As a seasoned researcher with over two decades of experience in financial markets and technology, I find myself intrigued by the ongoing debate around Bitcoin’s price trajectory. The recent drop below $60,000, followed by McGlone’s bearish sentiment, raises questions about the future direction of this digital asset.
On Tuesday and Wednesday, the value of Bitcoin dipped beneath $60,000, a decrease from its weekend surge which was triggered by the Federal Reserve’s decision to shift towards lower interest rates. Earlier, the price momentarily exceeded $65,000 but soon retreated.
Despite the market’s advancements, McGlone from Bloomberg remains pessimistic about Bitcoin. He suggests that Bitcoin’s seemingly reduced excitement could indicate a challenging path ahead for the promising realm of Web3, which is built on high security.
Bitcoin to U.S. Stocks Multiple
Is the swiftest horse indicating that the race has concluded? At approximately 11 times now, the peak of Bitcoin versus S&P 500 was 15 times in Q1 2020, and this year’s lower high was 14 times. This historic money influx and the past tense launch of U.S. ETFs might hint at a post-party hangover, with the trend potentially shifting back towards a ratio of 7 times between Bitcoin and S&P 500.
— Mike McGlone (@mikemcglone11) August 27, 2024
On Tuesday, McGlone posed a question to his audience on X: “Does the fastest horse indicating the race has ended mean there’s a hangover for Bitcoin?” He implied that the Federal Reserve’s largest money injection and the Bitcoin ETF listings in the rearview mirror could indicate a lingering effect on Bitcoin.
The Bloomberg Intelligence strategist contends that the value of Bitcoin relative to the S&P 500 Index appears quite low when compared to historical market trends. Currently, the Bitcoin/S&P 500 ratio stands at approximately 11 times, but it peaked at 15 times in the first quarter of this year, and even this year’s lower peak was 14 times.
The comparison between Bitcoin and the S&P 500 is based on their respective market capitalizations. Bitcoin’s value is determined by its market cap, while the S&P 500 is derived from the market caps of its constituent companies, taking into account an index divisor for mathematical calculations that experts might follow on CNBC.
If Bitcoin has managed to surge 15 times the value of the S&P 500 Index once previously, in March 2021, and came very close to doing so this year, then it’s reasonable to believe that such a growth could happen again. This is the perspective of BTC supporters like Marathon Digital, who are increasing their investment in Bitcoin in the short term.
Bitcoin Price to $81,000?
If Bitcoin were to match its previous 15-fold increase relative to the S&P 500, it would hit approximately $81,818, regardless of the index’s current level. This suggests there may still be significant potential for growth in Bitcoin during this cycle, given that we are at a turning point for its super cycle.
The intriguing graph might suggest that Bitcoin’s current price could reach $80,000 according to Blockstream CEO Adam Back, based on a hedge fund analyst’s MicroStrategy stock projection. McGlone posits that this ratio reveals signs of instability in the Bitcoin market, but he also suggests it may imply that Bitcoin is undervalued compared to usual trends. In simpler terms, this graph might be hinting at a potential increase in Bitcoin’s price based on analyst predictions, despite some current instability in the market.
If the S&P 500 Index continues growing at its projected rate by 2024 and Bitcoin’s price increases 15 times its current value, it could potentially be traded above $98,000. In other words, there seems to be significant potential for further growth in this bull market.
Furthermore, it’s worth noting that the last instance where bitcoin markets saw a similar multiple occurred ten months following the third halving. In contrast, we are currently at just five months since the fourth halving this year.
Once the hangover subsides, some individuals may find themselves with potential profits. Fancy another quick drink to help that along? (This sentence uses a different metaphor and simplifies the original to make it more accessible.)
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2024-08-31 17:09