Summary The Bitcoin halving did not lead to an expected price surge, but the focus now on establishing a Bitcoin strategic reserve in the US brings promise. Trump and RFK Jr. both promise to create a national Bitcoin reserve if elected, resonating with crypto enthusiasts. Bitcoin's market dominance is increasing, with potential government purchases and ETF inflows supporting my $148,000 price target. Investment Thesis Unfortunately, most recent reports on Bitcoin ( BTC ) indicate the anticipated bullish impact of the cryptocurrency's halving event has not materialized as many investors, including myself, had expected. Instead of leading to a price surge, Bitcoin experienced a period of volatility and stagnation post-halving. However, the new front now is a Bitcoin Strategic reserve. The concept here is the establishment of a strategic Bitcoin reserve in the United States. It's gaining traction and offers what I believe to be is a cornerstone for the cryptocurrency's future. Countries (including the US and already El Salvador) are exploring a reserve as a means to diversify their monetary holdings, which could lead to it becoming a much more legitimate financial asset, much like gold. In July, former President Donald Trump and heir to the famous political family, Robert F. Kennedy Jr., both running for the presidency, made headlines by promising to establish a strategic Bitcoin reserve akin to the gold reserves used to hedge against dollar fluctuations. Trump's recent comments during the Bitcoin 2024 Conference reveal a shift in his position towards cryptocurrencies, who previously called Bitcoin a "scam" but now pledges to transform the U.S. into a " crypto capital " and "bitcoin superpower" by creating a national Bitcoin stockpile if re-elected. On this same note, the Trump campaign's acceptance of Bitcoin donations and the promise of a Bitcoin reserve have resonated with crypto enthusiasts. They see this as a real bullish opportunity. Kennedy has similarly emphasized the importance of Bitcoin in his campaign, suggesting that a Bitcoin reserve could serve as a hedge against inflation and dollar devaluation. He is clearly capitalizing on public discontent with traditional financial systems by promoting Bitcoin as a means to protect individual financial sovereignty. I believe we are in the middle of a growing trend among some political figures who view Bitcoin as a potential solution to the economic challenges posed by fiat currencies. Both campaigns are tapping into the rising crypto sentiment and acknowledging Bitcoin's role in a diversifying monetary system. Last month, Sen. Cynthia Lummis (R-WY) introduced a bill in Congress proposing the U.S. government purchase one million Bitcoins to create a strategic reserve. Lummis argued that holding a significant Bitcoin reserve would enhance U.S. financial security and position the country as a leader in the digital currency market. The potential government purchase of such a large Bitcoin quantity could drive demand and increase Bitcoin's value, positively impacting related investment vehicles like IBIT. With the prospect of significant government involvement in Bitcoin, I believe ( IBIT ) represents a strong buy. The potential US government (alone) purchasing one million Bitcoins could drive an exponential increase in demand and increase Bitcoin's value, directly benefiting public market investment vehicles like IBIT. Why I'm Doing Follow-Up Coverage While I continue to be bullish on IBIT (and Bitcoin as a whole), it's more than evident that the cryptocurrency market (Bitcoin included) has experienced a notable drop since my last research piece , with its price dropping as low as $30/share in this first week of August as we say a route in asset prices due to the Yen Carry Trade unwinding . Despite the price action setback, I still the fundamentals of Bitcoin continue to strengthen, driven by growing institutional interest and strategic adoption plans. Just this past week, Morgan Stanley's decision to allow financial advisors to purchase Bitcoin ETFs, such as IBIT and Fidelity's Wise Origin Bitcoin Fund, for their clients, makes it the first major Wall Street bank to allow its advisors to offer direct Bitcoin investments to clients with a high-risk tolerance and a net worth of at least $1.5 million. I think this is a big first step. As Bitcoin continues to gain acceptance among political leaders and financial institutions, the implications for the cryptocurrency's market cap will be significant, likely triggering a large bullish move. The purpose of this update piece is to show how the fundamentals have detached from reality, in a bullish way. Deep Dive On Strategic Reserve There are a handful of Bitcoin reserve proposals on the table from major political leaders in the US. First is by former President and presidential candidate, Donald Trump. Trump proposed maintaining the current 200,000 Bitcoins held by the U.S. government from criminal seizures, rather than selling them off. This move, though largely symbolic, as reported, is intended to prevent these Bitcoins from entering circulation, and will potentially help stabilize and/or add upward pressure on the price of the world's most valuable token asset. Some have seen the plan as modest and lacking substantial economic impact by its critics. For those who have been following the space for a few years, it's crazy we are even here where there is a real chance the US gets a Bitcoin reserve. In contrast, Presidential Candidate Robert F. Kennedy Jr. proposed a more ambitious plan, pledging to purchase up to 4 million Bitcoins on behalf of the U.S. government if elected. This would represent nearly 20% of the total Bitcoin supply. Wow. Keep in mind, most countries have yet to recognize Bitcoin as a national asset, making these U.S. proposals as a massive icebreaker to help facilitate the right discussions about global reserves. On the other hand, a win in the presidential race for current US Vice President Harris might result in stricter regulations, which could dampen Bitcoin's valuation and market dynamics. The Harris campaign has reached out to cryptocurrency advocacy groups in an attempt to amend their relationships with them. I am not yet optimistic that a Harris Administration would be bullish for Bitcoin (or any cryptocurrency for that matter). Bitcoin Is Consolidating Crypto Market Share While candidates for US