Bitcoin Breaks $50K For First Time Since 2021

Forbes

Bitcoin reached the $50,000 mark for the first time since the bullish days of 2021. Its surge comes from a five-day period where it gained 13% and represents a strong recovery from a large sell-off in mid-January when long-awaited spot bitcoin exchange-traded funds (ETF) began to trade.  During the January drop, bitcoin fell to $38,500, as it succumbed to a familiar pattern of ‘buying the rumor and selling the news’ that plagued previously anticipated events in crypto such as the April 2021 direct listing by Coinbase and the launch of cash-settled bitcoin futures ETFs in October 2021.  Steven Ehrlich, the director of Forbes Digital Assets, joins “Forbes Talks” to discuss Bitcoin reaching $50,000 for the first time since 2021.  0:00 Introduction 0:20 Bitcoin reaching $50,000 Value Today 2:35 How Does This Translate To Real Money And The Stock Market? 3:57 What Was The Highest Bitcoin Before Today? 7:43 How Bitcoin Users Can Capitalize 10:01 What Are Current Bitcoin Miners Doing Now/Next  Read the full story on Forbes: https://www.forbes.com/sites/digital-assets/2024/02/12/bitcoin-passes-50000-amid-growing-etf-momentum/?sh=3d7682ac2a29  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Hi everyone, I'm Rosemary Miller here with Stephen Ehrlich, the Director of Forbes Digital

00:07 Assets here to tell us all about Bitcoin reaching $50,000 for the first time since 2021. Thank

00:16 you so much for joining me today, Steve.

00:18 Thanks, Rosemary.

00:20 So Steve, what happened? Why did Bitcoin reach 50k today?

00:26 It's been a bit of a slow burn really over the last few weeks or so. As you probably

00:31 recall, on January 11th, the SEC finally greenlit about 10 different spot Bitcoin ETF funds

00:39 to begin trading. And this was a long awaited, kind of a 10 year wait for crypto. And as

00:45 we've spoken previously, Rosemary, Bitcoin really surged about 50% in the three months

00:50 leading up to that point in time. I believe when the funds started trading, Bitcoin was

00:55 around 46,000. It went all the way up to about 49,000. But then as Bitcoin has a habit of

01:02 doing, it turned out that at least for now, those ETFs were a buy the rumor, sell the

01:06 news sort of event where Bitcoin then quickly fell down to 38,500 or so. A big part of that

01:13 was the fact that FTX, the estate of the collapsed exchange created by Sandbank and Freed had

01:19 about $1.2 billion worth of shares in one particular fund, this Grayscale Bitcoin Trust

01:24 that it liquidated right away, which sort of canceled out a lot of the net inflows.

01:30 But really kind of this, but a lot of trading volume, these ETFs were sort of muted. But

01:38 as we've seen over the last few weeks, and this was something that I predicted and many

01:41 other analysts had kind of predicted, there wasn't going to be a big usher in of $10 billion,

01:46 $20 billion into these funds right away. It just it takes time. And just because these

01:50 things are allowed to trade, that doesn't mean that all the different investment advisors

01:54 and brokers immediately start funneling customer funds into it. But we've started to see a

01:59 slow climb and really outflows from Grayscale have started to dwindle. And then the ETFs

02:07 led by Fidelity and BlackRock have a combined almost $8 billion in assets right now. And

02:11 it's just continuing to grow. So we've seen a surge in Bitcoin. I think the other thing

02:14 that's worth keeping in mind, too, is that in traditional equities, I mean, they're also

02:19 starting to grow. I mean, the Magnificent Seven continue to go up, led by Nvidia. And

02:23 just kind of in particular, I mean, the S&P keeps setting records across 5,000 for the

02:27 first time in history. And I think there is a bit more of a risk on behavior among traders

02:33 in particular.

02:34 So that's why it's starting to rebound after after Bitcoin dropped, after what the ETF

02:41 trading happened. So it's rebounding, it's correlated with traditional finance with the

02:48 stock market. That's what's going on here.

02:51 I think, I mean, there are certainly some some esoteric factors that are impacting Bitcoin.

02:56 I mean, I mean, it's really hard to discount just the ability for anyone to get exposure

03:03 to Bitcoin now without having to open up a wallet and fund an account somewhere like

03:08 Coinbase or Kraken or whatever. So those factors are very unique to Bitcoin, and I think they

03:14 will continue to grow. But to your point, I do think that we're in this sort of interesting

03:18 period just looking at the more macro picture where investors, they're trying to kind of

03:23 read the Fed's tea leaves to try and figure out where the economy is going.

03:26 Because on one hand, Jerome Powell and other members of the Fed are saying, like, hold

03:31 on, we're not going to decrease rates right now from the record highs that they ratcheted

03:35 them up to to kind of combat inflation. And but at the same time, we're also seeing like

03:42 robust economic growth, a terrific jobs report and so on and so forth. So and the stocks

03:47 keep going up. So investors are trying to make sense of all of this. And that's just

03:51 one additional threat that's helping sort of drive this risk on approach that I think

03:55 is flowing into Bitcoin as well.

03:57 So Steve, what was going on in crypto last time Bitcoin was this high?

