Commodity veteran shares 7 catalysts

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Mike McGlone, a 30-year market veteran, is a senior commodities strategist at Bloomberg Intelligence. McGlone shares the two events that turned him from a gold bug to a crypto bull. It also introduces the 7 catalysts for Bitcoin and Ethereum to reach $ 100,000 and $ 5,000 over time.

The two largest cryptocurrencies received a much needed boost after billionaire Elon Musk revealed he holds both in his personal wallet.

Tesla’s self-proclaimed “technoking”, whose portfolio also includes Dogecoin and Tesla and SpaceX stocks, revealed on a star-studded sign that its electric vehicle company would “most likely” start accepting bitcoin as payment again once it got through. confirmed renewable energy use in bitcoin mining.

Bitcoin (BTC) and ethereum (ETH) both rebounded after the “B Word” conference, topping $ 32,000 and $ 2,000 respectively by mid-afternoon on Thursday.

The much-acclaimed crypto rally was not unexpected for Mike McGlone, senior commodities strategist at Bloomberg Intelligence with over 25 years of experience in futures and commodities trading at the Chicago Board of Trade, ETF Securities, S&P Indices and elsewhere.

“I think it is only a matter of time for it to erupt and resume a sustainable uptrend,” McGlone said in an interview on Tuesday when bitcoin fell below a key support level. of $ 30,000.

In his view, there are legitimate reasons that bitcoin tends to fall in the short term. China’s crackdown on bitcoin mining and ESG concerns about wasting energy in mining have weighed on the cryptocurrency, but these are also long-term bullish signals as mining bitcoins are getting freer and more energy efficient.

From physical gold to digital gold

McGlone hasn’t always been a crypto bull. In fact, he was quite skeptical until bitcoin first surpassed the price of gold in 2017, which was $ 1,237.73 per ounce when bitcoin hit $ 1,238.11.

A more recent event that added to his optimism came when the New York attorney general stumbled upon Tether stablecoin in 2019. Lawmakers found Tether’s claim that it was backed entirely by US dollars at every moment was false and misleading, which scared. given Tether’s role as a key plumbing fixture in the crypto market.

“The market fell and fell in the short term and came back right away. That’s when I went bullish on bitcoin around $ 5,000 and have been since,” he said. he declares. “When the market said it didn’t care, I realized it was more of an organic global demand pool and the revolutionary aspects of bitcoin.”

McGlone believes bitcoin is heading towards $ 100,000 and “it’s only a matter of time” before it gets there.

He interprets the short-term price decline as a typical event relative to the potential long-term price gain and outlines the four catalysts for the future in a research note on Wednesday.

1. China’s crackdown on bitcoin mining has caused the hash rate to drop.

“This measure of computing power has a low correlation with the price of Bitcoin, but reflects a network that is rapidly moving away from Chinese dominance,” he wrote. “China’s lack of free movement of capital and rhetoric, along with its apparent animosity towards Bitcoin, extols the revolutionary nature of digital currency.”

2. Bitcoin and T bond prices are in a “friendly trend”.

McGlone explains that crypto peaked at around the same time as bond yields after both bottomed simultaneously in 2020. “As is the case with gold, a resumption of the downtrend in Stretch bond yields would support the digital store of value, ”he said.

3. The price of Bitcoin is going down, but regulation and adoption by the general public is on the rise.

“The increase in regulation is indicative of Bitcoin’s migration to the mainstream,” he said. “What’s different now, other than just pricing, is less supply and more demand, as ETFs testify, especially in Canada.”

4. Bitcoin is “too cold” which could face a reversion

“When prices stretch against more lasting fundamental trends, usually all it takes is a slight catalyst to trigger some reversal of the condition that we see in too hot crude versus too cold Bitcoin,” McGlone wrote. .

Ethereum infrastructure and building block

Ethereum, the benchmark platform for decentralized finance, also faces three catalysts that could see native token ether reach $ 5,000.

1. Ethereum has surpassed Bitcoin in number of active addresses on its network.

“Ethereum’s price is roughly equal with addresses at the start of 2H, on an autoscaling basis since 2018, and looks well positioned to resume its rise,” he wrote in a July 6 research note.

2. Ethereum follows Bitcoin’s 2017 trajectory

McGlone said this similar trajectory means the ether could “stay in the roughly $ 2,000 to $ 4,000 range until October and maintain a Bitcoin-like 2017 flight plan.”

3. Ethereum’s supply may be more limited than bitcoin

Ethereum has several upcoming upgrades that could make its network more efficient and scalable. The move to proof-of-stake mining and the Improvement Proposal (EIP-1559), which will burn tokens, are supportive of the rise in the price of ether, McGlone wrote.

“A lot of the benefits of upgrading can be factored into Ethereum, but our bias is to stay with the trend,” he wrote. “EIP-1559 may tilt the incremental offer to negative.”

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