The “best” time for Bitcoin is the “worst” time for everyone.
Original title: “The Year of Bitcoin”
Written by: Pantera Capital
On March 16, 2021, Pantera Capital, a top investment institution, published a monthly report ” Bitcoin Coming Of Age “, which analyzed the future expectations of Bitcoin and Ethereum, including the valuation of Bitcoin and why Ethereum underestimated.
Pantera Capital, as the top capital focusing on investing in the field of blockchain technology, can see Pantera Capital on every track, from public chains to protocols, from Layer 2 to applications. Every month, Pantera publishes a monthly report to conduct in-depth discussions on the market environment, trends, and industry development.
In the March monthly report, Pantera gave a deeper understanding of Bitcoin’s valuation and scarcity. Rhythm BlockBeats translated the opinions on Bitcoin in the monthly report, hoping to help investors.
The following is the Bitcoin part of “Bitcoin Coming Of Age”:
Dear investors:
Last year, when the virus began to affect us all, I wrote in my March 2020 investor letter:
“Bitcoin was born in the financial crisis. Now it has just come to his prime.”
When I was a bond trader, I realized that something was upside down. The “best” time for bonds is the “worst” time for everyone. A recession is the “best time” for bonds.
Unfortunately, I think this is happening in our cryptocurrency market.
As the government continues to increase the number of banknotes, people need to use more banknotes to buy a fixed amount of goods, such as stocks and real estate, but the government will ignore the money entering these areas, at least I think they will. But the result is that this will also inflate the prices of other things, such as gold, Bitcoin and other cryptocurrencies.
The United States entered this crisis with an unprecedented structural deficit. Expenses are 31% more than income. Before the emergence of the SARS-CoV-2 (new crown) virus, the Congressional Budget Office estimated that the deficit would exceed $1 trillion. It may now be three times as expected.
“1 billion spent here, 1 billion spent there, and soon this will become a huge sum of money.”
—U.S. Senator Everett McKinley Dirksen (Everett McKinley Dirksen)
Now that we have reached the trillion-dollar level, needless to say, the deficit must have a positive impact on the prices of things that cannot be increased at this time, similar to stocks, real estate, and cryptocurrencies. In other words, the exchange rate of the BTC/USD trading pair will rise.
The price of Bitcoin may set a new record in the next twelve months. This will not happen overnight. My guess is that it will take institutional investors 2 to 3 months to process their current portfolio. It will take 3 to 6 months to research new opportunities, such as bad debts, special circumstances, cryptocurrencies, etc. Then, when they begin to allocate assets, these markets will really start to take off.
All this has happened, it took months to stabilize, and it took months to regain strength. The firepower is now fully on.
I have gone through multiple cycles in these 35 years, and my trading instinct tells me that the price of encrypted assets will enter a period of rising.
We will see higher prices before the end of this cycle.
Price prediction through halving and S2F model
In the April 2020 letter , we announced the analysis of the impact of the Bitcoin halving event on the price of Bitcoin through the S2F (Stock to Flow ratio) model.
We predict that if the impact of the Bitcoin halving is similar to the historical one, it will increase along the following monthly path:
Bitcoin is now ahead of our forecast for April 2020—it will reach $115,000 this summer.
inflation
“In a sense, inflation is a ubiquitous monetary phenomenon that occurs when monetary increments are higher than production output.”
—Milton Friedman (Milton Friedman), 1970, “The Counter-Revolution of Monetary Theory”
Inflation is a ubiquitous monetary phenomenon, but not all inflation is the same.
Investors often ask why we can’t see inflation? The answer is: it all depends on where you look.
CPI (Consumer Price Index) does not show inflation. The Fed’s CPI targets mainly include those things with unlimited supply-flat-screen TVs, flip-flops, etc. With the severe weakness of the global economy, it will be difficult for people to see inflation on these things. This is why I firmly believe that the Federal Reserve and other central banks will continue their operations.
