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Bitcoin Spot ETF May Not Be As Bullish As You Think
Today’s letter is brought to you by Cal.com!What do I have in common with Chad Hurley (YouTube), Tobi Lütke (Shopify), and Alexis (776/Reddit)? We are all early investors in Cal.com and we use it instead of Calendly. Cal.com is the leading open-source scheduling platform, which gives you the same superpowers of efficiency previously reserved for elite corporations and tech gurus. Top performing teams choose Cal.com to increase business productivity, get insights on their team, and their automated workflows. Stop wasting your time with scheduling software that doesn’t work. Use technology to make your life easier. The best part? Set up is quick, easy, and you will never go back to your boring calendar tool. Exclusive for Pomp Letter subscribers/Pomp Podcast listeners, use code “POMP” for $500 off when you set your team up with Cal.com. Save time. Save money. Use Cal.com. To investors, There is significant interest in a bitcoin spot ETF being approved in the United States. But what if it is not as bullish as everyone believes? Let me explain. The spot ETF will bring in tens of billions of dollars into the bitcoin market. For this example, we can go to the extreme and say that $100 billion will flow into the asset. When that happens, the $850 billion market cap digital currency should see the price of bitcoin increase approximately 12%. That doesn’t sound like much, right? That is not the full picture though. We have to remember that approximately 70% of all bitcoin in circulation has not moved in over a year, so we can amplify the analysis by saying $100 billion will flow into a liquid market cap of about $255 billion. That is ~ 40% increase. With bitcoin’s price at $43,000 this morning, the 40% increase would only bring bitcoin to $60,000 price point. Why is this important? Even if the bitcoin spot ETF has an insane inflow of $100 billion, these financial products still won’t bring bitcoin back to the all-time high price of $69,000. So you are probably asking yourself — is Anthony Pompliano bearish on bitcoin? Not at all. I believe we will see a new all-time high price for bitcoin in the next 18 months, but I don’t think the bitcoin spot ETF will be enough to accomplish this milestone exclusively. Thankfully, there are two other factors at play which should help. First, the bitcoin halving is planned for early Q2 of this year. The supply shock will reduce the amount of incoming bitcoin to the circulating supply from 900 to 450 per day. All you had to do was pay attention in your Economics 101 course to know that increasing demand via the ETF, combined with decreasing incoming supply via the halving, should lead to higher prices than the ETF could produce by itself. Second, the Federal Reserve and central banks around the world are going to be forced to return to loose monetary policy over the next 18 months. We saw Fed Chairman Jerome Powell hinting at interest rate cuts on the horizon, but I don’t believe that will be enough. The Fed will have to restart the expansion of their balance sheet as well. As we saw during the COVID market boom, loose monetary policy increases the speculative nature of humans, which can drive free-market assets like bitcoin hundreds of percent higher. I abandoned the price target game long ago, so I don’t have a concrete number to give you. However, I can see bitcoin increasing hundreds of percent from the current levels throughout the next bull market. I just wouldn’t hold my breath waiting for bitcoin to 10x in the cycle — that is much harder for me to see happening. But who knows, I am wrong all the time. Investing is hard. Understanding the future is nearly impossible. The only thing I am certain of is that bitcoin will continue producing block-after-block of transactions and hundreds of millions of people around the world will find value in that. Hope you all have a great day. I’ll talk to everyone tomorrow. -Anthony Pompliano If you enjoyed this letter, you should consider subscribing to the Pomp Letter. I write 3-5x per week and explain in simple language what is happening in the economy, financial markets, and bitcoin. Qiao Wang is the Founding Member of Alliance DAO & Messari. In this conversation, we talk about speculation with VC's vs crypto users, degens & early adopters, the decentralized utopia, Coinbase's brand new blockchain, stablecoins vs bitcoin in Friedrich Hayek's vision, artificial intelligence, and more. Listen on iTunes: Click here Listen on Spotify: Click here Earn Bitcoin by listening on Fountain: Click here Crypto Analyst Reveals His Big Bets For 2024 - Qiao WangPodcast SponsorsCal.com - Changing the calendar management game. Use code “POMP” for $500 off when you sign up. Trust & Will - Estate planning made easy. They are fast, secure, and simple to use. Get your will or trust created today. 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