Here we are, two weeks later. Meanwhile, bitcoin has shown significant progress during this period, almost reaching the critical psychological milestone of $100,000. Its price has been retreating for the past few days, but there is no doubt that the bull market remains intact and in good health.

Bitcoin experienced a particularly sharp decline yesterday, falling below $93,000 with a 4.8% drop in a single day, erasing over half of the gains made the previous week. This correction, which triggered liquidations totaling $550 million, is attributed by many to strategies employed by market makers to force the liquidation of highly leveraged long positions. These market participants are believed to have deliberately pushed the price below the critical $100,000 threshold, where a “sell wall” had formed. Despite the decline, analysts view this movement as a normal year-end position adjustment. According to Ryan McMillin of Merkle Tree Capital, this dip could be temporary, with the market likely to retest the $100,000 level soon. Other experts highlight that such pullbacks are typical in bull markets, supported by structural factors like declining interest rates and evolving regulations.

Geoff Kendrick, an analyst at Standard Chartered, attributes this decline to changes in the U.S. Treasury market, particularly a reduction in the term premium, which temporarily reduces Bitcoin’s appeal as a hedge against instability in traditional financial markets. The decreased premium, coupled with the imminent expiration of monthly options, adds additional pressure on the market. Despite this context, Kendrick remains optimistic about Bitcoin’s future, reiterating his price predictions of $125,000 by the end of the year and $200,000 by 2025. In the meantime, the market appears stabilized by institutional demand, with exchange-traded funds (ETFs) accumulating about 77,000 bitcoins since the recent U.S. elections, and MicroStrategy continuing its massive purchases, establishing a potential floor between $85,000 and $88,700. Although short-term factors like options expirations and bond market developments weigh on Bitcoin, structural trends and institutional interest suggest a recovery in the medium and long term, supported by Bitcoin’s perception as a strategic asset in an uncertain financial environment.

Last week, Bitcoin-linked ETFs saw unprecedented demand, with investors injecting a record $3.12 billion in just seven days, according to a report from CoinShares. These ETFs, approved by the U.S. Securities and Exchange Commission (SEC) in January, allow investors to purchase shares tracking Bitcoin’s price without holding the cryptocurrency directly. This simplified access has attracted a wave of investors seeking exposure to digital assets. Investment flows into digital assets have now reached a record annual high of $37 billion, with Bitcoin as the main driver. For comparison, the debut of gold ETFs in the U.S. attracted $309 million during their first year.

Altcoins have also garnered interest, particularly Solana, with European funds receiving $16 million in investments, compared to $2.8 million for Ethereum-related products. This appetite for cryptocurrencies reflects a growing interest among investors in digital assets as a distinct asset class.

This boom coincides with the election of Donald Trump, the former U.S. president, whose victory on November 5 has stimulated investments in the crypto sector. Trump has promised to promote the growth of the digital asset industry, a declaration that appears to have bolstered investor confidence and accelerated inflows into cryptocurrency investment products.

MicroStrategy recently made its largest Bitcoin purchase to date, acquiring 55,500 BTC for a total of $5.4 billion. With this transaction, the company now holds a total of 386,700 BTC, valued at $37.6 billion. This purchase, financed through convertible note offerings and share sales, sets a new record for the company led by Michael Saylor, which began accumulating Bitcoin in 2020. MicroStrategy’s stock price showed volatility following this announcement. Although it initially rose by 4% in pre-market trading, it later declined by 1% during the day. Nevertheless, the stock has posted an impressive 500% increase since the beginning of the year, driven by Bitcoin’s rapid ascent and the company’s aggressive acquisitions. In just one month, MicroStrategy acquired approximately 134,480 BTC for $13 billion, a sum equivalent to what it had accumulated over the previous three years.

However, this strategy has sparked debates. Some analysts believe that MicroStrategy’s valuation far exceeds the value of its Bitcoin holdings. Citron Research, an influential firm, even took a short position on the stock, claiming its valuation is “completely detached” from reality. The company is seen as a heavily leveraged bet on Bitcoin, with a ratio of its market capitalization to Bitcoin holdings reaching 2.5 times. Meanwhile, other companies are following MicroStrategy’s example. Semler Scientific, a medical device firm, announced the purchase of 297 Bitcoins for $30 million, bringing its total holdings to 1,570 BTC. While significant for the company, these purchases remain modest compared to MicroStrategy’s Bitcoin reserves, which continue to dominate among publicly traded companies.

In August 2020, MicroStrategy announced it would adopt Bitcoin as its primary reserve asset, citing concerns over the devaluation of the U.S. dollar and impending inflation due to expansive monetary policies. Since this announcement, the company has consistently purchased Bitcoin at regular intervals, often raising additional funds through convertible note offerings and secured debt. By issuing low-cost debt, MicroStrategy generates liquidity to invest in Bitcoin. If Bitcoin’s value rises, the gains far exceed the cost of servicing the debt, creating substantial net profits. Exposure to Bitcoin has also significantly boosted MicroStrategy’s stock price. Traditional investors and cryptocurrency enthusiasts alike see the company as a way to invest in Bitcoin through the stock market. The stock’s rise allows MicroStrategy to issue more shares or debt under favorable conditions, raising further funds to buy more Bitcoin. This self-reinforcing cycle is viewed by some as a nearly infinite value-creation loop. As long as Bitcoin’s value continues to rise, the perceived risk associated with this strategy remains low, encouraging more investments and fueling the cycle.