The epidemic ban and stimulus policies have allowed consumers in rich countries to save a lot of savings and backlog a lot of demand. In the United States, the savings rate has soared from 7.6% in 2019 to 16.0% in the third quarter of 2020 and 13.4% in the fourth quarter.
Things that cannot be easily increased will have large-scale inflation: gold, real estate, Bitcoin, etc. The best proof of this argument is the stocks in the S&P 500 index. Revenue in the second quarter of 2020 was 32.3% lower than the same period last year. However, the Standard & Poor’s 500 Index has hit a record high. This is entirely a monetary phenomenon.
The number of shares is limited. However, Fed Chairman Powell made it clear that quantitative easing will be unlimited. He went on to say:
“When it comes to loans, the matter of running out of ammunition will not happen.”
—Jerome Powell (Jerome Powell), March 26, 2020
The U.S. budget deficit for fiscal year 2020 is $14,500 per adult. From one perspective, this is 1,000 times more than a dose of vaccine ($14.50).
Unlimited dollars
What happens when you flood the market with a lot of goods? The price of goods will fall. Just as the price in USD:
This is the Fed’s inflation-adjusted and trade-weighted dollar value. This reminds us of Econ 101’s supply and demand diagram.
Bitcoin’s monetary policy is designed from a mathematical perspective-no central agency can carry out “quantitative easing.” Some people may change the old saying to use “Bitcoin” instead of “Land”:
“Buy land; no one can reproduce land.”
–Mark Twain
Morgan Stanley talks about crypto assets
“I have been preaching Bitcoin for ten years. In the early days, it was like preaching in the desert. But in recent years, it has become more and more like preaching to a choir, which has also made preaching more and more interesting, and The choir is also slowly growing. Now the singing of the choir has become more and more beautiful-I immediately let them sing by themselves.”
–Morgan Stanley, Ruchir Sharma, Head of Emerging Markets and Chief Global Strategy Officer, February 9, 2021
Why cryptocurrencies are coming out of the shadows
“The government slowly realized this revolution. When the epidemic broke out, the U.S. dollar ruled the world and was used as the most popular medium of international trade. The currencies of other countries were anchored to the U.S. dollar. Most central banks used it as a “reserve currency. “. Before the United States, only five major countries enjoyed the coveted “reserve currency” status, dating back to the mid-1400s: Portugal, then Spain, the Netherlands, France, and the United Kingdom. These reigns lasted an average of 94 years. At the beginning of 2020, the U.S. dollar’s hegemony lasted for 100 years, which gave us reason to question how long the U.S. dollar can dominate…”
“In addition, under the leadership of the Federal Reserve, major central banks are printing money frantically to keep the economy running during the epidemic, which has also weakened people’s confidence in all sovereign currencies. 20% of the circulating U.S. dollars are in 2020 The issuance of printed money greatly increases the attractiveness of Bitcoin. Bitcoin is designed to gradually “mining” new coins and the total supply is limited. In fact, various central banks are unintentionally working together to promote the development of cryptocurrency. For a long time, cryptocurrency has been considered a decentralized, democratic alternative to the dollar…”
“Bitcoin is not only the hottest investment option in 2020. Looking back at the past 10 years, it is also the hottest investment target, with an average annual growth rate of more than 200%. Bitcoin has exceeded a trillion market value. But this is a hedge against traditional inflation. Assets, such as gold, are still very small compared to gold. The global gold market has reached 12 trillion U.S. dollars. This also leaves a lot of room for Bitcoin to grow.”
“The most irresistible and practical application of cryptocurrency is reflected in the $470 billion remittance market-explosion-proof workers can send money back to low- and middle-income countries. These transfers usually take 1 to 5 days and cost 5% of the total remittance. To 9%. Nowadays, payment systems using cryptocurrency can complete the remittance in a few seconds, and the fee is only a few cents.”
Source link: www.theblockbeats.com
