Markets are noisy, chaotic things that we human beings instinctively try to imbue with order and reason. This generally involves searching for explanations as to why prices are trending up or down or what triggered a sharp move.

Often there is an obvious explanation an earnings surprise or an unexpected corporate action. Sometimes the cause isn't so easy to see flows of funds, an evolving user base, steady product development and so on.

Noelle Acheson is the former head of research at CoinDesk and Genesis Trading. This article is excerpted from her Crypto Is Macro Now newsletter, which focuses on the overlap between the shifting crypto and macro landscapes. These opinions are hers, and nothing she writes should be taken as investment advice.

With bitcoin (BTC), its even harder to discern what is driving sentiment shifts at any given time because it doesnt have earnings, there are no corporate actions, regulation isnt the threat it is for some other crypto assets and the narratives are multiple and varied. There isnt even universal agreement as to what bitcoin is, let alone what drives its price.

But our search for reason amid chaos encourages us to latch on to something that makes sense, and if it is a narrative that justifies our interest while highlighting a timely concept, then so much the better.

One phrase were hearing a lot of these days is store of value. It tends to mean different things to different people, but in general, it refers to an asset that holds its value relative to a broad basket of other assets over a long stretch of time.

In spite of its short-term price volatility and sharp bear markets, bitcoin is a store of value because it is the only asset traded on liquid exchanges today with a programmatic and verifiable hard cap. With other hard assets (those with limited supply) such as gold, diamonds or real estate, we dont know the supply cap, nor do we know how much is currently in existence.

Plus, with other hard assets, the price influences the potential supply. For instance, if gold were to surge from $2,000 to $20,000 per ounce, new extraction methods would become viable, boosting the theoretical cap. Bitcoin is the only asset traded on liquid exchanges for which the price has no influence whatsoever on the supply. It is the hardest of hard assets.

Whats more, the supply of its most common denominator the U.S. dollar has been increasing over the decades, and more recently at an astonishing pace. We are likely about to embark on another wave of monetary easing, involving lower interest rates and the incentivization of credit to overcome declining economic growth and consumption.

An increase in the supply of USD above what economic growth can absorb will all other things being equal decrease its value relative to other assets, and following basic math, if the value of the denominator drops, that of the ratio increases. Bitcoin is a store of value and a hedge against currency debasement.

Finally, bitcoin the asset lives on a decentralized network (confusingly also called Bitcoin, distinguished here with uppercase), which lends this store of value an almost unique degree of seizure resistance. It can be argued that other hard assets can be held off the grid (gold can be kept under the kitchen floorboards, and maybe no one knows about the cabin in the woods), but they are complicated to transport and can be seized. Bitcoin ownership doesn't reside on centralized ledgers unless it is at the holders request, an option many choose for convenience. Even so, the assets inherent seizure resistance and mobility further enhance its store-of-value qualities.

Given the ballooning economic uncertainty, it makes sense that investors are looking to strengthen their portfolios with stores of value, and it makes sense that many are starting to pay more attention to this novel asset. This growing interest, were told, is one of the main factors behind bitcoins more than 80% price increase since the beginning of the year.

Only, technically, its not.

Stores of value are generally of interest to longer-term investors. Bitcoins price is set by short-term traders.

Thats not to say that the store-of-value narrative hasn't been a key driver of bitcoin investment since the early days. In bull markets and bear, those with a long-term thesis have been steady accumulators metrics that track the movement of bitcoin on-chain show that almost 30% of bitcoin in circulation hasn't moved in over five years, and even during the painful drawdown of last year, that percentage continued going up and to the right (true, some of these bitcoin could be permanently lost, but the bulk of it most likely corresponds to store-of-value investors). Almost 40% hasn't moved in over three years, over 50% hasn't moved in over two. You get the picture.

But this steady accumulation has been quiet and consistent, and hasn't accounted for bitcoins wild price swings. Those are driven by speculation on this and other narratives.

