By Brett Munster
Bitcoin hits new all-time highs
On March 5th, bitcoin briefly reached $69,210 breaking its previous all-time high set back in November 2021. Though bitcoin’s price pulled back shortly after reaching this milestone, the moment is significant for a number of reasons.
First, as I mentioned in a recent interview with Forbes, this is the first time in bitcoin’s history that a new all-time high was reached before the Halving. This cycle’s recovery and bull run appears to be happening quicker than in previous years. We believe that speaks to the growing adoption and conviction of bitcoin holders in the marketplace. One possible result is that the timeframe for these cycles is being condensed meaning bitcoin could possibly reach its eventual top quicker than previous cycles. Another possibility is that accelerated demand from the market, largely driven by the ETFs, means this cycle could be larger than the last one. It will be fascinating to watch how this cycle unfolds.
Second, the crossing of the previous all-time high has historically been the time when bitcoin’s price begins to see its biggest gains. It means nearly every holder of bitcoin is in profit which leads to further exuberance in the market. It’s typically around this time we start to see retail come rushing in. Sure enough, Coinbase’s app downloads are surging in the app store right now. It’s largely this phenomenon that explains why three of the last four times bitcoin broke its previous all-time high, bitcoin’s price went on to double within a month. If history were to repeat itself, that would mean bitcoin’s price would reach $138k in the next several weeks.
| Date bitcoin broke previous all-time high | Days it took for bitcoin’s price to double |
| December 2020 | 22 days |
| March 2017 | 89 days |
| November 2013 | 12 days |
| March 2013 | 26 days |
But historically, price doesn’t double and then stop. Last time we crossed new all-time highs, bitcoin’s price ran up 3.5x before peaking in November 2021. If that were to happen again, that would suggest bitcoin could reach a price of $240k over the next couple of years. Before you say that is ludicrously high, remember, last cycle we didn’t have the current ETF buying pressure nor did it have the supply squeeze we have today. The bitcoin ETFs have introduced a new source of demand into the market and there is significantly less bitcoin available to trade on exchanges than there was in 2020. I don’t know what price bitcoin will eventually top out at, but it’s well within the realm of possibility that we see BTC north of $200k between now and end of 2025.
It’s worth keeping in mind however, that this rise in price comes with increased volatility. It’s historically not just a straight line from crossing new all-time highs to cycle tops. Sure enough, minutes after crossing the all-time high mark last Tuesday, bitcoin’s price proceeded to fall 13% before bottoming at $60,000 then recovering to $66,000 the following day. By the end of last week, we were touching new all-time highs again of $70,000. Welcome to crypto.
A number of pre-set sell orders across several exchanges kicked in when the price first crossed $69,000 on March 5th, which caused the price to dip. That in turn caused a large number of margin calls which led to further selling. The good news is that a good amount of built-up leverage in the open interest market was flushed out in that dip and bitcoin’s price recovered quickly. We now have a better foundation from which to grow.
This sort of volatility within a larger upward trend is not uncommon for bitcoin. As Alex Thorn, the Head of Research at Galaxy Digital, pointed out on Twitter, the last time bitcoin approached its previous all-time high in December 2020, it “touched its prior all-time high of ~$20k twice, then ranged and traded -11.3% lower over 15 days before definitively breaking ATH. It is likely to look similar here, and some consolidation would be healthy after +62% YTD / +77% from YTD low (jan 23).”
Alex continued to point out that in the last run up from cycle low in March 2020 to cycle top in April 2021, bitcoin saw price corrections of 10% or more 13 different times. In the 2017 bull market, there were also price corrections of 10% or more 13 different times. If history is any indication, we are entering a period of increased volatility.
I do not have a crystal ball and I do not know what bitcoin’s price will ultimately peak at. What I can say after nearly a decade of investing in crypto is that crossing the previous all-time high is usually around the time when price action starts to really pick up. The best thing anyone can do is to not get sucked into the day-to-day madness of crypto’s price movements and remember bitcoin has historically rewarded those who hold for the long term.
ETFs continue to break records
When I sat down to write this week’s newsletter, I told myself that I wasn’t going to write about the bitcoin ETFs. We covered it last year, the weeks leading up to the approval, and every newsletter since they launched. But the bloody things won’t stop breaking records. So here I am again, writing about just how historic these bitcoin ETFs are.
