In a week filled with more surprising central bank moves, markets have been gyrating wildly.
The RBA’s decision to ease back on rate hikes with only a 25-basis-point increase has certainly been the standout. That set the ASX off on a big 3.8% rebound rally for Tuesday — the biggest one-day surge in two years.
Does that mean we’ve passed the bottom of this bear market cycle, though?
Maybe…
Maybe not…
All anyone knows for certain is that we’re in unusual monetary territory. Inflation is still running relatively hot, but the data may be outdated after massive tightening from the world’s leading central banks.
The fact that the Bank of England recently had to pivot was a clear turning point — one that may influence other central banks for the remainder of 2022.
For weary investors who have endured a bitter year, though, the real question is where to look next.
Stocks still seem as volatile and unpredictable as ever. The only real winners have been commodities and energy.
Gold perhaps has a chance to prove its value as a hedge against further volatility.
And then there is the enigma that is Bitcoin [BTC]…
Everything but the price
Cryptocurrencies, and bitcoin, in particular, have had a rough year.
No one is going to deny that, and no one should be overly surprised by it.
Previous cycles in bitcoin have showcased just how volatile the swings from top to bottom can be. Each and every time, it’s been a similar story — a massive boom followed by a pretty deep bust.
But the crucial detail is that bitcoin always comes back stronger in the next cycle…
Every ‘crypto winter’ is followed by an incredible boom to new all-time highs.
The only real variable is how long the winter lasts. Because while each trough has been shorter than the last so far, no one knows for certain if this trend will continue.
However, what we can tell you is that some metrics, other than the price itself, are looking increasingly positive.
The hash rate for bitcoin, for example — a measure of the total computing power being used to power the network — just hit a new all-time high. At a peak of 321 exahashes per second, this means that miners are still flocking to the biggest cryptocurrency.
You can see the steady climb for yourself in the following chart:
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| Source: Coin Warz |
That’s not all, though.
While the hash rate is important, the bigger indicator for a potential bitcoin resurgence can be seen by long-term accumulation. As one self-professed crypto quant trader — Ki Young Ju — has pointed out, the amount of long-term bitcoin accumulation is peaking in a similar fashion as it has in the past.
As he posted to Twitter:
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| Source: Twitter |
In other words, the ‘hodlers’ are steadfast in keeping a tight grip on their bitcoin. So, if there is no one left to sell bitcoin at these lows, the price must naturally go up…
The next big bitcoin boom
As for how high bitcoin could soar in its next bull market, no one really knows.
It has constantly defied expectations in the past and will likely continue to do so in the future. For that reason, our in-house crypto expert — Ryan Dinse — believes it is possible that bitcoin could reach US$1 million before the decade is over.
That may sound crazy, given where the crypto is currently trading, but he has the rationale to back it up.
You can hear about Ryan’s reasoning and logic for yourself right here.
I’d definitely encourage you to check it out, whether you own bitcoin or not — because this kind of development if it really does come to pass, will have a huge impact on all investors.
It won’t matter if you buy into the bitcoin ethos. At US$1 million, the influence of a crypto asset this big would be far too large to ignore. And that is precisely why you need to understand it now.
Because eventually, the rationale for bitcoin will transition away from speculation and toward utilisation. As crypto advocate and investor Mike Novogratz recently explained:
‘According to Novogratz, the 2017 bull run was primarily about the story of people not trusting the government and wanting more privacy and decentralization. “It was a Gen Z, millennial revolution, and it was global. That’s a powerful story,” the CEO noted.
‘Bitcoin hitting all-time highs above $69,000 in November 2021, another big rally, was “really generated” by the COVID-19 pandemic, Novogratz said. He suggested that the price action in 2020 and 2021 was “probably 80% story and 20% utility,” referring to the growing utility use case of digitalization amid the pandemic.
‘In contrast to the aforementioned cryptocurrency bull runs, the next Bitcoin rally will have to be “50% story, 50% utility,” Novogratz predicted, stating:
‘“It’s people building applications, people building systems a) that are fast and scalable and b) that are user-friendly. We don’t have them yet — that’s why we’re where we are. But in the next few years, they’re coming.”’
The journey to US$1 million per bitcoin is just getting started, but it is up to you to decide whether to be a part of it.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
