Bitcoin’s recent consolidation continues to make market participants uneasy. Many retail investors fear that Bitcoin will break out of its consolidation zone and move downwards. In our opinion, Bitcoin will climb the mountain of worry and break above $32,000. Even though there are systemic risks in all markets right now from political unrest, geopolitics, rising inflation, and high interest rates, there is a potential window for all markets to go one leg higher. As we have alluded to in prior briefings, the democratic party is going to be incentivized to have a high stock market going into the midterms. People tend to have short memories and vote with their wallets. We feel strongly that the late fall and early winter will be bullish for all risk assets.
Incumbent financial institutions for payments are taking drastic measures to ensure their companies are not left behind. For example, PayPal will now support the transfer of crypto to external wallets, and we believe this is a watershed moment for the crypto industry. Before long, crypto will be used as the prefered settlement mechanism for businesses and individuals due to its superior performance, cheaper transactions, and increased security.
In the Senate, a bipartisan crypto bill was proposed by Senator Lummis to provide greater regulatory clarity to the blockchain industry. This bill gives the CFTC regulatory oversight over all digital assets that are deemed non-securities, while providing guidelines around taxes and a legal definition for stablecoins. If the CFTC gains jurisdiction over digital assets, crypto may be able to see regulatory clarity sooner than expected. The SEC has been mute when it comes to providing thoughtful regulations to crypto and has been capricious in its enforcement policy. Should this bill pass, it will certainly be a net positive for the crypto space.