How Bitcoin Heads To $ 100,000

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Fidelity Investments Global Macro Director Jurrien Timmer joins Yahoo Finance to discuss the momentum behind Bitcoin as it pushes forward the 100K, the future of cryptocurrency and the outlook for the stock market going forward .

Video transcript

– Our next guest says Bitcoin could hit $ 100,000 by 2023, and that’s just because of momentum traders. Jurrien Timmer is the Global Macro Director of Fidelity Investment and is joining us now. Jurrien, really– it’s good to see you, and it’s really interesting to call here. Some would say Bitcoin could hit $ 100,000 within a month or two. Why did you take a longer timeframe?

JURRIEN TIMMER: Well, then, you know … first, hello. Glad to be on the show. One should always be warned that price predictions are great, but they’re not really worth much. What we do know is that Bitcoin, obviously, is on the move. And he’s actually on the move without the help of short-term elk hunters.

You know, when I look at the dynamics of the chain and you look at the number of bitcoins held by accounts that had them for less than three months, so I call these tourists, basically, short term traders chasing the momentum. , the opposite of HODLers, who only take this for the very, very long term. This group has fallen to 15% of all bitcoin owned. So I’m talking about short-term hunters.

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And that’s actually below what we see at most lows, not to mention a price approaching an all-time high of $ 65,000. We are at $ 58,000 today. So this ramp-up has happened without the help of moose hunters, which in my opinion is actually a really good sign because it means there’s something else driving Bitcoin up, and this is a fundamental demand for Bitcoin and its network. So, you know, when I find $ 100,000, it’s really just a conservative estimate based on the intersection of my supply model and my demand model.

So obviously one of the challenges with a new technology or a new asset like Bitcoin is that it’s a budding new asset class in price discovery mode. No one really knows what it’s worth, so we’re all trying to figure it out. But based on the network effect, Metcalfe’s Law, which means that as the network grows – and the network has already grown exponentially – the price increases even more exponentially at go from there. This is Metcalfe’s law in effect. And other technological innovations, and even, like, a stock like Apple – not that I’m a security analyst – has gone through the same process, where its sales have increased 38-fold in 10, 20 years, and its market value is multiplied by 900.

So it’s an exponential increase. And based on those metrics, by 2023 my models are going to be $ 100,000. But maybe it does it in a very non-linear fashion, because if we know one thing, it’s that Bitcoin doesn’t move in a straight line. So who knows? Maybe it goes to 200 first, then 100, and maybe that is the basis for the next bear market. So who knows? But that, to me, seems to be the path of least resistance. And the fact that we’re getting there without that momentum effect, I think, is a very healthy sign.

– Hi, Jurrien. It’s Julie here. It’s good to talk to you. Let’s talk a little more about this article on participation, right? It seems like everyone is asking these CEOs of big banks about crypto these days. We weighed Jamie Dimon recently – still a skeptic. Someone asked Gorman about it today, Morgan Stanley’s James Gorman. He said he doesn’t think it’s a fad, but at the same time he said it wasn’t a big part of their customer demand yet.

And so if you look at this network effect, and if it’s not the momentum traders and we look at who is growing in crypto, is there a way for us to know, is that that it comes from large financial institutions, for example? I mean, Fidelity also has a crypto trading operation by the way. So what do we know?

JURRIEN TIMMER: Yes. So I think maybe it’s a mix of everything. You know, I’ve been in meetings with big factories, whether it’s their retirement side or their cash flow. I think there is probably still some hesitation on this front, in terms of supporting Bitcoin as an asset, just because of regulatory risk, which I think will be resolved over time. And that, indeed, will be a positive point, because it will legitimize the space. But there’s the volatility, which I think isn’t going to go away because it’s a feature of Bitcoin’s price elasticity, right?

In other words, if there is more demand, you don’t get a supply response because the supply is essentially frozen. Volatility is therefore somehow inherent in it. But there is the retail side. I mean, you can buy Bitcoin even without an ETF. You can buy it in different ways. And I think there is a lot of interest. We also see it at Fidelity Digital Assets. We have done polls, and certainly there is growing interest in space.

But you know, this is a budding, maturing asset class. It’s not without risk, and that’s, I think, what you see expressed by some of the CB CFOs you mentioned. But you know, it’s one of those things where, when you have a small network, it’s easily disrupted, right? It can be regulated, hacked. It can be competed outside. But the larger the network, as Metcalfe’s law says, the more impenetrable it becomes. And I think Bitcoin now, especially with level, the second layers applied to it, and that will hopefully overcome the lack of scalability, which comes from being a decentralized ledger.

I think this is where the promises that Bitcoin can actually become, not just a store of value but also a payment system, which it really isn’t now because it’s too big, it’s too slow. . But I think that’s hope, and the more the network grows, the more powerful it becomes. And then it’s going to be harder and harder to ignore.

– Jurrien, I caught a tweet from you, a good tweet, showing a good graph, and you were talking about the market looking a little wobbly here or starting to wobble. How concerned are you about the market at the end of the year?

JURRIEN TIMMER: Okay, we’re talking about the stock market, aren’t we?

– Stocks, not Bitcoin. We know where it is going.

JURRIEN TIMMER: Yeah, yeah, yeah. The market is therefore at a point of transition. And by that, I don’t mean to make it look like a bearish event, because I don’t think it does. But we are in that seasonal time, of course, where people like to worry. And we’re a little vacillating. You know we’re down – not quite right now, but we’re down about 5% from highs, which of course in the grand scheme of things is nothing for the market. scholarship holder.

But we’re in this mode where – we’re in earnings season – that earnings growth is starting to peak, albeit at extremely high levels, plus 50%. And this is happening at a time when valuation multiples are starting to compress. And this is also happening at a time when the Fed is starting – will presumably start drawing liquidity, right? So the consensus is that they’re going to start shrinking in November, by $ 15 billion a month, and that they’ll be done with asset purchases by the middle of next year. And then at the end of next year, presumably, they’ll start raising rates.

So you have cash removal, you have peak earnings growth, and you have valuation multiples ranging from expansion to compression. And that doesn’t mean a bear market by any means, but it does mean there’s a lot going on, where there’s a new chapter coming up, which is sort of the mid-cycle chapter, and taking over. from the beginning of the cycle chapter. And the distinction is that at the start of the cycle, so coming out of a big bear market, which of course happened a year and a half ago, you have this massive V-shaped rally that’s entirely driven by valuation, as price is typically bottom before earnings. Then profits have joined in and sure, Q1 and Q2 have been quarters of massive profit growth, and I think Q3 will be the same, but at a slightly slower pace.

So we are moving to a different mode, and a mode where historically the market continues to go up, but it goes up a bit according to the long term trend, which is around 10% per year, and not like the numbers we’ve seen over the last year, which was basically 100% per year. Obviously, not sustainable. And we saw the same in 2010 after the GFC dips, when QE1 was supposed to end, and we kind of had an oscillation there, and then the markets kind of flattened or rose further in line. to historical trends. I saw the same thing in ’04.

So I think that’s what I’m seeing, and I think the oscillation is kind of part of that transition.

– We will be on swing alert here at Yahoo Finance. Jurrien Timmer, Director of Global Macro at Fidelity Investments. Glad to see you today.

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