Director of global macro at Fidelity, Jurrien Timmer, suggested that in the majority of portfolios, a small amount of Bitcoin investment could be extremely beneficial in what could be considered a bet on the upside potential due to the U.S. Securities and Exchange Commission’s (SEC) probable approval of the first spot Bitcoin ETF.
This comes at a time when the Bitcoin price appears more likely to continue rising than falling. As of the time of writing, the current value of Bitcoin (BTC) is $43,260.87, accompanied by a 24-hour trading volume of $28,203,977,364.24. This indicates a price decrease of -1.51% over the last twenty-four hours and a surge of 13.26% over the last seven days.
Bitcoin stands on shaky grounds
Regarding the risk-to-return ratio of the leading cryptocurrency, Bitcoin, Timmer explained, is significantly superior to assets such as the S&P 500 and gold, owing to its volatile nature. Therefore, he argued that a small amount of BTC “could go a long way” in the majority of the portfolios. “Bitcoin has been in a risk-reward class by itself so far this decade,” he continued.
The current valuation of cryptocurrencies on a global scale is $1.68 trillion, representing a change of 0.56% over the last 24 hours and 88.02% over the past year. At present, BTC holds a market capitalization of $845 billion, signifying a dominance of 50.26%. Stablecoins, meanwhile, have a market capitalization of $130 billion, or 7.75% of the total crypto market capitalization.
The macroeconomics specialist observed that the price increase does not appear to be a result of speculation seeking to outperform any news. This is owing to the small fraction of BTC held for less than three months or short-term speculators.
However, he stated that there has recently been an increase in interest in Bitcoin futures. This shows that some traders are preparing for an announcement. After the news, they may sell futures and acquire spot Bitcoin.
On the contrary, the percentage of Bitcoin held for at least five or even ten years continues to grow. These are the true believers, and my guess is that they aren’t waiting to sell the news.
Jurrien Timmer
In addition, the macro background has shifted from loose liquidity to tighter Fed policy, making Bitcoin’s value argument less enticing than it was in 2020-21, he observed.
He also noted the M2 money supply, which grew during the previous crypto bull market but has been declining since the Fed began tightening in early 2022.
With M2 money supply growing in real terms from $18.4 trillion to $23.6 trillion from 2020-21, the case back then seemed straightforward. But the Fed hit the brakes since early 2022, reversing the bubble in monetary inflation. Real M2 is now back on trend at $20.7 trillion.
Jurrien Timmer
What is the future of Bitcoin and BTC ETFs?
Fidelity is competing with Blackrock and other financial behemoths for the US SEC’s approval of the spot Bitcoin ETF. Although the Commission has a limited time frame from January 6-10, 2024 to grant approval, whether or not the agency decides to further postpone the process for technical reasons is currently unknown.
Analysts have been predicting the en masse approval of several applications in order to prevent a sole company from gaining a first-mover advantage.
According to Jurrien, there has obviously been an increasing interest in recent weeks, as evidenced in the crypto community, and his judgment is that some of these positions are in expectation of SEC movement. In that instance, these investors may sell futures to purchase spot ETFs when the major announcement comes.
M2 money supply and Bitcoin cycles have historically been linked, with some experts claiming that this has been the driving force behind markets rather than the halving occurrences. He also tied the current market to the 1940’s.
That makes the current chapter in history resemble the 1940s more than the 1970s. As quickly as the money supply rose above trend during World War II, it fell back during the second half of the decade. History seems to be repeating on that front.
Jurrien Timmer
