The optimistic macro outlook of both funds revolves around the scarcity of bitcoin, which is fueling its popularity as a safe haven.
BTC/USD 1 day price chart (Finance). Source: TradingView.com.
Why are the two largest funds so positive about Bitcoin?
As Cointelegraph previously reported, the outlook for the US Dollar Index is down.
Fear of inflation and increased liquidity in the financial markets led to a devaluation of the reserve currencies and thus of the dollar.
Ark Invest, for example, sees bitcoin approaching $500,000 in the future, as the fund expects it to surpass gold in terms of market capitalization. Bitcoin currently has a market capitalization of about 10% of gold.
BREAKING: Ark Invest believes the market capitalization of #Bitcoin will one day far surpass the capitalization of gold to exceed $10 trillion.
– Marketplace Meditations (@MrktMeditations) 5. April 2021
The Winklevoss twins, who own more than $1 billion worth of cryptocurrencies like bitcoin, have made a similar argument in the past.
In a popular new essay titled The Case for $500K Bitcoin, Tyler Winklevoss, co-founder of Gemini, says:
Today, the above-ground market capitalization of gold is estimated at $9 trillion. If we are correct in using the gold framework to value bitcoin, and bitcoin continues on this path, the bullish scenario for bitcoin is that it is undervalued by a multiple of 45. In other words, the price of bitcoin could rise 45 times from its current level, meaning we could see a price of $500,000 per bitcoin.
For its part, JPMorgan has set a more conservative target of $130,000, which is more realistic as a short-term target for bitcoin, as it would bring BTC’s valuation to around $2.73 trillion.
Holger Zschaepiec, market analyst at Welte, noted:
JPMorgan sets a price target of $130,000, but bitcoin’s theoretical fair value, adjusted for long-term risk, would fall to between $24,000 and $30,000 based on current volatility ratios. The upside potential depends on how close bitcoin’s volatility is to gold’s. (via BBG)
However, Zschaepitz noted that the long-term risk-adjusted price of bitcoin could fall in the future, which is not really predictable because it is difficult to predict volatility trends over time.
What traders think
According to a pseudonymous trader known as Bitcoin Jack, the SOPR indicator predicts that profit-taking could occur in the near term.
The SOPR indicator measures how many BTCs are making a profit on the market and are therefore vulnerable to a drop. The trader said:
Confirmation of the trend is expected soon, otherwise I think we will go back to another corrective structure that will last >1-2 weeks. The SOPR indicates a slight increase in profits.
Another cryptocurrency trader, Scott Melker, pointed out that bitcoin has done well against the S&P 500 and the U.S. stock market, making it still profitable as a store of value.
Bitcoin vs SPX. Source: TradingView.com.
$BTC Vs. $SPX. Most assets have increased in value because the denominator is the US dollar, which has decreased in value. When you compare stocks to a deflationary asset, they seem much less impressive.
If bitcoin continues to outperform the U.S. stock market in terms of risk, it will remain attractive to retail and high net worth investors in the short to medium term.
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