Bitcoin: A Safe Haven Against Tariffs & Fiat Mayhem
Bitcoin has emerged as a top-performing asset class worldwide, surpassing Alphabet's valuation and becoming the fifth-largest asset. However, recent market turmoil led to a 30% pullback from its all-time high of $109k achieved last year.
Bitcoin Decouples from Traditional Risk-On Assets
One of the long-term bearish arguments against Bitcoin is that it is just another "risk-on" asset. Historically, you may have observed that Bitcoin has acted like a leveraged Nasdaq product, dramatically outperforming in equity bull markets and underperforming in bear markets. However, this week's market events disproved that notion.
Despite the carnage in equities early in the week, Bitcoin rose 3%, regaining its 50-day moving average. The relative strength in the world's largest cryptocurrency stood out like a sore thumb Monday, but it's not just a one-day occurrence; it is becoming a trend.
While the Nasdaq and major US equity indexes are stuck below their long-term 200-day moving averages, Bitcoin remains above its mid-term 50-day moving average. Meanwhile, Bitcoin is nearly flat, while the S&P 500 Index ETF (SPY) and Nasdaq 100 Index ETF (QQQ) are each down double digits.
Liquidity is King in a Turbulent Market
As trade wars press on, international investors will likely park some of their funds in Bitcoin, leveraging its unique attributes, including scarcity, decentralization, and global accessibility. Liquidity is king on Wall Street, and I have learned that through over two decades of investing experience.
Legendary billionaire investor Stanley Druckenmiller teaches that "Earnings don't move the overall market; it's the Federal Reserve board... focus on the central banks, and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets."
Fed Chair Jerome Powell recently portrayed a "Hawkish" tone, signaling that he was not ready to cut interest rates and was concerned about the potential for tariff-induced inflation. However, it is essential that investors pay attention to what the Fed is likely to do instead of blindly listening to its rhetoric.
Bitcoin Correlated with Global Liquidity
It's not enough to focus only on US liquidity; Bitcoin is an international asset. Thus, we must focus on global liquidity. The Chicago Mercantile Exchange (CME) FedWatch Tool suggests that multiple interest rate cuts will occur in 2025 – a bullish sign for assets like Bitcoin.
Bitcoin's Bullish Seasonality Period
Historical seasonality patterns have been extremely accurate for Bitcoin in recent years. The seasonality roadmap suggests that Bitcoin should rally into August before retreating.
Bitcoin Adoption Among Public Companies
MicroStrategy (MSTR) founder Michael Saylor and his company received a plethora of flack when it added Bitcoin to its balance sheet and adopted a "Bitcoin Reserve Strategy." However, the strategy has paid off – big time. MSTR shares are up more than 2,000% over the past five years, dwarfing the 107.9% returns of the S&P 500 Index.
Other public companies like GameStop (GME), Semler Scientific (SMLR), and even nation-states like the US with its new "Strategic Bitcoin Reserve" are adopting Bitcoin as a store of value.
Relative Price Strength
During bear markets, the best thing investors can do is look for relative price strength. A good metaphor for this is to look for the tennis balls vs. the eggs, or those assets that bounce instead of break during market volatility and mayhem.
These assets are likely to perform best when the dust settles. While the major market indices and the vast majority of stocks are below their 200-day moving averages, Bitcoin remains above it – a subtle yet powerful sign of relative strength.
Bitcoin Technical Analysis
Currently, Bitcoin has a confluence of four distinct signals:
• Retest of Previous Breakout Zone: iShares Bitcoin Trust (IBIT) is currently retesting its breakout zone from November from a seven-month base structure. • Election Day Gap Fill: IBIT is filling the November election day gap, an area that should act as support. • 200-day Moving Average Tag: IBIT tagged its rising 200-day moving average for the first time in its history recently. • 3 Corrective Waves: Elliot Wave Theory suggests that sellers may be fatigued when a stock has three corrective selling waves (with wave 3 being the deepest).
Bitcoin Bottom Line
Despite a recent pullback, Bitcoin has demonstrated strength by decoupling from traditional "risk-on" assets during market turmoil, supported by factors like its scarcity, decentralization, increasing global liquidity, historical seasonality, growing adoption by public companies and even nation-states.
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