Is $100k Bitcoin Next After Crypto Hits Bottom?

(Kitco News) After stabilizing above $20,000 after this summer’s wipeout, Bitcoin appears poised for the next step as markets focus on regulation, institutional adoption and the next halving, according to 3iQ, the first regulated digital investment fund manager assets in Canada.

Although Bitcoin was caught up in the contagion risk of the DeFi space, falling from a record high of $60,000 posted last year to below $18,000 this summer, the world’s largest cryptocurrency is currently trading just below $24,000. And many analysts and market participants are beginning to agree that the price floor for Bitcoin has been reached.

“The normal correction of any growth or risk asset is a 50% retracement. First we saw Bitcoin move from $60k to $30k. And then we had our crypto financial crisis, which was the demise of the DeFi space and the lending models that people had created. And that was a sale from $30,000 to under $20,000. And I think we’ve seen most of that shakeout happen. We don’t see this continuing much longer,” 3iQ founder and CEO Fred Pye told Kitco News on the sidelines of Blockchain Futurist Conference in Toronto.

In the future, the time Bitcoin will spend below $20,000 will be very limited, 3iQ’s head of research Mark Connors added.

“I can’t guarantee it will never hit $20,000 again, but I will tell you that over the next year, the time it will be below $20,000 will be less than 2.5% of the time,” Connors said.

And this is because of the reasons why Bitcoin fell in the first place. “It was the washout. It was the failed piping. It wasn’t the protocol. And there was a technical reason it was run here. Are we suggesting current levels are a good entry point? 100%,” he said.

A year ago, Pye predicted that Bitcoin would reach $100,000 in 2023 and then possibly even $1 million this decade. Pye clarified that this price estimate was based on past and future halvings.

Since then, Pye’s price outlook hasn’t changed much. “These drivers were based on what we call the stock-to-flow analysis, which we quoted. Stock-to-flow ranks the scarcity of certain assets like gold and Bitcoin,” he said. “Gold is growing at 4% per year at this rate. Bitcoin is now growing at 2% per year and in two years it will grow at 1% per year. So the inflation rate of Bitcoin vs. Gold is becoming more and more attractive as a store of wealth. “

And going into the next Bitcoin halving, you’re going to see FOMO come back, with people looking to get back in to avoid missing out on the next rally,” Pye added.

In the past, Bitcoin’s limited supply and halving process made massive price increases possible. Bitcoin halving happens every four years, which is when the reward for mining bitcoin transactions is cut in half, which also slows down the rate of new bitcoins in circulation. The last bitcoin halving was in May 2020. And the next one is scheduled for May 2024.

On top of that, due to Bitcoin’s exponential growth, its price potential is still being overlooked. It was a similar story with televisions, the internet and social media, Connors pointed out. “Can Bitcoin hit $100,000? It’s a low level of adoption and sound technology, which is the answer to fiat degradation.”

Is the Fed a Problem for Bitcoin?

With markets zeroing in on the aggressive tightening path the Federal Reserve is taking to fight inflation, Connors said the upcoming rate hikes would have a limited impact on Bitcoin this fall and winter.

“The debt load is currently at WWII levels. When people say raise interest rates like Volcker did in the 1970s, the Fed can’t. Volcker had 30% debt to GDP. He had a runway because the impact on the economy was minimal. Right now can the Fed raise rates to 4%. But we won’t go higher than that. The next three Fed meetings are noisy,” Connors noted.

Regulation and any news from Congress, the Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC) will have a more significant impact on Bitcoin.

“The September meeting we care about is a meeting with the Cabinet. When the president’s task force says, here’s our plan for regulations so that institutions can put the hammer down and engage in crypto. That’s the meeting I care about,” he said.

The US and Canada are on two very different regulatory paths. Canada lags behind in terms of regulation of money flows by exchanges and custody. But Canada has won the battle regarding Bitcoin and Ether spot ETFs.

In the US, Connors added that it makes sense for the CFTC to have more oversight over crypto, which would view Bitcoin and Ethereum as commodities. But he warned that there could be a knife fight over funding in Washington.

“The CFTC is also used to having 24-hour markets. They are in a better place to monitor crypto. [But] The CFTC is a fraction of the size of the SEC, so it’s going to get more funding if this happens. There will be a turf battle. It’s going to be a knife fight in DC,” Connors described.

In 2021, 3iQ was one of the world’s first companies to launch Bitcoin and Ether ETFs in partnership with CoinShares.