With Bitcoin (BTC) inching ever closer to the monumental $70,000 mark, the crypto community is rife with speculation about a possible surge to $100,000, which many believe will herald a significant altcoin season. Amidst this excitement, renowned crypto analyst Axel Bitblaze has shared his insights on X, dissecting whether the requisite liquidity and catalysts are in place to drive Bitcoin to new heights.
Bitcoin Surge Set To Be Fueled By Stablecoins
Central to Bitblaze’s analysis is the pivotal role of stablecoins in the current crypto landscape. Describing them as “the gateway to the crypto industry,” he highlights their essential contribution to the broader crypto ecosystem. The total market capitalization of stablecoins has soared to $173 billion, marking its highest point since the TerraUSD (UST) collapse, indicating a robust influx of liquidity.
Stablecoins’ Influence on BTC Price
Tether (USDT), the undisputed leader in the stablecoin market, commands a staggering 69% of the market share with $120 billion. Bitblaze underscores the historical linkage between BTC prices and USDT’s market capitalization, stating, “Between March 2020 to November 2021, USDT’s market cap increased 17-fold, while BTC’s price surged 16.5 times.” Despite USDT’s continued growth since March 2024, Bitcoin’s price has been relatively static, suggesting a substantial pool of liquidity poised to enter the crypto markets imminently.
FASB Rule Change: A Catalyst for Corporate Bitcoin Adoption
Another key factor influencing Bitcoin’s trajectory is the upcoming amendment in accounting standards by the Financial Accounting Standards Board (FASB). At present, publicly traded companies encounter hurdles in holding Bitcoin due to unfavorable accounting regulations. Bitblaze elucidates, “If a company buys Bitcoin at a certain price and it fluctuates, the current rules require them to report it at the lowest value, impacting earnings reports adversely.” This often deters companies from investing in Bitcoin despite its potential as a strategic asset.
Implications of the New FASB Rules
The forthcoming FASB rule change, slated for implementation in December 2024, promises to rectify this issue by allowing companies to report the fair market value of their Bitcoin holdings. Bitblaze posits that this regulatory adjustment could motivate more corporations to integrate Bitcoin into their balance sheets, thereby increasing demand. He points to MicroStrategy’s strategy as an example, which has resulted in substantial profits from their Bitcoin investments.
Expanding M2 Money Supply: A Macro Perspective
Bitblaze also examines the macroeconomic environment, particularly the M2 money supply, which encompasses cash, checking deposits, and other near-money assets. Currently standing at $94 trillion, the M2 money supply is nearly 39 times the total crypto market capitalization. According to Bitblaze, historical patterns suggest that for every 10% rise in M2 supply, Bitcoin’s price surges by 90%.
Potential of M2 Supply on BTC Growth
Despite the M2 money supply being approximately 3% higher than its previous peak, Bitcoin has not yet surpassed its 2021 highs, suggesting untapped liquidity. With global rate cuts and quantitative easing on the horizon, fiat currencies may become less attractive, potentially redirecting this liquidity into the crypto markets. As Ray Dalio famously remarked, “Cash is trash,” and this immense money supply could soon find its way into alternative assets like Bitcoin.
Shift From Money Market Funds To Bitcoin
Since November 2021, money market funds have swelled to $6.5 trillion as investors sought refuge in Treasury bills amidst rising interest rates. However, with the Federal Reserve initiating rate cuts and signaling more reductions, the yields on T-bills are anticipated to decline, prompting a shift towards higher-return investments such as Bitcoin and other cryptocurrencies.
Forecasting the Inflow to Crypto Markets
Bitblaze anticipates a substantial outflow from money market funds, with investors seeking riskier assets in pursuit of better returns. He describes these digital assets as “the fastest horses” in a quantitative easing environment, forecasting that this shift could channel significant capital into the crypto markets. By aggregating various liquidity sources, including the M2 money supply, money market funds, corporate cash holdings, and stablecoin market cap, Bitblaze estimates a potential $103.17 trillion pool—43 times the current total crypto market capitalization.
Addressing skeptics, Bitblaze concludes, “For a $200 billion inflow, a mere 0.19% of this liquidity pool needs to enter crypto. If $20 billion in net inflows occurred during stagnant price movements, imagine the potential with favorable conditions.”
