Bitcoin's price regime, more hikes coming
Bitcoin showing why it's not a tech stock. Fed to hike in May and June.
I didn’t realize that bitcoin’s price spiked $2,000 while writing this post until dropping in the bitcoin chart below! The bullish vibes are strong today. Let’s get into it.
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Characterizing bitcoin’s three cyclical price peaks looking back, and describing why the next bitcoin price regime is not yet priced in.
Bitcoin’s bullish price technicals.
The Fed will hike again in May and June because the very front end of the yield curve is too steep for them not to.
Rates markets are pricing in policy reversal (rate cuts) for 2023.
Bitcoin’s fourth price regime
Bitcoin has come a long way. It has experienced three halving events (each block reward is currently 6.25 BTC, down from 12.5, 25, and the original 50 BTC block reward). It has even died countless deaths, if you read certain financial press. It has also graced the main stage on the world scene, time and time again.
As we enter what I believe to be the next exponential growth wave, there are a few ways I’d like to describe the different price regimes in bitcoin’s young history.
In bitcoin’s first year, barely anybody knew what it was. But by age 4, bitcoin had a massive underground popularity, hilariously and perfectly captured by the Reddit wizard drawing and moniker “magic internet money.” And that is exactly what it was. Bitcoin was internet money, and it was magical because it worked without any central issuer or company—something that had never existed before. It survived off an elegant set of rules and SHA256 encryption. It reached a market cap of $10 billion by 2013, purely by being magic internet money.
Bitcoin’s second price regime came after bitcoin didn’t die by 2015 following a massive 80% crash. It started receiving mainline attention, namely from CME and Fidelity, both which bet millions on R&D, convinced that bitcoin was indeed digital gold. This collective realization from the sophisticated investment universe can be thought of as the “5% probability that bitcoin will one day replace gold” era, allowing bitcoin to reach a market cap of over $300 billion.
The most recent price regime was the “post-pandemic, work-from-home, global digital economy, universal basic income” phase, in which bitcoin is settling in around the $1 trillion market cap. While the price swings have been large, bitcoin has consolidated around this impressive valuation for well over a year. The valuation is an acceptance that bitcoin is a mainstay in our society and will always have demand. During this phase, the “bitcoin is either going to $1 million or to $0” crowd ditched the mantra in realization it was likely to be the former.
I believe we are entering bitcoin’s next price regime, one that can be labeled “the risk models are broken” phase, in which bitcoin takes on an immediate strategic importance for institutions of all types around the world. This is the phase when countries, companies, and organizations political or geopolitical realize that a zero-bitcoin position is a strategic blind spot, one that must be covered with a purchase, or at the very minimum an investment in bitcoin education and infrastructure. Let’s look at where the price could go.