Bitcoin Price Surpasses $100,000 as Crypto Optimism Grows and Regulation Improves

It’s a whirlwind. Bitcoin surpassing $100,000 may be the champagne moment, but the digital asset class has a lot to welcome and digest since the Fed’s easing cycle began on September 18, and even more so since the US election.

New incoming leadership at the SEC and other regulatory agencies, blockchain-savvy cabinet appointees, a new “AI and Crypto Czar,” and frequent mentions of bitcoin and crypto by the President-elect all point to more support for the industry from the US government.

You are reading Crypto Long & Shortour weekly newsletter with insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Wednesday.

The availability and early success of bitcoin index options and ETFs offer risk management tools accessible to individuals and institutions through broker accounts. This not only invites investors with more sophisticated risk management needs, but also provides another place for bitcoin liquidity.

Record numbers of spots and derivatives on digital asset exchanges, which topped $10 trillion in November, remind us that it’s not all about US ETF inflows and outflows — there are giant crypto global markets out there and they love theirs. seen.

Medium- and long-term optimism may be well-placed here, due to the tailwinds of regulatory expectations (better, stronger, easier to navigate), the macroeconomic state (an easing cycle, but there is the possibility of inflation), the health industry (sea of ​​talent, global competition, a hiccup-free 2024), and green shoots of institutional adoption (more than $100 billion in bitcoin and ether ETFs, balance in MSTR).

While the timing – whether in markets, regulation or macro – is never easy, here are some predictions for the months and quarters ahead in digital assets.

Prediction 1: Bitcoin adoption momentum will continue

Among digital assets, bitcoin’s regulatory support is the most “complete” today. In the United States, you can gain exposure to bitcoin natively or through futures, ETFs, asset management products, or options. Bitcoin stands to gain the least from the more prescriptive digital asset regulation in the US Nevertheless, bitcoin’s adoption momentum is strong, with a lot of room to run. With a fixed ultimate supply of 21 million bitcoins, a known and hard-coded “monetary policy,” and a better understood narrative and context for investment allocation, we look forward to further integration of bitcoin into in individual, advised, and institutional portfolios. Adoption momentum is the long-term driver of bitcoin’s price, with macro factors affecting short- and medium-term fluctuations. Every time we see a bitcoin-skeptical article, we know the adoption momentum will continue.

Prediction 2: low bitcoin volatility lies ahead

The growing population of bitcoin holders and the wider range of financial instruments to provide exposure to the price of bitcoin will continue to moderate the volatility of bitcoin, bringing it closer, to usually, to equities (or, at least. the others equities). US bitcoin ETFs options allow for more sophisticated and accessible risk management strategies. This has two implications. First, investors with institutional-level risk management requirements – and particularly strong hands – can own bitcoin given the availability of options. Second, investors can use asset protection options to avoid selling positions in a weak market, which would otherwise exacerbate drawdowns. We also believe that retail investors will trade bitcoin call options against long ETF positions, a yield strategy allowed in retirement accounts, which will dampen options prices and volatility.

Prediction 3: greater sustained breadth will highlight the “5%-er conundrum”

In the month since the US election, the broad-based CoinDesk 20 Index has nearly doubled, outperforming bitcoin’s strong performance. The CD20/bitcoin ratio also increased significantly, the resurgence of Ethereum and other blockchain assets lives up to the promise of more dedicated and applicable digital asset regulation in the US with the incoming administration in 2025. We expect that this continue, with the CD20 exposure to the above digital assets that show the growth-part of crypto along with bitcoin’s “store of value” appeal.

This presents a conundrum for the “5%-ers,” those investors who want to invest in digital assets (beyond bitcoin) but don’t have time to become experts in sectors, pick names, or think about the weather. In traditional asset classes, this is a classic application of indexing to provide access, diversification, and automatic rebalancing. We predict (and hope!) that regulatory authorities will allow investors to avail themselves of these benefits in easily accessible wrappers.