However, Bitcoin’s extreme volatility remains a significant risk. A sharp drop in price could lead to massive losses for MicroStrategy, jeopardizing its financial stability. Continuous debt issuance to fund Bitcoin purchases increases the company’s leverage, which could become problematic if market conditions deteriorate. By concentrating a significant portion of its resources in Bitcoin, MicroStrategy exposes itself to specific risks, including unfavorable government regulations or technological changes. The success of this strategy heavily depends on Bitcoin’s continued upward trend. A prolonged stagnation or decline could expose the weaknesses of this approach.

MicroStrategy’s bold and innovative strategy of heavily investing in Bitcoin reflects a strong conviction in the cryptocurrency’s long-term potential. The perception of an “infinite money glitch” stems from the value loop created by investing in a rising asset, boosting the stock price, and raising funds under favorable conditions. However, this strategy is not without risks. Dependence on a volatile asset, accumulation of debt, and regulatory uncertainties pose significant challenges.

Rumble Inc., a Nasdaq-listed video-sharing platform, announced its intention to invest up to $20 million of its cash reserves into Bitcoin. This strategy aligns with a growing trend among companies adopting Bitcoin as a diversification tool, following the example of MicroStrategy and Metaplanet Holdings. Rumble views Bitcoin as a hedge against inflation and a means of preserving long-term value, according to its CEO, Chris Pavlovski. Founded in 2013, Rumble has positioned itself as an attractive platform for users, particularly those from the crypto community. This initiative also aims to strengthen its image with this audience. Pavlovski emphasized that Bitcoin, unlike government-issued currencies, cannot be diluted through excessive money printing, making it an excellent inflation hedge. Rumble’s move adds momentum to the growing corporate adoption of Bitcoin, as inflation concerns and the integration of digital assets into financial strategies continue to rise. Rumble stated that the timing and scope of its Bitcoin purchases would depend on market conditions, cryptocurrency prices, and its liquidity needs. The company noted that this strategy remains flexible and could be adjusted or suspended depending on how the situation evolves.

President-elect Donald Trump has nominated Scott Bessent, a hedge fund manager known for his pro-cryptocurrency stance, as the next Secretary of the Treasury. Founder of Key Square Group, Bessent was a key economic advisor to Trump’s campaign and is expected to play a central role in shaping the administration’s economic policies, including the ambitious project of creating a strategic Bitcoin reserve. A Yale graduate and former partner at Soros Fund Management, Bessent brings extensive experience in fund management and macroeconomic investments. He has managed several investment funds, including his own $1 billion hedge fund, and served as Chief Investment Officer at Soros Fund Management before founding Key Square Group in 2015. Known for his firm support of cryptocurrencies, Bessent views digital assets as essential to the future of finance, promoting innovation and economic freedom. This vision aligns with the Trump administration’s objectives of integrating cryptocurrencies into its economic framework. Beyond his commitment to crypto, Bessent has supported candidates from both major U.S. political parties and contributed significantly to Trump’s campaign.

Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), has announced his resignation effective January 20, 2025, coinciding with the beginning of Donald Trump’s new term. Gensler, known for his tough stance on the cryptocurrency industry, made his mark with strict regulatory actions, particularly following the collapse of FTX in 2022. He pursued several major platforms, including Binance and Coinbase, and argued that most tokens violated SEC regulations, generating controversy over his approach. Under his leadership, the SEC intensified enforcement actions against crypto entities, targeting not only tokens but also emerging sectors like decentralized finance (DeFi), NFTs, and blockchain gaming. However, his tenure was also marked by criticism from Congress and the industry, accusing him of a lack of regulatory clarity and efforts perceived as stifling innovation. The nomination of a successor more favorable to cryptocurrencies is anticipated, with names such as Hester Pierce and Mark Uyeda mentioned as potential candidates. Despite these tensions, Gensler played a key role in significant developments, including the approval of Bitcoin exchange-traded funds (ETFs), which helped propel Bitcoin’s price to new record highs. These ETFs, while celebrated by investors, represent only one aspect of his controversial tenure, which was dominated by his hardline stance on cryptocurrencies. Lastly, Gensler’s blockchain expertise, acquired at MIT, initially raised expectations for creating a clear framework for the industry. However, his tenure was sometimes seen as fueling regulatory turf wars between the SEC and the Commodity Futures Trading Commission (CFTC), particularly over Ethereum’s status. As the Trump administration prepares for changes, this resignation could mark a turning point in the relationship between the state and the crypto industry.

Analysts remain almost unanimously optimistic following the recent correction, asserting that this dip is part of a typical consolidation cycle before a new rally. Markus Thielen, founder of 10x Research, explains that this phase could be linked to a slowdown in volatility ahead of the Thanksgiving weekend, providing the market with an opportunity to reduce its overbought conditions. According to Charlie Sherry, an analyst at BTC Markets, this correction reflects Bitcoin’s typical cyclical pattern, where sharp gains are followed by necessary pullbacks to stabilize the market and reduce leverage. He describes this retreat as the “final flush” before Bitcoin surpasses the symbolic $100,000 milestone. However, he warns that if the correction deepens, the price could fall between $88,000 and $90,000, or even as low as $80,000 in an extreme scenario, while still aligning with historical bull market trends.

Other experts, such as CK Zheng from ZX Squared Capital, consider $100,000 a significant psychological resistance level. Some investors might reduce their positions at this threshold, leading to a temporary market consolidation. Nonetheless, Zheng remains confident, suggesting that any moderate correction would present an opportunity for long-term investors to enter the market. Overall, the short-term outlook for Bitcoin remains bullish. With favorable macroeconomic factors and crypto-friendly policies expected under the new Trump administration, analysts predict that Bitcoin will surpass $100,000 by the end of the year or early 2025, marking a key milestone in its adoption and evolution within the global market.

The presented information is as of November 26th, 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.