Investor and analyst Charles Edwards believes that bitcoin (BTC) is set to make big gains thanks to a BlackRock exchange-traded fund (ETF).
In his latest interview with Cointelegraph, Edwards, the founder of quantitative bitcoin and digital asset fund Capriole Investments, took an in-depth look at the current state of BTC price action.
His earlier optimistic statements have stood the test of time, and after a few months of events, Edwards sees no need to change the long-term perspective.
He argues that bitcoin may be less certain in the shorter time frame, but the broader narrative of crypto becoming a recognized global asset class will undoubtedly prevail.
Cointelegraph (CT): When we last spoke in February, the price of bitcoin was hovering around $25,000. Not only is BTC up 20% today, but Bitcoin’s NVT ratio is also at its highest in a decade. Does it suggest more profit?
Charles Edwards (CE): NVT is currently trading at normal levels. At 202, it is trading in the middle of the dynamic range band, well below the 2021 highs. Looking at today’s normalized readings, this doesn’t tell us much; Only by this metric is bitcoin properly evaluated.
CT: At the time, you described bitcoin as being in a “new regime,” but you predicted a maximum of 12 months of growth. How has your thinking evolved since then?
CE: That thinking largely persists today. Bitcoin has been up almost 30% in a row since February. The difference today is that the resulting relative price opportunity is slightly lower, and we are now trading with key price resistance at $32,000, which represents the bottom of the 2021 bull range and the confluence with the larger weekly and monthly order blocks.
Today my near-term outlook is mixed, preferring cash until one of three things happens:
- the price clears $32,000 on the daily/weekly time frame, or
- the price averages back to the mid-$20,000s, or
- On-chain fundamentals are returning to the development regime.
CT: At $30,000, miners have started sending massive amounts of BTC to exchanges which is rarely seen. Poolin, in particular, has seen a record amount of transfers in recent weeks. To what extent will the alleged selling by miners affect the price in the future?
CE: It is true that relative selling pressure from bitcoin miners has increased. We can see this in the two on-chain metrics below; Miners print and sell hash ribbons. Bitcoin’s hash rate has increased by 50% since January – which is an increase of more than 100% year-on-year.
This rapid growth rate is not sustainable in the long term. Therefore, we can expect any delay to trigger a typical Hash Ribbon dedication. This rapid increase in hash rate can only mean one thing; An extraordinary number of new mining rigs have joined the network.
Bitcoin is 50% harder to mine, there is 50% more competition and as a result the relative BTC income for miners is 33% lower.
There were several months of delays and backlogs in global mining hardware shipments until 2022; We probably saw the backlog get cleared in the first half of the year with a big jump in the hash rate. New mining hardware is expensive, so it makes sense that miners would want to sell some more at relatively higher prices today in order to cover operating costs and take advantage of the 100% price rally we’ve seen over the past 7 months.
Miners are major stakeholders in bitcoin, so if they sell quickly, it could affect the price. Although their relative share in the network is declining, the risk factor is no longer what it was.
CT: In terms of US macro policy, how close do you see the Fed to inflation for the second half of the year? Will there be more tours after July?
CE: The market is counting on a 91% chance of rate hikes for the remainder of the year. There is a 99.8% chance the Fed will raise rates at next week’s meeting, according to the CME Group FedWatch tool. So it is likely that we will see one or two more rate hikes in 2023. This seems excessive given that inflation (CPI) has been on a steady downward trend since April 2022 and is now well below the 5% fed funds rate.
Of course, much can change in the coming months, but even if we take two more rate hikes as a base scenario, I expect any net change in the Fed’s plan to pause. We have already seen significant stress in the banking system, with several banks collapsing just a few months ago. 2023 was the largest bank failure ever by dollar value; Even more so than in 2008, so things could change a lot in the next six months.
In any case, the Fed has implemented most of its rate hike plan. 90% of the tightening work is complete. Now it’s a wait-and-see game – will inflation keep falling as expected? And will it happen before or after the economy turns?
CT: Bitcoin’s correlation with risk assets and its inverse correlation with the strength of the US Dollar has been declining recently. What is the reason for this? Is this part of a long term trend?
CE: Bitcoin has historically spent most of its life “uncorrelated” with risk markets, rotating from periods of positive to negative correlation. Correlation comes in waves. The last cycle saw a very strong correlation with risk assets. It started with the Corona accident on March 12, 2020. When fear is at its peak, all markets move risk-on (into cash) at once, and we see asset class correlations rise drastically as a result.
After that crash, a wall of money entered the risk-on markets in the biggest QE ever. In that regard, the next year was “all a business” – up and to the right for risk on. Then, in 2022, we saw all risk assets vanish as bond prices were revised after the Fed’s most aggressive rate hike regime in history.
So it’s been a weird time. But there is no intrinsic need for bitcoin to have a high correlation with risk assets. It is likely that as bitcoin becomes a multi-trillion dollar asset, it is likely to become more intertwined with major asset classes over time and thus expected to have a more consistent positive correlation with gold over the next decade, which has a very negative correlation with the dollar.
CT: How do you think US regulatory pressure will affect bitcoin and crypto markets in the future? Do you think Binance and Coinbase are just the tip of the iceberg?
CE: It’s impossible to say for sure, but I believe regulatory fears of an early 2023 launch are exaggerated. Bitcoin was classified as a commodity a long time ago and is clear from a regulatory point of view. There are certainly question marks over many altcoins, but the legal fallout of XRP not being considered a security was certainly an interesting twist this month.
In conclusion, it is quite clear that industry and government – where it matters – are behind this asset class and know it is here to stay.
BlackRock ETFs have a success rate of 99.8%, and the announcement to launch a bitcoin ETF was essentially a green signal for regulators and the financial industry.
We’ve seen half a dozen other major financial institutions follow suit, and now presidential candidate Kennedy is certainly talking about backing the dollar with bitcoin. This asset class is here to stay. There will be bumps and hiccups along the way, but the direction is clear to me.
CT: How do you see the progress of the BlackRock Spot ETF and its impact on bitcoin upon its launch?
CE: The approval of the BlackRock ETF would be huge for the industry.
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BlackRock is the world’s largest asset manager, and its (and regulatory) seal of approval will bring a new wave of capital to the market. Concerns and uncertainty regarding crypto regulation has led to many institutions being sidelined in the last year. ETF approval would be a huge rubber “yes” stamp for bitcoin.
ETFs arguably make it easier for institutions to keep bitcoin on their balance sheets, as they don’t have to worry about custody or even penetration into the crypto space. So it opens a lot of doors. The best comparison we have for this phenomenon is the launch of Gold ETFs in 2004. Interestingly, it was launched when gold was down 50% (as is bitcoin today). This was followed by a whopping +350% return, which was a seven-year bull run.
Essentially, bitcoin ETFs are just another target on the road to wider regulatory adoption and establishing bitcoin as a serious asset class. And this has big consequences.
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This article does not constitute investment advice or recommendations. Every investment and trading move involves risk and readers should do their own research when making decisions.
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