Why Bitcoin Is Set for a Major Breakout Now

The stars have aligned for Bitcoin’s next epic breakout.

Beaver Bulletin · September 26, 2024 · By Andrew Throuvalas

1. The Federal Reserve dropped interest rates by 0.5% last week – and China followed suit. 

That’s a really big drop for the central bank by historical standards, but ultimately aligned with what the market increasingly knew to be true: the Fed was late to cut rates, and now must move fast to save the U.S. economy from potential recession.

After the central bank’s Wednesday decision, the People’s Bank of China (PBOC) also announced multiple rate cuts on Monday aimed at reversing a prolonged downturn in its property market. It also reduced required down payments for property purchases, and slashed bank reserve requirements by 0.5%.

With China and the Fed’s actions, all of the world’ major central banks are now moving back in the direction of printing money. Shocker.

Naturally, Bitcoin’s price has reacted with optimism. The coin’s price is now CAD $85,500, and looking poised to close September with an uncharacteristic green candle.

The timing is extraordinary – especially since rate cuts aren’t even the most bullish gift Bitcoin received this week.

2. The SEC has approved trading of options for BlackRock’s Bitcoin spot ETF. 

For the uninitiated: options are derivative instruments that let you purchase the “option” to either buy or sell Bitcoin at a pre-determined price at a later date. Think of them as insurance in case Bitcoin either pumps (or dumps) substantially from its current price.

Still not following? No problem.

All you have to understand is that several market experts view regulated options trading for spot Bitcoin ETFs as one of the most bullish developments in the history of finance.

“Without exaggeration, this marks the most monumental advancement possible for the crypto market,” wrote Jeff Park, Head of Alpha Strategies at Bitwise, to Twitter on Friday. “The financial world will see regulated leverage on a perpetual commodity that is truly supply constrained.”

CoinDesk analyst James Van Stratten bolstered this view, claiming Bitcoin options create the potential for a “gamma squeeze”: options dealers are forced to buy more BTC as traders purchase more calls, pushing the price up further and fuelling even more volatility.
Of course there are the naysayers: some say options will actually dampen Bitcoin volatility, while others say they’ll increase the supply of “paper BTC” in the market and suppress the asset’s price. Ex- Galaxy Digital Derivatives Trading Head Joshua Lim claims variations of Bitcoin options trading already exist, and they haven’t caused any kind of bullish whirlwind.

Then again, similar arguments were made late last year before BlackRock’s Bitcoin spot ETF rolled out in January. Within two months, the bears had been proven wildly wrong, and it was only Bitwise who had captured the overwhelming demand for the product before its launch.

If BlackRock’s success so far is any indicator, I would not bet against their options roll out once it arrives. Besides – options aren’t the only reason that BlackRock is bullish on Bitcoin right now. 

3. BlackRock analysts say that their clients are buying BTC to hedge against a U.S. sovereign debt crisis. 

In a presentation shared last week, the company claimed that Bitcoin has “little fundamental exposure” to macro factors influencing other asset classes, and said some of its best attributes are its global nature and fixed supply.

“The growing concerns in the U.S. and abroad over the state of U.S. federal deficits and debt has increased the appeal of potential alternative reserve assets as a potential hedge against possible future events affecting the U.S. dollar,” they added, claiming this concern explains a “substantial portion” of client’s interest in Bitcoin.

You heard it here: even BlackRock is now acknowledging that the United States’ $35 trillion debt burden is now a serious problem, and that Bitcoin could be a solution for people. That’s because Bitcoin is mostly detached from the calamities that would unfold if the U.S. defaulted, including “banking system crises, sovereign debt crises, currency debasement,” and “geopolitical disruption.”

They’re not the only ones either. 

4. Donald Trump just doubled down this week about the potential for using Bitcoin to help wipe out his nation’s debt.​

Now in his case, he doesn’t seem all that knowledgeable about how that would work. “Ill write on a little piece of paper– $35 trillion in crypto – we have no debt!” he said.

But the fact that he’s said it more than once means discussions are likely happening within his party about the opportunity for this. Trump already announced plans for a strategic Bitcoin stockpile in July, and senator Cynthia Lummis has since presented a more comprehensive bill that would allow the U.S. to acquire more BTC for this purpose.

Then again, these are just promises, and they are contingent on Donald Trump winning the election. As far as betting markets are concerned, his odds of victory are still a total 50/50.

Stay humble,

Andrew