Will Bitcoin Hit $100,000 in the Next 12 Months?Dec 16, 2022
Let us preface this entire post with the fact that predicting any asset's price on a day-to-day basis is basically all but impossible. Translate that over to the crypto world and this effect only gets multiplied substantially further.
At Moby, our entire mission is transparency at all costs, so when we give you our projections we fully admit that these are subject to change and are usually over longer more projectable periods of time. While many other companies out there will tell you that they can do the opposite with 100% precision, the hard truth is that this is mostly a marketing & advertising ploy.
So with that context, we want to give you our team's projections for bitcoin over the next 12-24 months.
We're long the asset and fundamentally believe in its continued price appreciation over the longer term.
Where Bitcoin's price will be next week is impossible to say, but here at Moby we're long-term investors looking to consistently beat the market on a risk-adjusted basis.
FTX & Sam Bankman-Fried:
Before we get into our long-term thesis, it'd be impossible not to address the FTX & Sam Bankman-Fried drama. So let's quickly chat about it.
While crypto has been dwindling this year due to macro forces, the entire debacle with FTX is just adding additional doubt to an "industry" that is already somewhat shaky.
But let's peel back the layers here: Is this a fundamental issue with crypto or is this an isolated incident? It's honestly a bit of both. Hear us out for a second.
As the new CEO of FTX said, this is just a classic case of embezzlement and fraud. This could have happened in any industry and was not specific to anything crypto-related.
However, because crypto is highly unregulated and this company was based out of the Bahamas, the ability to lie and cheat therefore was easier than ever.
So while the FTX drama could have unfolded in any industry, it was easier due to the fact that Crypto has close to 0 guardrails.
Therefore our takeaway is that while it'll dent crypto's reputation in the short run, this further places an emphasis on regulation over the long run which will bring more legitimacy to the asset class.
So, long story short, we believe that the issues with FTX will be negligible in the long run.
However, FTX aside, crypto is still facing the same issues it did earlier this year and that's macro-related -- e.g. the same pressures the stock market is facing.
What we've seen with Bitcoin is that it is highly correlated to equity markets. And once these markets rebound, as hard as it may be to believe, Bitcoin will rebound with it.
While the market rebounding is nearly impossible to predict, it seems likely that the first half of 2023 will be rough with some alleviation coming in the second half of the year. That's because we should be at the bottom of the recession and interest rates should be peaking around then.
While this isn't an exact science, what we're looking for is key data points that suggest we're on the other side of this recessionary period. And as we mentioned, once we are, we believe everything will rebound.
So while it may seem absolutely nuts that we think Bitcoin will rebound sharply in the next 24 months, just look back to all of crypto's historical crashes and see that it's always rebounded.
As we mentioned in the intro, we are long-term investors and large price movements in the "crypto-verse" are inevitable. Even once they rebound, there will likely be another crash again.
Being a long-term investor is all about riding those waves out. So once markets rebound, you better believe the rebound in crypto will be hard and fast.
If we've learned anything in the last decade, it's this: Don't fight the Fed.
And now with that out of the way, let's get into our long-term projections and thesis on crypto:
The long-term acceptance of crypto will always hinge on institutional adoption.
It's a hard truth in an environment rooted in decentralization, but if merchants, banks, governments, and other large entities don't adopt crypto, then it's truly hard to imagine it scaling globally.
And that has always been the trouble with crypto from day 1. Its entire mission was to fight back against "the man".
But in modern times, that fight has evolved into the beginning stages of acceptance. And the reason that is so important is that once institutions accept crypto, the price (regardless of use case), can begin to truly flourish.
Here's a summary of our outstanding thesis from last year:
The current market cap (as of writing this) of bitcoin is ~$350B. And when thinking about the potential future investments into bitcoin, given the size of the market today, we still believe it is extremely nascent and has a ways to go.
So why do we think this? We think this because most of the investment to date in bitcoin is mostly retail lead and still is waiting for massive investment from the institutional world. While this is starting to happen, only a small percentage of companies are actually doing this.
So let's run a thought exercise here.
What if every major US company made an investment into bitcoin similar to what we've seen with Tesla, Square and a few others? Looking more closely into this, we see that the total cash position for US public companies is over $1.5T. Therefore if every company followed Tesla’s lead and invested 7.7% of their balance sheet into Bitcoin, that would be an injection of over $130B.
Given the market cap of Bitcoin is only $875B, this means that just US companies alone would increase the size of the market by 15%. If the US government also did that with their balance sheet (and to be conservative we'll half it) it would increase Bitcoin's market cap by 45%!
While this may seem like ludicrous examples, to us this is being conservative for 3 reasons.
This only accounts for US companies. If institutions, foreign companies, governments, etc. did the same this would only balloon the effect.