In any public market, the latest trade is what determines the price. In liquid markets, there are trades every nanosecond, and they are usually at prices close to the last one but changing preferences will move this up or down. These are usually from traders and market makers hoping to profit from short-term moves, which are influenced by narratives and news.

For bitcoin, while we dont have access to the churn in exchange volumes since these happen off-chain, we do know the average age of on-chain movements. Much more trading is done off-chain than on-chain, and so we can assume that they are at least representative of the makeup of exchange volumes. The chart below from Glassnode shows that, on any given day, at least half of bitcoin transferred between addresses had last been moved within the previous 24 hours (the light and dark yellow bands). Even on-chain, the bitcoin market is high turnover, and short-term traders dominate.

So, in the case of bitcoin, the trader-led expectation of growing interest in the store-of-value narrative is probably behind more of the recent price move than is actual interest. Investors may increasingly see bitcoin as a store of value, and growing demand in the face of a fixed supply will obviously push the price up. But the bulk of price moves are from traders betting on this demand rather than actually forming part of it.

This highlights the key role narratives play in crypto markets, more so than in other markets with a steadier flow of fundamental data.

It also exaggerates price movements on the way up, and on the way down. Unlike fundamental value drivers, narratives are inflated and deflated by sentiment, which is influenced by an incomprehensible range of factors. It even ends up influencing itself.

What generally happens in bitcoin cycles is that the prevailing narrative starts out being about one thing (e.g., store of value) and ends up being about another (price). Whatever you may believe is the main story line driving current interest store of value happens to be the one Im hearing most about these days, but theres also monetary liquidity, the need for banking insurance and more our attention invariably pivots to price movements, which themselves end up becoming the story.

We need to keep an eye out for this because weve all seen how that type of narrative can push the price up (which is good) but rapidly remove support when winds change. When price becomes the story, we need to be aware that sentiment is becoming flimsier, because traders are no longer betting on what longer-term investors will do, they are betting on what other traders will do.

The underlying potential growth may not have changed and accumulation by those with an eye on the bigger picture will continue regardless. But sentiment and price tend to be driven by short-term market participants who are influenced by much more than a good story. This matters for market momentum, and serves as a warning against becoming too wedded to any particular narrative when it comes to trying to make sense of market moves.

Read more from the original source:
Bitcoins 'Store-of-Value' Narrative Is Real but Not a Price Mover - CoinDesk

Many investors have dismissed the notion that bitcoin could be a type of digital gold since the cryptocurrency has been trading like a speculative risk asset for much of the past two years. But about 50 years ago, gold did the same thing, Morgan Stanley said in a recent note. If bitcoin's current moves continue to follow those of gold in the 1970s, the cryptocurrency could be in for some tough times ahead. In 1971, individuals could no longer convert U.S. dollars to a specified amount of gold. Since 2008, governments have become more reliant on central banks creating new fiat currency money that isn't backed by a commodity to provide support in times of crisis, according to Morgan Stanley's note. That's different from bitcoin, which has a limited supply. In the '70s, "gold was tracking the rising rate of consumer price inflation (CPI), which was largely a result of the recent explosion of fiat money supply," said Sheena Shah, a strategist at Morgan Stanley and a coauthor of the note. "Bitcoin, on a logarithmic scale, has so far followed a similar path to the price speculation of gold in the 1970s, which also seemed to follow a four year cycle." Starting in 1971, gold prices quadrupled within four years as the U.S. dollar money supply grew rapidly, the strategist said. "That wasn't the height of the speculation, however: from August 1976 to January 1980, the price of gold rose eightfold from $102 to $850." "As the gold price was still managed for the first few years, the similarities may be a statistical coincidence more likely, in our view, is that both were driven by similar speculation cycles," she added. Bitcoin fans have long highlighted its potential to act as a "digital gold" because it's divisible, scarce and doesn't rely on a central issuer. They also once argued that bitcoin offered a hedge against equities, but last year's market havoc threw cold water on that idea as the cryptocurrency's correlation with stocks hit an all-time high . At the end of March, that correlation fell to its lowest since 2021 , while bitcoin's correlation with gold has been climbing. After the Federal Reserve loosened monetary policy to support the economy at the start of the Covid pandemic, bitcoin outperformed gold 2.9x over the three-and-a-half-year period, Bernstein recently noted. This year, banking crisis fears in the U.S. helped push bitcoin to even greater gains. CNBC's Michael Bloom and Gabriel Cortes contributed reporting

