Summary Bitcoin's resilience amid global trade tensions and tariff uncertainties underscores its potential, with a 1.6% return last week despite market-wide declines. Positive regulatory developments, including the creation of the Strategic Bitcoin Reserve and institutional investments, bolster Bitcoin's outlook and adoption. Global liquidity remains robust, with M2 supply up 3.5%, supporting Bitcoin's price stability and growth potential despite economic uncertainties. I maintain a Buy rating on Bitcoin, driven by favorable regulatory changes, institutional interest, and strong liquidity conditions. Investment Thesis Last week's Liberation Day tariff announcements were meant to provide some more certainty amid an already shaky start to 2025's trading season. But the stakes still ran high heading into last week's announcements. Then came the final announcements that shed light on country-wise tariffs, which threw global trade into disarray and caused animalistic bearishness of epic proportions in markets worldwide. There was no place to hide, with almost every single asset class ending the week deep in the red. Almost. Bitcoin ( BTC-USD ) was last week's standout performing asset class, returning investors 1.6% over the previous week's close. No other asset class was able to pull that off last week. Exhibit A: Bitcoin was the lone performer on a sour bench of underperformers on the markets last week. (TradingView) Although Bitcoin has come off from its 52-week high of $109k, the resilience it is demonstrating is worth noting. Regulation is poised to get a lot easier for Bitcoin and digital currencies, institutions are allocating even more capital towards digital currencies, and business deals are being scored on the mother of cryptocurrencies, which keeps up the enthusiasm for Bitcoin. I am still very bullish on Bitcoin, maintain my Buy rating and have been adding to my position at current levels, noting this resilience. Here's The Key Reasons Why Bitcoin Will Keep Running Last year, I published a note explaining why the current administration's crypto-friendly stance was positive for Bitcoin and cryptocurrencies in general. I laid out three promises that were made during election campaigns and saw that one out of three promises had already been delivered. Last month, the Trump 2.0 administration announced the creation of the Strategic Bitcoin Reserve while also stating intentions to "establish a United States Digital Asset Stockpile that can serve as a secure account for orderly and strategic management of the United States' other digital asset holdings." Last week, the current administration also moved one step closer to seeing Paul Atkins as the SEC chair . Pending a full Senate vote, Paul Atkins, who served as SEC chair at the start of the century, moves one step closer to becoming SEC chair. There are many reasons why the crypto industry favors Atkins as SEC chair . Along with Paul Atkins, Jonathan Gould is also nominated as US comptroller of the currency. These positive developments in the regulatory world of crypto have been topped off with the environment getting a lot easier for Bitcoin and the businesses that operate in the digital currency space. For example, the state of Illinois is expected to drop their lawsuit against Coinbase ( COIN ), and when they do, Illinois will become the fourth state to do so after Kentucky, Vermont, and South Carolina. This is after the SEC dropped their charges against Coinbase that originally targeted the crypto exchange's staking program. This recent spate of developments, which I noted above, occurred over the past week to past month, which is quite a bullish change in sentiment from the regulatory environment. Institutional participation was already ramping up over the past 12-15 months, and I believe the tariff uncertainties may have pushed more institutions to raise their capital allocation towards Bitcoin. GameStop ( GME ) is creating its own Bitcoin treasury , following in the footsteps of MicroStrategy ( MSTR ). But what I find more encouraging for Bitcoin and cryptocurrency's case is the moves of large institutions such as Fidelity ( FIS ) and BlackRock ( BLK ). Take BlackRock's recent move to expand its blockchain-based money market to Solana. Here is how Solana's president explains the gravity of this move in a recent interview : So it starts with money market fund and that's I think how folks kind of run the tokenization infrastructure once you've tokenized a money market fund we've already seen private credit funds come online and then that's going to open up pretty quickly into the whole world of traditional finance assets which taken as a whole I think something around hundred trillion dollars of assets. The appetite to diversify portfolios away from fiat cash or stocks is only increasing, and the current tariff uncertainties are creating stronger cases for digital asset exposure that starts with Bitcoin. One key reason for this belief, in my view, is that Bitcoin's blockchain infrastructure offers a level playing field that cannot be directly impacted by governmental controls and measures. This is based on Bitcoin's fundamental design, where the digital asset was designed to be decentralized based on a system that operates without a central authority or single point of control, instead relying on a distributed network of participants to maintain the digital asset. However, global liquidity is extremely crucial for Bitcoin because, at the end of the day, it is an asset class. An asset class that can be volatile. And most asset classes, especially risky assets, follow a rule of thumb: More M2 money that circulates leads to higher asset prices. Research by Lynn Alden suggests : Bitcoin moves in the direction of global liquidity 83% of the time in any given 12-month period, which is higher than any other major asset class, making it a strong barometer of liquidity conditions. This is why liquidity is one of the key indicators I look for when assessing my outlook on Bitcoin. Exhibit B: Bitcoin's price versus global liquidity levels. (BGeometrics) And so far, global liquidity does not look to be drying up, despite the sky-high concerns surrounding tariffs. Global M2 supply is still up 3.5% despite tensions from last week. US Feds announced last month that they were slowing the pace of balance sheet run-off (also called QT, or quantitative tightening), which was a big boost for global liquidity and Bitcoin's outlook. The moment the Fed's QT program ends, which is expected to be at some point this year , I am expecting a surge in liquidity, which should turn up the momentum on Bitcoin. This is one of the key reasons why I believe Bitcoin's outlook will still remain strong. I suspect this is also a reason why VC funding for crypto-backed startups is set to surge 50% this year to ~$18 billion. Note that as per recent reports , VC funding for crypto-backed startups already reached $4.5 billion, a quarter of the $18 billion I observed. This puts VC funding firmly on track to reach the $18 billion projections for this year. In my view, VCs would not be funding crypto startups if their outlook on Bitcoin & the crypto industry was not strong. Also note that these developments have happened despite the tariff traumas that commanded the narrative through Q1. All these reasons that I stated above led me to believe that Bitcoin continued to stay calm despite trade tensions that boiled over in the majority of the world's markets. Risks & Other Factors To Note So far, my outlook does not assume a large-scale economic shock in the economy, which is the primary reason for many liquidity crunches. In such cases, liquidity would be strained, as seen in 2022 in Exhibit B above. If the current administration's tariff and trade policies were to continue advancing in such a way that consumer spending gets hit and economic growth suffers, I will have to re-evaluate my outlook on Bitcoin. At the moment, this is not my base case. Takeaway Bitcoin's performance at a global level versus all major asset classes at such a confusing time for global trade is worth noting. The only explanation here is the range of positive catalysts surrounding Bitcoin, starting from regulatory environments that are on track to get more Bitcoin-friendly to global liquidity that remains on the up despite global tensions. I continue to maintain my Buy rating on Bitcoin.
