The News Block #30 (03/26/24)
GBTC Sees Record Outflows, Cathie Wood Says Bitcoin Could Hit $3.8 Million per Coin, Japan’s Largest Pension Fund Exploring BTC, Central Banks Signal Rate Cuts, Biden Signs $1.2 Trillion Spending Plan
Listen to the latest episode of the News Block below. 👇
GBTC Sees Record Outflows
One of the biggest question marks surrounding this year’s Bitcoin rally was what the new ETF investors would do when Bitcoin experienced one of its trademark pullbacks. Would the people buying these ETFs prove to have “diamond hands?” Or would these ETF holders sell at the first sign of trouble putting greater downward pressure on Bitcoin’s price?
At first glance, it would appear that the latter was the case. Over the last week, the ten ETFs saw total net outflows of more than $880 million as Bitcoin’s price dipped. But when you take a closer look, you’ll find that doesn’t paint the whole picture.
Nearly all of the recent outflows were once again related to GBTC, which saw more than $2 billion of outflows last week. When you exclude GBTC, you’ll find the rest of the ETF issuers have been net buyers during this month’s downturn. According to Bloomberg Intelligence Analyst James Seyffart, the other nine ETFs saw inflows of more than $1.1 billion last week.
Many analysts are attributing these GBTC outflows to the Genesis bankruptcy, which had nearly $4 billion dollars worth of GBTC shares to sell.
It’s important to note that as part of the Genesis bankruptcy process, the court ruled that Genesis clients could be paid in-cash or in-kind, meaning in bitcoin. This means that Genesis’s clients can either choose to get paid in cash for their bitcoin, valued at the date when Genesis filed for bankruptcy, or be paid in bitcoin itself. Given that Bitcoin is up nearly 200% since Genesis filed for bankruptcy, it’s likely that many of its clients are choosing to get paid in bitcoin.
So although the Genesis bankruptcy estate is dumping a massive amount of GBTC shares, a large percentage of those shares are likely being exchanged for bitcoin to be distributed to Genesis’s clients.
All in all, the fact that the other nine ETFs were still buying despite bitcoin’s drop shows that demand remains strong and that the buyers of these ETFs may be better educated and more long-term thinking than what was previously thought.
Cathie Wood Says Bitcoin Could Hit $3.8 Million per Bitcoin in 2030
One investor that hasn’t let Bitcoin’s recent price action dampen her bullishness is ARK Invest CEO Cathie Wood. In an interview at the Bitcoin Investor Day conference last week, she mentioned that the new ETF products and the flood of institutional demand could up her previous price target by more than $2 million.
ARK Invest had famously said that their bull case for Bitcoin was to reach $1.5 million by 2030, but now, recent developments have forced them to reevaluate this.
At the conference, Wood said, "Last year we put out our bull case for bitcoin. It was $1.5 million. With this institutional green light that the SEC has provided, kicking and screaming though it did, the analysis we've done is that if institutional investors were to allocate a little more than 5 percent of their portfolios to bitcoin, as we think they will over time, that alone would add 2.3 million dollars to the projection I just gave you."
For those doing the math, that puts ARK Invest’s long-term prediction at $3.8 million per bitcoin! 🚀
One cohort of institutional investors that Wood may be alluding to here are pension funds. According to the Global Pension Assets Study, in 2023, they held nearly $50 trillion in assets.
The signs are out there that this is already well underway. Last week, the world’s largest pension fund, Japan’s Government Pension Investment Fund, with $1.4 trillion in assets under management, announced that it is exploring Bitcoin as a “diversification tool” and potential investment.
$3.8 million per bitcoin may seem like a over-zealous prediction to some people, but when you consider the trillions and trillions of dollars in wealth floating around out there, it’s really not that crazy. If these institutional investors start to allocate even a tiny percentage of their funds into bitcoin, the impact on its price could be substantial.
Another interesting point Wood made at the conference was she called Bitcoin a “financial super highway” and emphasized how we have seen increased Bitcoin adoption in countries where fiat currencies are depreciating at a rapid rate.
Wood brought up Nigeria as a prime example, but another country that recently made headlines was Argentina.
Bloomberg recently reported that Argentina has seen the highest amount of Bitcoin purchases in 20 months as Argentinians are increasingly turning to it to protect themselves against inflation that is currently running at 276% YoY.
Wood made it clear that Bitcoin still has “miles to go,” but its encouraging to see Bitcoin adoption gaining traction in the countries that need it the most.
Central Banks Signal Rate Cuts
Turning now to the fiat world, the stock market rallied last week after Fed officials indicated that they expect to cut rates this year despite inflation picking back up and the unemployment rate still at historic lows.
The Fed hinted that they predict a hotter economy and are expecting to cut rates three times this year, maybe as early as this summer.Fed Chairman Jerome Powell didn’t stop there. He also indicated that the Fed will slow the rate at which they will reduce its balance sheet - or quantitative tightening – saying, “The general sense of the committee is that it’ll be appropriate to slow the pace of runoff fairly soon,”
This means that not only will the Fed add fuel to the fire to an already overheated economy when they cut rates, they will also pump more liquidity into the system by slowing the pace at which they reduce the size of their balance sheet. In short — markets LOVED this.
Soon after the press conference, Bitcoin rebounded sharply, gold hit a new all time high, and major stock indices also reached historic highs. If you’ve listened to my recent shows with macro experts Luke Gromen and David Hunter, you’ll understand why some analysts are now predicting a melt-up in risk-on assets heading into the summer.
The Fed isn’t the only central bank signaling a return to easier monetary policy. In fact, Bank of America Global Research highlighted that over the last six months, there have been 55 rate cuts across the globe, the most since entering the pandemic.
So why are central banks starting to ease now when inflation is still running hot and the unemployment rate is at multi-decade lows?
Well – I have my theories – and they revolve around the growing mountain of debt. By keeping interest rates elevated, the Fed increases the interest expense for the Treasury, making it more expensive for them to issue more debt in the future.
The Wall Street Journal reports that “annual issuance of U.S. Treasurys has exploded, nearly doubling since the pandemic began. The government sold a record $23 trillion worth in 2023. And few think the spree is going to slow soon, given the widespread expectation that government spending will continue to rise.”
The Wall Street Journal is right here. There are no signs that the spending spree will stop any time soon, and in fact, President Biden just signed a new $1.2 trillion dollar spending plan last week.
Our government simply can’t stop spending money it doesn’t have and the only logical conclusion for why the Fed is signaling rate cuts now is that they are trying to make it more affordable for our government to keep adding to its debt pile.
The question becomes, how long can the government keep issuing more debt before the market starts to call them out on it?
Billionaire Citadel CEO Ken Griffin spoke on this underappreciated risk in a recent CNBC interview, listen to the clip below.👇
Griffin went on to say that if there is a loss of confidence in US debt due to our excessive spending, then we will “fund our domestic liabilities with domestic money.”
To decode that last statement…they’ll turn to the money printer.
This is really the end game scenario that many Bitcoiners see as an inevitability. Everyone saving in dollars will see their purchasing power eroded as our government attempts to print their way out of its debt problem.
It’s why I choose to save in a money that government officials can’t print instead of one that they can print an infinite amount of with a click of a button.
It’s why I choose to save in Bitcoin.
Until next week, keep stacking.
- N₿
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NEW: Luke Gromen: Whether Fed Cuts or Hikes, Inflation and Bitcoin Are Going Higher...Is Melt-Up Likely?
Luke Gromen is a macroeconomist and founder and president of Forest for the Trees, a research firm he started in 2014 specializing in global macroeconomic, thematic and sector trends. Luke holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University.
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