Bitcoin (BTC) will win big thanks to the BlackRock exchange-traded fund (ETF), investor and analyst Charles Edwards believes.
In his latest interview with Cointelegraph, Edwards, who is founder of quantitative Bitcoin and digital asset fund Capriole Investments, delves into the current state of BTC price action.
With his previous bullish statements continuing to stand the test of time, and after an eventful few months, Edwards sees no need to change the long-term perspective.
Bitcoin, he argues, may be a less sure bet on shorter time frames, but the overall story of crypto becoming a recognized global asset class undoubtedly remains.
Cointelegraph (CT): When we last spoke in February, the price of Bitcoin was around $25,000. BTC is not only 20% higher today, but Bitcoin’s NVT ratio is also at its highest levels in a decade. Does this suggest more upside?
Charles Edwards (CE): NVT is currently trading at a normal level. At 202, it trades in the middle of the dynamic range band, well below the highs of 2021. Given its normalized reading today, it doesn’t tell us much; it’s just that Bitcoin is valued enough by this metric alone.
CT: At the time, you described Bitcoin as being in a “new mode” but predicted up to 12 months of upward grinding to come. How has your thinking evolved since then?
CE: That thinking largely remains today. Bitcoin has been steadily grinding around 30% since February. The difference today is that the relative value opportunity is slightly less as a result, and we are now trading into major price resistance at $32,000, which represents the bottom of the 2021 bull market range and confluence with major weekly and monthly order blocks.
My outlook today for the short term is mixed, with a bias towards cash until one of three things happens:
- Price releases $32,000 in daily/weekly time periods, or
- Price average returns to the mid-$20,000s, or
- On-chain basics return to growth mode.
CT: At $30,000, miners began sending BTC to exchanges en masse at levels rarely seen. Poolin, in particular, has moved a record amount in recent weeks. To what extent will the alleged selling of miners affect the price going forward?
CE: It is true that relative Bitcoin miner selling pressure has increased. We can see this in the two sub-chain metrics; Miner Sell Pressure and Hash Ribbons. Bitcoin’s hash rate is up 50% since January – that’s more than a 100% annual growth rate.
This rapid growth is not sustainable in the long term. Therefore, we can expect any slowdown to trigger the typical Hash Ribbon capitulation. This rapid growth in hash rate can also only mean one thing; an extraordinary amount of new mining rigs have joined the network.
It is 50% harder to mine Bitcoin, there is 50% more competition and as a result 33% less relative BTC income for miners.
Through 2022 there have been delays and backlogs in global mining hardware shipping for many months; we probably saw that backlog drain out in the first half of the year with the big hash rate. New mining hardware is expensive, so it makes sense that miners would want to sell a little more at relatively higher prices today to help cover operating costs and take advantage of the 100% price rally we’ve seen in the last 7 months.
Miners are big stakeholders of Bitcoin, so if they sell quickly, it can affect prices. Although because of their relative share of the network is decreasing, that risk factor is not what it once was.
CT: When it comes to US macro policy, how do you see the Fed approaching inflation for the second half of the year? Will more tours be coming after July?
CE: The market estimates a 91% chance of rate hikes for the rest of this year. There is a 99.8% chance the Fed will raise rates at next week’s meeting, according to the CME Group. FedWatch Tool. So we’ll probably see one or two more rate hikes in 2023. That seems pretty excessive given that inflation (CPI) has been trending steadily downward since April 2022, and is now well below the Fed funds rate of 5%.
Of course things could change quite a bit over the coming months, but if we take two more rate hikes as a base case, my expectation that any clean change in the Fed’s plan would be to pause. We have already seen the considerable strain in the banking system, with multiple bank collapses just a few months ago. 2023 was the biggest bank failure of all time in dollar value; more than 2008, so things could change considerably over the next six months.
Regardless, the Fed has implemented the vast majority of its rate plan. 90% of the stretch is complete. It is now a waiting game — will inflation continue to decline as predicted? And will that happen before or after the economy turns around?
CT: Bitcoin’s correlation with risk assets and inverse correlation with the strength of the US dollar has declined of late. What is the reason for this? Is this part of a long-term trend?
CE: Bitcoin has historically spent most of its life “uncorrelated” with risk markets, oscillating from periods of positive to negative correlation. Correlation comes in waves. The last cycle happened to see a very strong correlation with risky assets. This started with the Krono crash on March 12, 2020. When fear peaks, all markets take risk (into cash) in unison, and we’ve seen a huge spike in correlations across asset classes as a result.
After that crash, a wall of money entered risk markets from the biggest QE of all time. In that respect, the following year was “every single trade” – up and to the right for risk. Then in 2022 we saw the unwinding of all risk assets as bonds repriced following the Fed’s most aggressive rate hike regime in history.
So it was unusual times. But there is no intrinsic need for Bitcoin to have a high correlation to asset risk. It is likely that over time, as Bitcoin becomes a multi-billion dollar asset, it will become more interconnected with major asset classes and so expect to see a more consistent positive correlation with gold over the next decade, which has a very negative correlation with the dollar.
CT: How do you think US regulatory pressure will affect Bitcoin and crypto markets going forward? Do you think Binance and Coinbase were the tip of the iceberg?
CE: It is impossible to say for sure, but I believe that the regulatory fears of early 2023 were well exaggerated. Bitcoin was long ago classified as a commodity, and from a regulatory perspective is clear. There are certainly question marks over various altcoins, but the legal outcome of XRP being considered not a security was definitely an interesting turn of events this month.
Finally, it’s pretty clear that industry and government – where it matters – support this asset class and know it’s here to stay.
BlackRock ETFs have a 99.8% success rate and its announcement to launch a Bitcoin ETF was essentially a regulatory and financial industry green light.
We’ve seen half a dozen other leading financial institutions follow suit and, of course, now presidential candidate Kennedy is talking about backing the dollar with Bitcoin. This asset class is here to stay. There will be bumps and hiccups along the way, but the direction is clear to me.
CT: How do you foresee progress of the BlackRock spot ETF and its impact on Bitcoin should it launch?
CE: The BlackRock ETF approval will be huge for the industry.
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BlackRock is the largest investment manager in the world, and its (and regulatory) seal of approval will allow a new wave of capital to flow into the market. Many institutions sat on the sidelines last year due to concerns and uncertainty about crypto regulation. ETF approval will be a big rubber “yes” stamp for Bitcoin.
ETFs are also likely to make it easier for institutions to put Bitcoin on their balance sheet, as they don’t need to worry about custody or even entering the crypto space. So it opens a lot of doors. The best comparable we have for this event is the gold ETF launch in 2004. Interestingly it launched when gold was down 50% (much like Bitcoin today). What followed was a massive +350% return, a seven-year bull run.
Basically the Bitcoin ETF is just another goalpost on the road to broad regulatory acceptance and establishing Bitcoin as a serious asset class. And it has big implications.
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This article does not contain investment advice or recommendations. Every investment and business move involves risk, and readers should do their own research when making a decision.