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3 Reasons Bitcoin's Momentum is just Beginning

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Whether it be a game of pool, a “2-minute drill” for a football team, or the stock market, momentum can play an integral role in technical and fundamental outcomes. On Wall Street, one can trace the heart of price trends to fundamental momentum. For stocks, this usually means increasing earnings expectations, leading to more investor interest. For other assets, it can mean scarcity and a better use case. Either way, all price trends are birthed when buying pressure outweighs selling pressure and momentum picks up. Bitcoin, which is up ~125% year-to-date and is the world’s most popular cryptocurrency, is one such asset class gaining momentum. Below are three reasons the Bitcoin momentum may just be beginning:

International Adoption & Real-World Use is on the Rise

Last night, hyperinflation-plagued Argentina shocked the world by electing a wild-haired, chainsaw-wielding Libertarian candidate named Javier Milei. After embracing socialism for years, an inflation rate of more than 100% a year pushed citizens of South America’s second-largest economy to move in a completely different direction and try something new politically. Years of money printing, currency devaluation, and corruption have collectively brought the country to a tipping point, disrupting the delicate balance between money supply and economic output. Investors cheered the news and sent domestic juggernauts like oil juggernaut YPF ((YPF - Free Report) ) higher by ~34% and the MSCI Argentina ETF ((ARGT - Free Report) ) higher by more than 10% in volume which tracked 9,800% above average in early trading.

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As is the case throughout history, crisis tends to lead to opportunity for investors. In the case of Argentina, the real opportunity may be in Bitcoin. Because Argentina is in such financial trouble, the economic picture remains muddled regardless of who’s in office. However, the election results are bullish for Bitcoin for two main reasons. First, Milei is the second pro-Bitcoin presidential candidate in Latin America to gain office (El Salvador’s Nayib Bukele was the first).

Between the two shocking election outcomes and a wave of US politicians embracing Bitcoin, the momentum is shifting politically on a grand scale. Second, and most importantly, Bitcoin is being used in the real world to stave off inflation. The evidence? Following the election news, Bitcoin hit new highs in three inflation-plagued countries, including Nigeria, Turkey, and, of course, Argentina. The evidence is clear: world citizens are gravitating toward Bitcoin because of its inflation-resistant protocol (there will only ever be 21 million coins, while countries around the world print money endlessly). Year-to-date, Bitcoin is up a robust 351% versus the Argentine Peso.

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Bitcoin Supply is Stagnant

Over the weekend, Bitcoin analyst Will Clemente pointed out that “88% of Bitcoin supply hasn’t moved in at least three months.” In other words, many investors seem to be shifting to a long-term mindset. Because Bitcoin has a fixed supply, as the remaining supply wanes and investor demand increases, Bitcoin should rally further.

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Image Source: Glassnode, Will Clemente

Institutional Appetite

Long-awaited approval of ETFs will likely mean a quantum leap for the Bitcoin asset class. With juggernauts such as Fidelity and BlackRock ((BLK - Free Report) ) applying for ETFs, demand will soar from both institutions and retail investors should the ETFs be approved (they likely will be). In the meantime, Bitcoin proxies such as the ProShares Bitcoin ETF ((BITO - Free Report) ), Coinbase ((COIN - Free Report) ), and MicroStrategy ((MSTR - Free Report) ) should benefit dramatically.


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