcoin Seasonality: “Uptober”
Historically, autumn has been the best time to be long Bitcoin. Since 2010, October has averaged a robust 29.5pc, and November has averaged 37.9pc.
Image Source: Glassnode, ETC Group
IBIT Options Approval
Though Bitcoin has been the best-performing asset since its inception, Wall Street has only embraced it recently. This January, the institutional dominoes began to fall after the U.S. Securities and Exchange Commission finally approved several spot exchange-traded funds (ETFs), such as the Fidelity Wise Origin Bitcoin Fund (FBTC) and the Grayscale Bitcoin Trust (GBTC). A particular watershed moment for the crypto industry was BlackRock’s (BLK) launch of the iShares Bitcoin Trust ETF (IBIT). IBIT was the most successful ETF of all time, attaining over $10bn in assets in under two months. Meanwhile, IBIT’s price performance has been a net positive since inception, gaining nearly 50pc thus far.
On September 20th, news broke that the SEC approved options trading for the Bitcoin ETF. Options on IBIT will open the Bitcoin industry to a news type of trader, and other Bitcoin ETFs will likely gain approval in the coming months. Meanwhile, several leveraged Bitcoin ETFs, like the 2x Bitcoin Strategy ETF (BITX), are live and give investors even more flexibility.
Institutional Adoption
Dozens of countries, ETFs, private companies, and public companies like MicroStrategy (MSTR) continue to adopt Bitcoin as access becomes easier. This constant accumulation should put a floor under the price of Bitcoin.
Bottom Line
Bitcoin’s price action has been frustrating of late, but the odds of a breakout to $100,000 are increasing dramatically. The FTX repayment, IBIT options approval, and institutional adoption are some bullish catalysts that should drive Bitcoin much higher in 2025.
Zachs Investment Research, 30 September 2024
Share Recommendations. (30 September 2024)
iShares Bitcoin Trust. IBIT
2x Bitcoin Strategy ETF. BITX
Strategy – Buy If You Believe (Or Wait For The Next Buy Signal)
I have included a four-month moving average, which appears to work well for this ETF although I am puzzled as to how that relates to how the fund value is calculated.
The 2x Bitcoin Strategy ETF (Ticker: BITX) is a leveraged Bitcoin-linked ETF that seeks to provide daily investment results, before fees and expenses, that correspond to two times (2x) the return of Bitcoin for a single day, not for any other period.
The Fund presents different risks than other types of funds. The Fund is not suitable for all investors and should be used only by knowledgeable investors who understand the consequences of seeking daily leveraged (2x) investment results, including the impact of compounding on Fund performance. The Fund is intended to be used as a short-term trading vehicle. Investors in the Fund should actively manage and monitor their investments, as frequently as daily. The Fund is not intended to be used by, and is not appropriate for, investors who do not actively monitor and manage their portfolio. An investor in the Fund could potentially lose the full value of their investment within a single day. The Fund does not invest directly in bitcoin. Instead, the Fund seeks to benefit from increases in the price of bitcoin futures contracts for a single day.
Volatility Shares – Fund Description.
The fund is certainly volatile. Between September 2023 and March 2024, the price of Bitcoin roughly trebled. The fund’s price rose sixfold which is what you would expect from the two times leverage. It then fell to a low of $18.9 in August 2024, a decline of around three-quarters. This is worse than expected from Bitcoin’s decline of a third over the same period.
The numbers are not too far out of line and for an investor pursuing a Michael Saylor strategy of adding to his position over time the volatility becomes an asset. An alternative to buying over time would be to wait for a buy signal from the four-month moving average and then invest. This strategy could be repeated whenever the moving average gives a buy signal. I would expect either strategy to be rewarding despite what the fund’s sponsors say.