This only factors in that companies do this as a balance sheet cash alternative. What if bitcoin became a major investment for them too, similar to what we've seen with gold? Gold's market cap is over $9T. If bitcoin even became half of that, we'd see it rise over 5 times! That would make the price of bitcoin go to $250,000 a coin!
Bitcoin's market cap makes it half the size of companies like Apple and Amazon. While these companies are massive, bitcoin isn't a company, it's a currency. If widely adopted, the value of a currency will always outweigh the value of a single company. If it was widely accepted that bitcoin was equal to a dollar or another major currency, bitcoin's price would need to appreciate rapidly given there's only a fixed amount and you cannot debase it!
The summary of our entire thesis is that once institutional adoption comes to the table, large swaths of unthinkable money will finally be injected into the currency, which will trump any other significant shift in crypto's entire history.
And guess what? The early stages of that look to be happening now. And the proof is in the pudding 👇
Here's the proof:
Earlier this year, Goldman Sachs announced an OTC trade of crypto with Galaxy Digital. While they did do a futures trade with CME last year, this is so significant because this actually posed a risk to the bank that they were willing to take. Therefore this is a big step towards them staking real adoption. And per the President of Galaxy Digital, "This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients". While the details of the trade were not disclosed it's not as important as the signaling effect toward the other banks on wall street.
Bridgewater, the largest hedge fund in the world with over $200B in AUM, recently announced an investment into crypto. Their CEO last year personally bought bitcoin but recently is talking about how bad "cash is". And what's more is not only have they made an investment into crypto but they're also backing a crypto-based fund.
BlackRock is the largest asset manager in the world ($10T in AUM) and is also getting involved in crypto. In early February they also said they're launching a crypto trading service and that it would be run through their Aladdin trading system ($20T in AUM is managed through this platform). If BlackRock gets enough of crypto trading, this would be huge.
So if you think the largest asset manager, hedge fund and bank was enough, you were mistaken. Pensions, endowments & sovereign wealth funds are now getting involved too. And what's crazy is pension funds and sovereign wealth funds (funds who allocate on behalf of sovereign nations) have balance sheets larger than any other institutional type. In pensions alone there is over $50T sitting in these assets.
For example, the Houston Firefighter Pension Fund bought $25M in crypto this year. The Virginia Public Pension Fund also made a $50M investment into a crypto fund. And other large pension funds are now also getting involved in private funding like FTX, Celsius and more! The Harvard fund, Yale, and others are also now believed to be investing crypto assets too.
If you want even more proof of adoption a report recently came out by IntoTheBlock which shows the number of institutional trades going on right now. And this report shows that institutions (e.g. denoted as any trades over $100k in value) represent 99% of the trades going on right now. And this grew exponentially from 2020 when it was closer to 75%. Therefore it can be assumed that institutions are pouring into crypto at a rate never seen before. To further quantify this $193B of trading volume was done in CoinBase in 2020 and in 2021 it was $1.7T. Breaking this down we saw that retail volume grew 7x while institutional grew 9.5x.
The entire takeaway is that we're still in the 1st inning of a wave of major institutional players coming to the table.
And while this may not be good for the bitcoin ecosystem in the long run, it surely will be good for the price as massive amounts of demand starts surging in a way never seen before.
When we wrote up our thesis on Bitcoin last year this was the event we were looking toward and it looks like it's starting to begin now.
While the timing of the "real inflow" is still impossible to predict, this signaling is what is more important than ever. We now know what we've been speculating for years. And that is that these institutions will finally start getting involved.
The only step left though is when foreign nations start getting involved.
And from what we've seen so far, central banks could be the next step. This can't be understated. While it will surely come with regulation this is a net positive.
Foreign central banks have to hold global currency reserves and they need to pay attention to what's in these baskets because they need to access these reserves quite often to preserve their mandates.
However, as we saw with Russia, accessing foreign currency reserves is harder than you would normally think. This is because at any time you're subject to serious risk. For example, the Russian Central Bank had 60% of its global FX reserves frozen almost overnight.
And while they "did this to themselves" this is important for other countries, because now central bankers are considering whether USD are as safe as they were originally made out to be.
We, in theory, could be one conflict away from some foreign body freezing USD reserves.
On top of this central bankers have been scared of holding a depreciating asset (e.g.) that's subject to foreign politics. And yes other central banks can diversify their assets but they're really looking for something that's not as centrally located that is impossible to seize, appreciates, isn't inflationary, etc.
And if these countries start accepting it as legal tender this could really scale adoption faster.
While this last piece will take a while to play out, this would be the kicker that skyrockets crypto into stardom.
Long story short, our thesis on Bitcoin and crypto is now reiterated and we're just waiting on the next major catalyst to boost the price further.
Timing is still near impossible to predict but now over a multi-year time horizon, our $100K price target still holds strong!