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Crypto bulletin

December 17th, 2024

Crypto Bulletin – Week 366

Bitcoin’s price hit a new all-time high of $107,800 USD yesterday before slightly retreating. Currently, the world’s largest cryptocurrency is trading around $107,300 and could quickly shatter new records.

Analysts agree that this bullish trend could continue until the end of the year and into 2025, supported by institutional and political factors. Rachael Lucas, an analyst at BTC Markets, highlights that this new peak reflects Bitcoin’s evolution as a more mature asset. Once dominated by retail investors, Bitcoin is now backed by institutional demand, ETFs (exchange-traded funds), and corporate treasuries, strengthening its legitimacy in financial markets. Several recent events have contributed to this surge, notably statements from President-elect Donald Trump, who aims to create a strategic reserve of cryptocurrencies and harness their economic potential.

Markets are now looking toward the U.S. Federal Reserve’s upcoming meeting scheduled for Wednesday. Expectations of a 25-basis-point interest rate cut could further stimulate the cryptocurrency market. According to Min Jung, an analyst at Presto Research, the Fed’s decisions and developments surrounding Trump’s inauguration in January will have a crucial impact on Bitcoin prices in the coming weeks.

This week, Bitcoin also reached a new all-time high relative to gold, with a ratio of 37.3. This means a single Bitcoin can now buy about 37 ounces of gold, surpassing the previous November 2021 peak of 36.7. This performance signals a potential shift in investor preferences for a store of value, where Bitcoin is starting to establish itself as a credible alternative to traditional gold. According to Sidney Powell, CEO of Maple Finance, this record illustrates the growing adoption and maturity of Bitcoin as an asset class. He attributes this momentum to increasing inflows into Bitcoin ETFs and the recognition of Bitcoin as an essential component of a balanced portfolio. Despite this breakthrough, investors still turn to gold during times of uncertainty, as Bitcoin remains highly correlated with traditional markets, partly due to the approval of U.S.-based Bitcoin ETFs.

Bitcoin ETFs currently represent $119 billion in assets under management, a figure still below the dollars held in gold-backed ETFs. However, Bitcoin’s programmed scarcity, with a maximum supply limited to 21 million tokens and “halving” events that periodically reduce issuance, contrasts with the continuous production of gold through mining. While gold benefits from historical stability with annual volatility of about 20%, Bitcoin offers higher return potential despite greater volatility, around 50%. This difference in risk and reward continues to fuel the debate over supremacy between these two stores of value in an ever-evolving economic environment.

MicroStrategy, the first Bitcoin-focused company to join the Nasdaq 100, will make its official entry on December 23, 2024. This inclusion, tied to the company’s market capitalization, provides a major opportunity through passive inflows from ETFs tracking this index. With an estimated weighting of 0.47%, this could generate about $2.1 billion in purchases of MSTR shares via Nasdaq 100-backed funds, according to Bloomberg.

In the medium term, MicroStrategy could also aim for inclusion in the S&P 500, an even more prestigious index. Currently, the company does not meet all necessary criteria, particularly the requirement for positive earnings over the last four quarters. However, thanks to new FASB accounting standards taking effect in January 2025, the company will be able to value its Bitcoin reserves at their real market value. This should allow it to record an exceptional gain in Q1 2025, sufficient to meet eligibility criteria ahead of the second S&P 500 rebalancing scheduled for June 2025.

Meanwhile, MicroStrategy continues to accumulate Bitcoin at an unprecedented pace, now holding 439,000 BTC valued at over $45 billion. Analysts, such as those at Bernstein, note that this unique strategy improves the stock’s liquidity and enables the company to raise additional capital to fund purchases. With a debt level around 18% of its Bitcoin holdings, MicroStrategy still has room to issue new debt or shares, especially if Bitcoin’s price remains stable above $100,000. The outlook for MicroStrategy remains very optimistic. Benchmark and Bernstein analysts maintain buy recommendations with price targets of $650 and $600, respectively. Thanks to its strategic positioning and growing institutional support, the company continues to solidify its pioneering role in integrating Bitcoin into traditional finance.

The cryptocurrency exchange FTX, which collapsed in November 2022, plans to reimburse its creditors and customers at the beginning of 2025. According to the announced schedule, the court-approved reorganization plan will take effect on January 3, 2025, with the first payment expected within 60 days of that date. Reimbursements will be facilitated through Kraken and BitGo platforms, where eligible clients must complete identity verification (KYC), fill out tax forms, and register before the deadline. The initial payments will target creditors with claims of $50,000 or less, representing over 90% of creditors affected by FTX’s bankruptcy. Reimbursements will be based on the USD value of crypto assets held on FTX at the time of bankruptcy in November 2022. Details regarding other creditors will be communicated later. FTX plans to allocate up to $16.5 billion for these repayments. The finalized plan, completed in October, would allow 98% of creditors to recover approximately 118% of the USD value of their claims. This marks a significant step toward resolving the FTX scandal and returning funds to affected investors.

Texas Representative Giovanni Capriglione recently proposed a bill to establish a strategic Bitcoin reserve for the state of Texas. This initiative, similar to ongoing national discussions in the U.S., aims to build a Bitcoin reserve held for at least five years without being sold. Texans will even have the option to donate to this fund. The bill highlights Texas’ commitment to fostering innovation in digital assets while enhancing its residents’ financial security. The proposal, named H.B. No. 1598, specifies that Bitcoins will be stored offline in a secure wallet disconnected from the internet to mitigate hacking risks. Additionally, transactions involving foreign countries or illegal entities will be strictly prohibited. Capriglione emphasized that inflation poses a major threat to investments and that Bitcoin, often viewed as a store of value, could serve as protection against it. Interest in this initiative has grown since Donald Trump’s election, as he has voiced support for Bitcoin, even urging his supporters not to sell their cryptocurrencies. Texas, with its attractive electricity costs and government incentives, has already become a hub for Bitcoin miners. Furthermore, the example of U.S. government-held Bitcoin reserves, primarily from criminal seizures and valued at over 198,000 Bitcoins (approximately $20 billion), has lent weight to this proposal.

Ripple will launch its U.S. dollar-backed stablecoin, RLUSD, on December 17. Each token will be fully backed by U.S. dollar deposits, Treasury bonds, and cash equivalents. To ensure maximum transparency, an independent auditing firm will produce attestations of RLUSD reserves, which will be published monthly. Ripple thus enters an already competitive stablecoin market dominated by players like Tether, Circle, and PayPal. Tether remains the leader with over $140 billion in circulation. Brad Garlinghouse, Ripple’s CEO, emphasized that launching RLUSD under the strict regulation of the New York State Department of Financial Services (NYDFS) demonstrates a proactive approach aligned with the sector’s highest standards. In the months following the launch, RLUSD will be integrated into Ripple Payments to facilitate business transactions, a service that has already processed $70 billion in volume. RLUSD will initially be available on the XRP Ledger and Ethereum, but Ripple plans to extend its stablecoin to other blockchains and decentralized finance applications in the future.

Given the unique nature of the Rivemont Crypto Fund for our auditors (Deloitte), it has been agreed that, temporarily and briefly, the fund will be exclusively exposed to Bitcoin’s price as of December 31, 2024. Rest assured that this temporary situation will not prevent us from capitalizing on the 2025 alt-season, should it occur.

The presented information is as of December 17th 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered. 

 

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