Read more from the original source:
Bitcoin's chart has some eerie parallels to gold in the 1970s - CNBC

Bitcoin climbed on Tuesday, topping the key psychological level of $30,000 as investors awaited key inflation data later in the week that could steer crypto prices.

The largest cryptocurrency by market cap was last higher by more than 3% $30,237.42, according to Coin Metrics. Earlier in the day it rose as high as $30,432.83. On Monday night it climbed 7% Monday night to break through the $30,000 level for the first time since June.

Ether advanced more than 1.5% to $1,922.06 as investors awaited the Ethereum network's latest tech upgrade, scheduled for Wednesday. Earlier, it rose to $1,937.03, its highest level in a year.

Now that bitcoin has touched $30,000, a move into the mid- to high-30s will be "likely" if it pushes through with conviction and would "force short speculators to cover and buy instead," said James Lavish, managing partner at the Bitcoin Opportunity Fund. "Some investors are trying to get positioned ahead of that," he said.

See Chart...

Bitcoin (BTC) and ether (ETH) YTD

Traders are likely speculating that Wednesday's consumer price index number "could come in at a level that gives the Fed reason to think about pausing raising rates in the next meeting, thereby giving a boost to assets like bitcoin," Lavish added.

Investors are also watching the latest reading on the producer price index, due out Thursday.

Cryptocurrencies have been rallying this year. Monday night's action brings bitcoin's year-to-date gains to more than 80%, while ether has now added 60% for the year so far. Price moves for the two crypto assets have historically tracked relatively in line on a percentage basis, but the top two crypto assets "decoupled" in March, thanks to a "flight to quality" in bitcoin following bank closures.

Nevertheless, the two cryptocurrencies remain somewhat correlated for the time being and macro drivers continue to influence both assets. The upcoming inflation data will be key in determining if or when the Fed will pause or put an end to its rate hiking campaign.

Meanwhile, ether has been climbing ahead of its planned "Shanghai" tech upgrade, which is expected to bring a wave of negative sell pressure on the market as previously locked funds on Ethereum are released over the next few weeks.

Read the rest here:
Bitcoin tops $30,000 for the first time since June ahead of key inflation data; ether nears $2,000 - CNBC

A sign for a Bitcoin automated teller machine (ATM) at a gas station in Washington, DC, US, on Thursday, Jan. 19, 2023.

Al Drago | Bloomberg | Getty Images

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribehere.

Markets were mostly unchanged Monday, though bitcoin breached $30,000. Investors are waiting for bank earnings and price reports.

Markets in the U.S. reopened Monday but seemed to retain a post-holiday sluggishness as investors digested multiple signs of a slowing but still strong economy.

First, even though consumers felt credit was harder to come by in March, the banking turmoil is subsiding. Charles Schwab said average daily outflows were down from February, and the bank had added $53 billion of core net new client assets in March. That trend is consistent with the broader banking industry, according to Federal Reserve data. For the period ending March 29, deposits increased by $42.3 billion on a non-seasonally adjusted basis.

Likewise, although the tech sector was hit by bad news, the storm clouds had a silver lining. Computer shipments for the first quarter plummeted but IDC thinks cratering demand lets companies finish "rejigging their plans" and improve their supply chains. Indeed, Dell popped 2.98% and HP rose 1.54% on the news though Apple fell 1.6%, probably because it saw the steepest fall in shipments.

The same dynamic of "bad news is good news" played out in the memory chip sector. Samsung's plan to cut chip production helped push rivals Micron Technology and Western Digital higher by 8.04% and 8.22%, respectively. There were too many chips flooding the market, analysts believe, and tighter supply is a good thing.

