4 - 6 minute read
The founder of SkyBridge Capital, Anthony Scaramucci, has expressed bullish confidence in Bitcoin as the leading cryptocurrency has recorded gains of nearly 70% in 2023, increasing from $16,521 to $28,060. In an interview with Yahoo Finance, Scaramucci stated that “we’re through the bear market”. He notes that Bitcoin has consistently outperformed every other asset class over longer periods of time, adding that “any time that you’ve held Bitcoin in a four-year rolling interval, so you pick the day, hold it for four years, you’ve outperformed every other asset class”.
Scaramucci went on to express his optimism about Bitcoin’s outlook in the next halving cycle, which is set to take place in early March 2024. Bitcoin has historically operated on a four-year cycle, with an upwards trend starting soon after each halving cycle. However, he qualified his statement by adding, “that is a guess. We don’t know.”
Bitcoin’s enviable start to 2023 comes amid poor market and regulatory conditions that may yet weigh down the price. Crypto institutions based in the United States are struggling to find banking partners and liquidity following the collapse of crypto-friendly banks such as Silvergate, Silicon Valley, and Signature Bank. Additionally, there are fears that the US is putting into place a policy to prevent banks from interacting with crypto. The two largest crypto exchanges in the world, Binance and Coinbase, have both been subject to recent scrutiny from regulators. Coinbase received a Wells Notice on March 22 notifying of possible enforcement action from the Securities and Exchange Commission, while Binance has been sued by the Commodity Futures Trading Commission after allegedly violating trading and derivatives rules.
Despite these events, crypto sentiment remains positive. The Crypto Fear & Greed Index, an indicator used to measure crypto sentiment, is currently sitting in greed territory and is pushing for highs that haven’t been seen since Bitcoin’s all-time high in November 2021.
Bitcoin outperforms every other asset class
Scaramucci’s statement that Bitcoin outperforms every other asset class may come as a surprise to some, but it is not a new concept. Many investors and analysts have long observed that Bitcoin’s returns have been significantly higher than traditional assets such as stocks, bonds, and gold. A study by Fidelity Digital Assets [https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/FDAS/bitcoin-investment-thesis-final.pdf] found that Bitcoin had low correlation to other asset classes, which means that including Bitcoin within a portfolio could help diversify and reduce the overall risk.
The halving cycle
The halving cycle is a phenomenon unique to Bitcoin. The mining reward for Bitcoin is programmed to halve every four years until the maximum supply of 21 million Bitcoin is reached. The halving events, which reduce the number of new coins miners receive as a reward for solving complex mathematical problems, have been correlated with previous price increases. However, the correlation is not always direct, and there are many other factors that can influence the price of Bitcoin.
The collapse of crypto-friendly banks has made it more difficult for crypto institutions to find banking partners and liquidity. The US government is also reportedly considering a policy to prevent banks from interacting with crypto, which could further constrain the industry’s growth. The regulatory scrutiny on Binance and Coinbase suggests that regulators are looking to increase their oversight on the crypto industry, which could result in increased compliance costs for companies.
Crypto sentiment remains positive
Despite these challenges, crypto sentiment remains positive. The Crypto Fear & Greed Index indicates that investors are still bullish on Bitcoin and the overall market. However, it is important for traders to be cautious and consider the risks associated with investing in cryptocurrencies. As with any asset, the price of Bitcoin can be volatile, and there is no guarantee of returns.
Scaramucci’s bullish outlook for Bitcoin is based on historical performance and the upcoming halving cycle. However, the industry faces significant challenges from poor market and regulatory conditions. Traders should remain vigilant and keep abreast of any developments that could impact the price of Bitcoin. While investing in cryptocurrencies can offer the potential for high returns, it is equally important to manage risks and avoid becoming over-leveraged.
