(Kitco News) After stabilizing above $20,000 after summer’s wipeout, Bitcoin appears poised for its next move as markets focus on regulation, institutional acceptance and the next halving, according to 3iQ, the first regulated mutual fund manager for digital assets Canada.
Although bitcoin has been caught up in the risk of contagion in the DeFi space, falling from its record high of $60,000 last year to below $18,000 this summer, the world’s largest cryptocurrency is currently trading just under $24,000. And many analysts and market participants are beginning to agree that the price bottom for bitcoin has been reached.
“The normal correction for growth or risk assets is a 50% retracement. First, we saw Bitcoin move from $60,000 to $30,000. And then we had our crypto financial crisis, which was the unwinding of the DeFi space and the lending models that people had created. And there was the sell-off from $30,000 to under $20,000. And I think we’ve seen most of that restructuring. We don’t see this going on for long,” said Fred Pye, founder and CEO of 3iQ, told Kitco News on the sidelines of the Blockchain Futurist Conference in Toronto.
Going forward, the time Bitcoin will spend below $20,000 will be very limited, added Mark Connors, 3iQ’s head of research.
“I can’t guarantee it’s never going to hit $20,000 again, but I can tell you that over the next year it’s going to be under $20,000 less than 2.5% of the time,” Connors said.
And that’s because of the reasons Bitcoin fell in the first place. “It was the washout. It was the failed installation. It wasn’t the protocol. And there was a technical reason why it was driven here. Are we suggesting the current values are a good entry point? 100%,” he said .
A year ago, Pye predicted that Bitcoin would hit $100,000 in 2023 and possibly even $1 million this decade. Pye clarified that this price estimate was based on past and future halvings.
Since then, Pye’s price outlook hasn’t changed much. “These drivers were based on the so-called stock-to-flow analysis that we cited. Stock-to-flow ranks the scarcity of certain assets like gold and bitcoin,” he said. “Gold is growing 4% per year at this rate. Bitcoin is now growing at 2% per year and in two years it will grow at 1% per year. So bitcoin’s inflation rate versus gold is becoming more and more attractive treasury.”
And at the next Bitcoin halving, you will see FOMO return, with people looking to get back in to catch the next rally, Pye added.
In the past, bitcoin’s limited supply and halving process enabled massive price jumps. The bitcoin halving occurs every four years, and then the reward for mining bitcoin transactions is halved, which also lowers the rate at which new bitcoins are circulated. The last bitcoin halving took place in May 2020. The next one is planned for May 2024.
Additionally, due to Bitcoin’s exponential growth, its price potential is still being overlooked. It was similar with television, the Internet and social media, Connors emphasized. “Can Bitcoin Reach $100,000? This is a low brand with acceptance and solid technology that is the answer to fiat debasement.”
Is Fed a problem for Bitcoin?
As markets have locked in on the aggressive tightening path the Federal Reserve is taking to fight inflation, Connors said the upcoming rate hikes this fall and winter would have a limited impact on Bitcoin.
“The debt burden is currently at World War II levels. When people say raise rates like Volcker did in the 1970s, the Fed can’t. Volcker had a debt ratio of 30% of GDP. He had a catwalk because the economic impact was minimal. At the moment the Fed can hike interest rates to 4%. But we don’t go beyond that. The next three Fed meetings are noise,” noted Connors.
Regulation and any news from Congress, the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) will have a more significant impact on Bitcoin.
“The September meeting that is important to us is a meeting with the cabinet. If the President’s Task Force says, here’s our plan on regulation so institutions can then bang the hammer and get involved in crypto. This is the meeting I care about,” he said.
The US and Canada are on two very different regulatory paths. Canada lags behind in regulating cash flow, exchange and custody. But Canada won the bitcoin and ether spot ETF battle.
In the US, Connors added that it made sense for the CFTC to have more oversight over crypto, which would consider Bitcoin and Ethereum commodities. But he warned there could be a stabbing in Washington over funding.
“The CFTC is also used to having 24-hour markets. You are in a better place to monitor crypto. [But] The CFTC is a fraction of the size of the SEC, so it will get more funding in this case. There will be a turf battle there. There’s going to be a stabbing in DC,” Connors said.
In 2021, 3iQ was one of the first companies in the world to launch Bitcoin and Ether ETFs in partnership with CoinShares.
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