Investor and analyst Charles Edwards believes Bitcoin (BTC) will be a big hit thanks to a BlackRock exchange-traded fund (ETF).
In a new interview with Cointelegraph, Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments, digs into the current state of BTC price action.
As his previous bullish statements continue to stand the test of time, and after a tumultuous few months, Edwards sees no need to change his long-term view.
He believes that Bitcoin may be less certain on shorter time frames, but the overall narrative of cryptocurrencies becoming a recognized global asset class undoubtedly remains.
Cointelegraph (CT): When we last talked in February, Bitcoin was around $25,000. Not only is BTC up 20% today, but Bitcoin’s NVT ratio is at its highest level in a decade. Does this mean more benefits?
Charles Edwards (EC): NVT is currently trading at a normal level. 202, trading in the middle Dynamic Range range, well below the 2021 high. Given today’s standardized interpretation, it doesn’t tell us much. Just based on this metric alone, Bitcoin’s valuation is quite reasonable.
CT: At the time, you described Bitcoin as being in a “new regime,” but predicted a 12-month uptrend ahead. How has your thinking evolved since then?
Chief Executive: This idea still exists today. Since February, Bitcoin has risen steadily by about 30%. The difference today is that the relative value opportunity is slightly less, and we are now at the $32,000 major price resistance level, which represents the bottom of the 2021 bull market period and the confluence with the major weekly and monthly order blocks.
My short-term outlook today is mixed, leaning toward cash until one of three things happens:
- The price settles at $32,000 on the daily/weekly time frame, or
- The price average returns to around $20,000, or
- On-chain basics return to growth.
CT: At $30,000, miners started sending large amounts of BTC to exchanges at rare levels. Biyincoin, in particular, has seen record volumes in recent weeks. To what extent will the so-called sell-off by miners affect the price movement?
Chief Executive: Indeed, the relative selling pressure from Bitcoin miners has increased. We can see this in the two on-chain metrics below; miner selling pressure and hashrate ribbons. Since January, Bitcoin’s hash rate has increased by 50%, an annualized growth rate of more than 100%.
This rapid growth is unsustainable. As such, we can expect any slowdown to trigger the typical capitulation of the hashrate ribbon. The rapid increase in hash rate can only mean one thing: a large number of new miners have joined the network.
The difficulty of mining Bitcoin has increased by 50%, and competition has increased by 50%, so miners’ relative BTC income has decreased by 33%.
The world has seen months of delays and backlogs in mining hardware shipments through 2022; we may have already seen the backlog cleared in the first half of the year as hashrate surged. New mining hardware is expensive, so it makes sense that miners would want to sell more at relatively high prices today to help cover operating costs and take advantage of the 100% price increases we’ve seen over the past 7 months.
Miners are the main stakeholders in bitcoin, so if they sell bitcoin quickly, it affects the price. Although their relative share in the network is decreasing, the risk factors are not what they used to be.
CT: Speaking of U.S. macro policy, how do you see the Fed’s response to inflation in the second half of the year? Will there be further rate hikes after July?
Chief Executive: The market is pricing in a 91% chance of a rate hike for the rest of the year. CME Group puts 99.8% chance of Fed rate hike at next week’s meeting Fed Watch Tool. So we’re likely to see a rate hike or two in 2023. This seems rather excessive given that inflation (CPI) has been trending downward since April 2022 and is currently well below the 5% fed funds rate.
Of course, things could change a lot in the coming months, but if we take two more rate hikes as a base case, I would expect any net change in the Fed’s program to be on hold. We’ve seen the banking system come under enormous stress, with multiple bank failures in the past few months. 2023 is the worst bank failure ever recorded in dollar terms; more than in 2008, so things could change a lot in the next six months.
Regardless, the Fed has already implemented most of its rate hike plans. 90% of the tightening is complete. It’s a wait-and-see game now – will inflation continue to fall as expected? Will this happen before or after the economic turn?
CT: Bitcoin’s correlation with risk assets and negative correlation with a stronger U.S. dollar has been declining recently. What is the reason? Is this part of a long-term trend?
Chief Executive: Historically, Bitcoin has been “uncorrelated” to the risk market for most of its life cycle, fluctuating from periods of positive to negative correlation. Correlations appear in waves. The last cycle happened to have a strong correlation with risky assets. This started with the COVID crash on March 12, 2020. When fear is at its peak, all markets move away from risk (to cash) in unison, and as a result we see correlations across asset classes surge.
After that crash, a flood of money from the largest ever quantitative easing was poured into risky markets. In that respect, the year ahead is “one trade” – risk up and to the right. Then in 2022, we see an unwinding of all risk assets as bonds reprice after the most aggressive Fed rate hike regime in history.
So this is an unusual time. But there is no intrinsic demand for Bitcoin to be highly correlated with risky assets. Over time, as Bitcoin becomes a multi-trillion-dollar asset, it is likely to become more closely correlated with major asset classes, so expect a more consistent positive correlation with gold, which is highly negatively correlated with the U.S. dollar, over the next decade.
CT: How do you think regulatory pressure in the US will affect the future of Bitcoin and the cryptocurrency market? Do you think Binance and Coinbase are just the tip of the iceberg?
Chief Executive: Can’t say for sure, but I think regulatory concerns in early 2023 are overblown. Bitcoin has long been classified as a commodity, which is clear from a regulatory perspective. There are certainly question marks over various altcoins, but the legal consequence of XRP being deemed not a security is definitely an interesting twist of events this month.
In the end, it’s clear that industry and governments (importantly) support this asset class and know it’s here to stay.
The BlackRock ETF has a 99.8% success rate, and its announcement of a Bitcoin ETF is essentially a green light for regulation and the financial industry.
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 bumps along the way, but the direction is clear to me.
CT: How do you see the progress of the BlackRock spot ETF and its impact on Bitcoin after its launch?
Chief Executive: The approval of the BlackRock ETF is significant for the industry as a whole.
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BlackRock is the world’s largest asset manager, and its (and regulator’s) approval will allow a new wave of capital to flow into the market. Over the last year, many institutions have been on the sidelines due to concerns and uncertainty over cryptocurrency regulation. ETF approval will be a big rubber “yes” stamp for Bitcoin.
ETFs also arguably make it easier for institutions to add bitcoin to their balance sheets, since they don’t need to worry about custody or even move into the cryptocurrency space. So it opens a lot of doors. Our best comparison to this event is the gold ETF launched in 2004. Interestingly, it was launched when gold was down 50% (much like Bitcoin is today). What followed was a massive 350% return and a seven-year bull market.
Essentially, a bitcoin ETF is just another goal for regulators to broadly accept bitcoin and establish it as an important asset class. It has great significance.
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This article does not contain investment advice or advice. Every investment and transaction involves risk, and readers should do their own research when making a decision.
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