The nine new bitcoin ETFs have amassed over $25 billion in total assets under management (AUM). Prior to their launch, I wrote that the new ETFs would likely grow to $25-$50 billion in aggregate over the course of this year. Boy was I wrong. We are only two months in and we are already at that level. The nine new ETFs are currently on pace to accumulate over $150 billion by the end of the year. That’s not even taking into account the $27 billion currently in GBTC. Nearly everyone, including myself, completely underestimated how much demand the ETFs would generate for bitcoin.
Blackrock’s bitcoin ETF (IBIT) became the fastest ETF in history to reach $10 billion in AUM. The previous record was held by GLD, the largest gold ETF in the world. That record stood for multiple decades. It took GLD nearly 2 years to get to $10 billion. Blackrock just did it in 7 weeks!
And it’s not just Blackrock. Fidelity (FBTC) now has over $7 billion in AUM. Ark Invest (ARKB) has $2.5 billion and Bitwise (BITB) is likely to cross the $2 billion this week. Each of these on their own would normally be considered wildly successful. But add them all up and its record shattering. Below is a chart comparing the net AUM across the nine new bitcoin ETFs (not including GBTC) to the AUM of GLD when it first launched. Keep in mind that GLD was arguably the most successful ETF ever before the bitcoin ETFs launched. Let’s see if you can spot the difference.
The nine net new bitcoin ETFs crossed $25 billion in aggregate AUM in just 38 days of trading. It took GLD 1,059 days of trading (nearly 3 years) to reach the same mark.
The crazy thing about these numbers is that many of the largest asset managers and RIAs haven’t even entered the market yet. As we explained before, most of the traditional financial world was not expecting a bitcoin ETF to be approved in January so most were unprepared to offer it to their clients at launch. It wasn’t until just last week that Bank of America, Merrill Lynch, and Wells Fargo all finally announced that they will begin to offer the bitcoin ETFs to their wealth management clients. Morgan Stanley is now considering adding the bitcoin ETFs to its brokerage platform. Many more are likely to follow in the coming weeks and months. We have already seen record levels of inflow and some of the biggest players are only now starting to offer the bitcoin ETFs to their clients.
The bitcoin ETFs have fueled investor interest, which has helped push the price of bitcoin up, which then has spurred more investor interest, and so on. It appears that the buying demand isn’t going to slow down any time soon. If anything, it is likely to continue growing in the coming months.
Will every American own bitcoin, even if they don’t know it?
It’s possible that over the next several years, nearly every American that has a 401k or money in the stock market could have some exposure to bitcoin in their portfolio.
I don’t expect that every American is going to open a Coinbase account and start buying bitcoin. But there are two recent developments that could lead to more than 100 million Americans having bitcoin exposure in their portfolios without intentionally adding it and perhaps, without ever knowing it’s there at all. The first has to do with bitcoin ETFs being added to model portfolios by the biggest financial players. The second is MicroStrategy entering the S&P 500.
Let’s start with the first reason. Most people aren’t financial experts, nor should they be. Rather than research individual stocks, study macro trends, build diversified portfolios, and rebalance periodically, a large number of people would prefer to outsource that work to financial experts (rightfully so). It’s much more convenient to invest in a pre-made portfolio that automatically takes care of all that for you than to do it yourself. As a result, these model portfolios are extremely popular and prevalent throughout the financial system.
Recently, the financial institutions responsible for creating these model portfolios started adding the bitcoin ETFs. Fidelity, one of the largest 401k managers in the world, now has multiple blueprint portfolios that include a 1-3% allocation to crypto. Anyone who allocates to Fidelity’s pre-made “All-In-One” portfolios now has exposure to bitcoin whether they are aware of it or not. Keep in mind that if that allocation is through a 401k, that means a portion of someone’s paycheck every two weeks or every month is being invested into a model that includes a bitcoin allocation. That’s a constant stream of demand to buy bitcoin that has never existed before.