president and US senators are debating the concept of a US strategic Bitcoin reserve, Bitcoin's market share among major cryptocurrencies has steadily consolidated over the past few years, exceeding its competitors like Ethereum (ETF), and Solana. As of early August, Bitcoin dominates the market with a 55.70% share. Powering this, I believe, is the increased accessibility for institutional investors and high-net-worth individuals to invest in and participate in Bitcoin's potential. BTC Dominance (coinmarketcap.com) At the same time, the Ethereum blockchain's launch of spot ETFs here in the U.S. was anticipated to similarly bolster its market presence much like the launch of Bitcoin ETFs did for Bitcoin. However, these largely ETFs resulted in a "sell-the-news" scenario that led to price declines for the second, more valuable token. Ethereum's price has fallen against Bitcoin, with the ETH/BTC ratio reaching a three-year low. Bitcoin is gaining market share in the cryptocurrency market as investors realize it is one of the few highly viable, legitimate cryptocurrency assets. With assets consolidating into Bitcoin, I view the token as a slightly safer bet (but still risky), especially given the political and regulatory uncertainties facing Ethereum and other altcoins. I believe this suggests that Bitcoin will likely continue to capture a larger share of the crypto wallet market, and with it continue to see strong upward movement. Valuation My $148,000 price target for Bitcoin remains unchanged from my previous coverage in April. I still believe this target reflects the potential for an exponential price appreciation curve driven by the possibility of governmental purchases that could accelerate Bitcoin demand while removing a ton of market supply. With this, IBIT is still well-positioned to capitalize on this dynamic. Previously, I highlighted how the rising ETF inflows and the expected reduction in Bitcoin's supply, which should keep the valuation outlook for Bitcoin promising. I believe the recent market volatility (while extreme) is still less extreme than what was anticipated because of the ETFs consistent inflows into the market. ETFs are providing liquidity, so the insane volatility we used to see in Bitcoin drops off. This will help bring more marginal buyers into the market. Risks While this was not on my risk list back in April, one of the biggest risks to Bitcoin's price is if a non-crypto advocate were to win in the upcoming election, causing a high likelihood of a large sell-off in Bitcoin. Vice President Harris has been seen as less favorable towards cryptocurrency, with expectations of continued regulatory crackdowns akin to the Biden administration's policies (such as keeping SEC chairman Gary Gensler). The crypto market has shown increasingly extreme sensitivity to political developments, with Bitcoin's price fluctuating in response to proposed government policy and SEC enforcement announcements. For example, SEC chairman Gary Gensler, since taking office in 2021, has maintained a critical view of the crypto sector, often emphasizing the prevalence of fraud and manipulation within it. He argues that digital assets should adhere to the same regulatory standards as traditional securities and commodities. These regulations would be inherently incoherent with a decentralized blockchain. Gensler's tenure at the SEC has been marked by a series of high-profile enforcement actions against major crypto firms, including Ripple and Coinbase ( COIN ). These resulted in prolonged legal battles that have frustrated industry leaders. For instance, Ripple's legal challenges with the SEC have cost the company over $100 million in defense, highlighting the agency's aggressive approach. Over the last three weeks, Trump's odds of winning the presidency have decreased notably. His probability of success fell from 67.9% to 49% as reported on one platform (Polymarket). Vice President Harris, who recently entered the presidential race, has seen her odds improve, even overtaking Trump on other betting sites. Please keep in mind that this analysis is not meant to be political commentary but rather an examination of what is driving the crypto market. Bitcoin prices have been sensitive to political events, given Trump (and RFK Jr's.) strong pro-crypto stance and promises to create a strategic Bitcoin reserve. The market perceives a Trump victory as beneficial for Bitcoin, which can lead to increased adoption and favorable regulatory policies. Please also keep in mind that while the market has a clear preference for who they want to win, Bitcoin's performance under President Biden has been robust, despite the administration's regulatory stance. The cryptocurrency has benefited from exponential institutional interests and investments, with Bitcoin gaining traction following Biden's executive order on digital assets in early 2022 . In contrast, Donald Trump, initially a skeptic, has recently shifted his stance, actively courting the crypto community by promising less regulatory pressure. Bitcoin also thrived during Trump's presidency , benefiting from a lack of regulatory clarity, which allowed the market to expand rapidly. The point here is that while industry insiders are concerned that without Trump in the White House, Bitcoin could face pressures, the currency has done well under both democrats and republicans. I believe it will probably continue to perform well under both hypothetical administrations, too. The question is, if we get a truly pro-Bitcoin president in office that wants to establish a Bitcoin reserve, what will that do to prices? Bottom Line While price action itself has been weak, Bitcoin's fundamentals appear stronger than ever, despite its recent price decline. The cryptocurrency's resilience is demonstrated by growing institutional interest and strategic endorsements from political figures like Trump and Kennedy, who advocate for a national Bitcoin reserve as a hedge against inflation and currency fluctuations. Major financial players like Morgan Stanley have also begun offering Bitcoin ETFs to investment advisory clients, signaling increased institutional adoption. With this, my $148,000 price target for Bitcoin remains unchanged. I continue to view Bitcoin as a strong buy, as its growing integration into mainstream finance and its potential role in a national reserve strategy support its long-term valuation.
