Bitcoin needs catalyst for $100K, gold going higher, ETH still undervalued: Analyst

As a seasoned analyst with a foot firmly planted in both TradFi and DeFi worlds, I find myself intrigued by Ethereum’s current position. Having attended ETHDenver earlier this year, I can attest that the energy and enthusiasm surrounding Ethereum were palpable – a testament to its robust fundamentals. However, during this cycle, ETH has been somewhat of a laggard compared to its peers like Bitcoin and Solana.

2024 will be remembered by financial experts and crypto enthusiasts as the breakthrough year for Bitcoin, marking its widespread acceptance within conventional finance. Some significant events that contributed to this recognition include the highly successful debut of spot Bitcoin ETFs, Michael Saylor’s ambitious plan to invest $42 billion in Bitcoin, and a fresh record high achieved by Bitcoin itself.

At crypto events and online discussions, analysts and industry leaders often delve into the integration of Bitcoin (BTC) in various financial sectors. To gain insights about the potential impact of Bitcoin and cryptocurrencies on traditional finance, we spoke to Brian Russ, Chief Investment Officer at 1971 Capital, for a clearer perspective on this topic.

Regarding CryptoMoon’s query: As institutional and private investors continue to purchase shares of Spot Bitcoin ETFs, I wonder about its future integration in investment portfolios. What can we anticipate for Bitcoin’s role in investment strategies as time goes by?

Brian Russ is convinced that wealth and asset management companies will soon demonstrate to their clients how investing in Bitcoin or a mix of Bitcoin and Ethereum within a traditional 60/40 portfolio would have significantly boosted returns. As evidence for this diversification strategy becomes available, larger investment advisers are likely to encourage their clients to invest in cryptocurrencies instead of keeping their investments at zero.

VanEck was among the pioneers in proposing this idea, as they published a research report approximately six months ago following the launch of the Bitcoin ETF. Interestingly, their findings mirrored what we’re seeing now with the Bitcoin Spot ETF. In essence, they presented a bar graph illustrating a traditional 60/40 portfolio would have yielded around 9% return. However, if one had invested in a mix of Bitcoin and Ethereum (ETH) at varying levels, the top allocation level suggested a 17% return. This means that instead of the 9% return from a 60% equities, 33% bonds, and 7% Bitcoin and ETH portfolio, you would have earned a significantly higher 17%.

It seems quite persuasive, doesn’t it? I believe that as more of this research becomes available, we may witness increased interest from various parties such as individual investors, family offices, and institutional investors who have been hesitant so far. They might think, “Let’s invest a small portion like half a percent or even 5%.

CryptoMoon: What will it take to send Bitcoin price to $100,000 and above?

PAR: It seems to me that a significant event or factor is required to trigger such a substantial increase in Bitcoin’s price. I don’t believe it would escalate purely due to demand exceeding supply, though it could surpass $70,000 given these circumstances. However, without some sort of catalyst, I’m not expecting a sudden, explosive surge. The election could potentially serve as this catalyst, but I’m hesitant because the outcome is somewhat predictable and already factored into the market. If the election results were to significantly influence Bitcoin’s price, we might see the breakout happening before, rather than on November 5 or 6. However, it could be something that occurs after the election, such as new policies or other factors. Therefore, I’m keeping a close watch for what this catalyst might be that will push Bitcoin and the broader market higher. I don’t anticipate that we’ll just see it reach new highs and then continue to skyrocket like in the past.

CryptoMoon: Why are gold and silver also hitting new highs alongside Bitcoin?

AL: It might be beneficial to distinguish between speculative commodities such as precious metals, and utility commodities like gold and copper. For instance, when considering the precious metals market, it appears to be a significant aspect of this largely anti-dollar trade. The confusion arises because we often view gold and silver as protective measures or risk management tools. However, if you examine history, they haven’t typically served that purpose.