And it’s not just Fidelity. BlackRock filed regulatory paperwork to get clearance to allocate a portion of its $36 billion Strategic Income Opportunities Fund to a bitcoin ETF. It also plans to add bitcoin to its $17 billion Global Allocation Fund. In a recent SEC filing, Morgan Stanley stated its desire to integrate the bitcoin ETFs into 13 investment vehicles. These include their Advantage Portfolio, Asia Opportunity Portfolio, Counterpoint Global Portfolio, and International Opportunity Portfolio.
I bet many readers of this newsletter already own some of these very same funds in their 401ks or personal portfolios. Surprise, you now have a bitcoin allocation (albeit likely small) in your portfolio even if you haven’t bought BTC on Coinbase or invested directly in the bitcoin ETF.
The second development has to do with MicroStrategy. In 2020, the founder and CEO Michael Saylor began buying bitcoin as an alternative to holding cash on the company’s balance sheet. Since then, the company has continued aggressively buying bitcoin using profits from the business, taking out debt, and issuing new stock. MicroStrategy currently holds 193,000 BTC making it the largest corporate holder of bitcoin.
MicroStrategy, which is a publicly listed company, is currently sitting on over $6.6 billion of profits from its bitcoin purchases. The strategy has paid off handsomely as the company’s stock price has exploded since 2020 and the company’s market cap is now over $24 billion. MicroStrategy has a larger market cap than more than 170 companies currently listed on the S&P 500.
To qualify to be included in the S&P 500, a company must meet several criteria, most notably be above a certain market cap threshold and have positive earnings over the past four quarters. Even if the criteria are met, the S&P’s 11-member executive committee must also approve a company’s inclusion. Today, MicroStrategy meets all the requisite criteria so it’s just up to the committee to decide if MSTR will be added to the index or not.
Why is getting added to the S&P 500 index a big deal? Because the three largest ETFs in existence are simply tracking the S&P 500. Those three funds are State Street’s SPDR S&P 500 ETF Trust (SPY), BlackRock’s iShares Core S&P 500 (IVV) and Vanguard’s S&P 500 ETF (VOO), each of which has over $400 billion in assets. These funds are in nearly every American’s stock and 401k portfolio. If MicroStrategy gets added to the S&P 500, bitcoin will automatically be added to nearly every portfolio including 401ks, pension funds, and just about every retail portfolio.
Even more interesting is what Michael Saylor may do if his company is added. The moment MSTR is added to the index, there will be automatic buying of the stock by those ETFs we just mentioned because they will need to add MicroStrategy’s stock to their holdings. In theory, that could drive the price up further. Every time MicroStrategy’s stock price has risen, Saylor sells more shares and uses those proceeds to buy more bitcoin. Bitcoin’s price goes up, stock goes up, and Saylor issues more stock to buy more bitcoin. He has created a feedback loop that keeps driving the price and market cap of the company up. The higher the market cap of MicroStrategy, the larger the weighting the company will hold in the index meaning anyone who owns a S&P 500 based fund, increases their bitcoin exposure without them doing a thing.
Between MicroStrategy’s eventual inclusion in the S&P 500 and the bitcoin ETFs being added to an increasing number of model portfolios, bitcoin will be a part of nearly every American’s portfolio in the not-too-distant future, even if they do not realize it.
In Other News
Bitcoin soars to new all-time high above $69K.
February marked the largest monthly candle in the asset’s history, with bitcoin climbing roughly $20,000 in the shortest month of the year.
Ethereum hits $3,800 for the first time since December 2021.
The nine newborn U.S. spot bitcoin exchange-traded funds have now amassed 300,000 BTC ($17 billion) in assets under management in less than two months.
Blackrock ETF reaches record $788 million daily net inflow.
Coinbase sees a massive surge in traffic.
The SEC is facing mounting pressure from lawmakers to back off the crypto industry.
Eight U.S. state attorneys general challenged the SEC’s lawsuit against Kraken in a joint amicus brief filing claiming it exceeds the regulator’s authority.
Crypto trading platforms set various records amid banner end to February.
Nearly three out of four institutional investors plan to increase their existing investment in crypto.
Pro-bitcoin Senator Cynthia Lummis pushes stablecoin bill.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
Disclaimer: This is not investment advice. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. All Content is information of a general nature and does not address the circumstances of any particular individual or entity. Opinions expressed are solely my own and do not express the views or opinions of Blockforce Capital or Onramp Invest.
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