Outside those industries, however, the major stock indexes were mostly unchanged. The S&P 500 ticked up 0.1%, the Dow Jones Industrial Average added 0.3% and the Nasdaq Composite declined by 0.03%.

Investors await a slew of economic indicators this week. On the earnings front, JPMorgan Chase, Wells Fargo and Citigroup report quarterly results. Traders will certainly pore through those reports, but they'll also want to see what the U.S. consumer price index and producer price index say about the economy. If they reinforce last week's jobs report and indicate that the economy isn't overheating, the Federal Reserve may actually manage to steer markets to a fabled "soft landing." Investors are keeping their fingers crossed.

Subscribehereto get this report sent directly to your inbox each morning before markets open.

Read the original here:
CNBC Daily Open: Bitcoin breaches $30,000 as the economy slows - CNBC

As Bitcoin price breached the vaunted $30,000 level, many became excited as to how much more the king of crypto can bring on the table. Will Bitcoin shoot for $31K? $35K? Or, $100K? The bull run is here, they say.

Forget about these puny figures. They dont mean nothing. At least, according to these well-known fund managers.

Bitcoin aficionados should brace themselves: the founder of a Boston-based investment management firm has predicted a startling $10 million price tag per BTC.

According to Larry Lepard, founder and managing partner of Equity Management Associates, the US dollar is on the verge of utter collapse, which will cause Bitcoins price to skyrocket.

Hard assets, such as Bitcoin, the king of cryptocurrencies, will profit from the dollars continued devaluation, as has been the case for decades, according to Lepard.

He predicted that the price would rise significantly as more and more people realized they should put their savings in this manner.

I think well hit $100,000. Then I think well reach $1 million, and [] ultimately $10 million per coin. Im sure my grand kids will be shocked at people who own one coin. I mean being a whole coiner will be a big deal, he said.

Ina recent interview with Kitco, Lepard predicts that the dollar will collapse within the next decade, and that as a result, investors would pounce on Bitcoin and other scarce assets.

As the banking turmoil of March receded farther into the past and investors became more confident about monetary policy in the United States, Bitcoin surpassed the $30,000 threshold for the first time since June 10, 2022.

Analysts relate the rise to the publics anticipation of this weeks U.S. inflation statistics, which has the ability to affect the Federal Reserves monetary policy trajectory.

Lepard goes on to state that he believes the intelligent people in the world and ultimately most people get the joke and realize that fiat currency is losing value consistently and that, if this trend continues, more and more people will opt for Bitcoin.

To back up his claim, another fund manager Jesse Myers of Protocol Capital also believes that Bitcoin can reach the $10 million price tag per BTC.

According to a report by The Daily Hodl, Myers discussed the thought process and chronology behind his bold prediction during an interview with Natalie Brunell on the Coin Stories podcast.

In a time of rising debt and currency depreciation, Myers argues, Bitcoin is establishing itself as a safe haven for investors seeking a tangible and scarce form of wealth preservation.

Bonds and fiat currency, he said, are risky investments in the current economic context because of the need for extraordinary levels of money printing to cover the national debt and unfunded commitments.

Myers says that Bitcoin is in a prime position to challenge traditional financial assets as a popular place for investors to lodge their money as the United States struggles with $31 trillion in national debt and a mind-boggling $170 trillion in unfunded obligations.

Meanwhile, acknowledging that Bitcoin faces challenges, Lepard says he has serious concerns that the technology will fail since he foresees significant use cases and growth and just cannot imagine a future in which Bitcoin does not prevail.

According to Lepard, Bitcoin has a significant edge over gold due to its limited quantity of 21 million coins, and this limitation will play a significant role in Bitcoins eventual parabolic price rise to $10 million per BTC.

At the time of writing, Bitcoin price was trading at $30,093, up 6.27% in the last 24 hours, data from crypto market tracker CoinMarketCap shows.

-Featured image from ShareGrid

See the original post:
Bitcoin Price Predicted To Hit $10 Million By These Fund Managers ... - Bitcoinist