2008 and March 2020 saw significant sell-offs in precious metal markets, which can provide liquidity during times of crisis when assets are rapidly sold off. Over time, I’ve observed that gold and silver behave differently than traditional hedges or insurance policies. Instead, the US Treasury market and U.S. dollars have historically served as better hedges against crises or recessions. However, what intrigues me about the precious metals market is its unique history. For instance, the unlinking of the dollar from gold in 1971 marks a turning point. Currently, I believe we are in the midst of the third bull market for precious metals.

It’s tricky to pinpoint exactly when the bull market for precious metals began, but it seems likely that March 2020 could be a reasonable starting point, don’t you agree? This is because we experienced an unprecedented viral pandemic crisis, followed by massive stimulus measures. The combination of this once-in-a-century event and the enormous amount of money injected into the system has significantly increased the M2 money supply by approximately 50% over an 18 to 24 month period. I believe we’re roughly halfway through this economic story.

This indicates that we might be looking at a bull market for precious metals that could last around 10 years, starting about 4 to 5 years from now. When you consider the impact of COVID-19 and the resulting stimulus measures, escalating fiscal deficits, and the upcoming presidential election, which may further increase these deficits, we’re seeing a trend where bigger deficits are becoming almost inevitable. This could lead to a self-reinforcing cycle. The perception about the dollar as a safe haven for value is shifting, making room for more competition. Precious metals and Bitcoin are two such contenders in this competitive landscape.

As a crypto investor, I recently came across an intriguing valuation framework for Ethereum (ETH) at the ETHDenver event. Despite ETH’s underperformance in terms of value during this cycle, I am curious to know if your analysis suggests that ETH is still on course according to your methodology?

Absolutely, I prefer it here more than ETHDenver would have been in February this year. Factors like fundamentals, sentiment, positioning, liquidity, and technicals are considered by me, and currently, these factors appear to be slightly better than they were before. The core idea remains the same. For instance, daily active wallets on L1’s have risen approximately 800% over the last 3-4 years according to Dan Tapiero’s research. Moreover, as per the recent A16z State of Crypto report, there are currently around 220 million monthly active crypto addresses interacting with L1’s, which is an all-time high and increasing at a growing rate.

Examining recent advancements in the Ethereum network structure, transaction costs have noticeably decreased. The change from proof-of-work to proof-of-stake, which occurred some years back, has been substantial. Looking at the foundational aspects, the narrative remains positive. However, when considering the price, it’s shown less strength compared to cryptocurrencies like Bitcoin. In terms of Ethereum vs. Bitcoin or even Ethereum against Solana, its top competitor in terms of market cap, the price-related sentiment is currently negative. Given that sentiment often follows price trends, we seem to be experiencing a period of pessimism towards Ethereum at present.

The story suggests that Second Language (L2) tokens are parasitic and there are substantial obstacles on Ethereum’s development path. I believe some tough yet insightful questions are being posed. However, despite using a conventional valuation method and spending most of my career in Traditional Finance (TradFi), I am not fully convinced that fundamental factors are the primary influencers at this moment.

It’s clear we’re dealing with technology that’s not fully mature yet, as it operates effectively in the dark. However, this immaturity might come with a financial advantage for certain assets. For instance, Ethereum can serve as a reliable asset to back up DeFi or other blockchain applications. Additionally, there could be an added value due to popular sentiment, which is often referred to as memetic premium, that attaches itself to many of these assets.

What is the value or influence of Vitalik Buterin and the Ethereum community, particularly in terms of their popularity and the growth of their ecosystem? To put it simply, at various conferences, you’ll find many sold-out events. There are numerous sponsors, a significant amount of investment, a large number of attendees, a high level of enthusiasm, and a multitude of developers involved. By most fundamental measures, the ecosystem appears to be thriving. However, the roadmap may take some time before it becomes fully realized. We’ll have to wait and see if the L2 scaling solution is the ideal choice for Ethereum. If not, I believe that the protocol and foundation are intelligent enough to adjust their strategy accordingly.

This post serves as a source of broad information rather than providing any specific legal or financial guidance. It’s essential to understand that the perspectives, assumptions, and conclusions shared within this article belong solely to the author and may not align with the views of CryptoMoon.

2024-11-01 02:20

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