04:01 Yeah, so this is a really interesting point, because the last time Bitcoin was this high

04:06 was December of 2021. When it was at this point, it was kind of climbing down from close

04:12 to $70,000. It reached that point in October of 2021. And that's when the SEC greenlit

04:18 the trading and launch of Bitcoin futures ETFs. These are different than spot ones,

04:23 because futures really just kind of roll up futures contracts, cash settles futures contracts

04:27 into an equity people can trade these new products to actually physically acquire the

04:31 Bitcoin. That's not super relevant here. But that was another one of those by the rumor

04:35 sell the news types of events. And Bitcoin is kind of on its way down. As we all know,

04:40 2022 was horrendous for all markets, but in particular for crypto. I mean, just in general,

04:46 record high inflation led to a risk off approach across all asset classes. But in particular,

04:51 I mean, crypto then struggled from the collapse and bankruptcy of three hours capital, which

04:55 led to subsequent bankruptcies of all sorts of major firms, BlackFriars, Voyager, Celsius,

05:01 so on and so forth. And all of that was sort of capped by the collapse and bankruptcy of

05:05 FTX in November 2022, which when other markets started to stabilize Bitcoin then went down

05:11 even further. And I believe Bitcoin fell almost as low as I think 15 or 16,000, which is three,

05:17 four X below what it is now. So that's what crypto really was dealing with. And if you

05:22 looked in December 2021, I mean, nobody would have anticipated all the pain, everything

05:27 that happened. So the fact that it was kind of able to build itself back up after so many

05:32 critics were dancing on the graves of crypto, I think is a real testament to the power of

05:36 this community.

05:37 Well, do you believe it's sustainable Bitcoin lingering around this $50,000 mark? And I

05:42 mean, what do you think is likely to happen next?

05:46 I do think it is sustainable. I mean, there could be reversals. I've been reading a lot

05:51 about sort of sell walls at 50,000. There's a lot of I think there's a strong chance that

05:58 there's going to be some short term profit taking, which tends to happen, especially

06:02 when Bitcoin reaches sort of these important mental thresholds. So I would not be surprised

06:07 to see a bit of a retrace, maybe back down to the mid to high 40s. But longer term, I

06:14 do think that this is going to be sustainable. I mean, as you know, I don't get into long

06:18 term price predictions because that's frankly just throwing darts at the dartboard. But

06:22 if you just look fundamentally at what's happening, there's going to be more and more brokers

06:27 and RIAs that are onboarding clients into these products, which will help drive demand.

06:32 And then in April, Bitcoin is going to have its fourth halving. This is a quadrennial

06:37 event that's really kind of celebrated in the community. And basically what it means

06:42 is that the issuance rate of new Bitcoin is going to be reduced by 50 percent. I believe

06:47 right now it's 6.25 Bitcoin per every block that gets created on an average of 10 minutes.

06:52 Now it's going to go down to 3.125. And it's going to keep halving every four years until

06:57 the final Bitcoin is mined in the year 2140. This is not just a cause of celebration for

07:02 Bitcoin sort of like hardwired monetary policy. These halvings have traditionally been very

07:07 bullish for Bitcoin and just simply it's a supply and demand thing. Each Bitcoin doesn't

07:13 necessarily get scarcer. But again, it's a sort of like a disinflationary type of process,

07:19 which tends to reward investors over the long term. So with these kind of concurrent events,

07:25 the increased flows plus the halving, it really could create a sort of a cocktail of demand

07:31 that could drive the price of Bitcoin higher. But again, I'm not going to necessarily get

07:36 into specific predictions on where the price could go. There's plenty of pundits out there

07:40 that are prognosticating on $100,000, $200,000, $500,000, $1 million. I'll let them kind of

07:45 stick to what they want to do.

07:47 Well, Steve, how are crypto stocks and other assets reacting to this news?

07:52 Yeah, this is really interesting because one of the things that we've spoken about quite

07:57 often Rosemary is just that Bitcoin is sort of the bellwether or the engine for the rest

08:02 of crypto. When it's doing well, other assets tend to follow it, follow it and tend to outperform

08:09 it. And the reverse is true as well. It's the safe haven assets when the markets are

08:14 doing poorly. People will roll out of these like altcoins or smaller cap alternative tokens

08:21 and go into Bitcoin. And right now it's just kind of just checking the numbers a little

08:24 bit because Bitcoin had been going up and it's being outpaced in particular by Ether,

08:30 which is seen as like the second largest crypto token. But then even some tokens that are

08:37 more directly relevant or correlated to Bitcoin itself, like Stacks, which is kind of seen

08:41 as a complementary blockchain to Bitcoin. And then sort of this new meme coin token

08:47 called Ordi, which is also based on Bitcoin. I mean, they're also, I think, somewhere between

08:53 6 and 10 percent up on the day and Bitcoin really is only up about 2 percent. So that's

08:57 why when I was talking about the slow burn for Bitcoin, it's not like Bitcoin surged

09:00 up 15 percent today and reached this number. It's kind of been going for a while, which

09:04 is why things might be a bit more sustainable. And then even on the equity side, too, it's

09:09 a lot of investors, especially if Bitcoin is starting to do well, will buy exposure,

09:15 further exposure to Bitcoin through equities. MicroStrategy, which has the largest treasury

09:20 of Bitcoin in the world, at least from a corporate perspective, it's up. A lot of the Bitcoin

09:25 miners, Marathon, Riot, Strongholds, CleanSpark, they're all outperforming Bitcoin right now.

09:31 And interestingly, Coinbase is not, because Coinbase is seen as a bit more of a diversified

09:37 way to get exposure to the space. So we are seeing the same patterns that we frequently

09:42 see when Bitcoin reaches these thresholds or does well, where some of these higher beta,

09:47 more ancillary stocks and tokens are outperforming it.

09:52 Wow. So wait, could you touch on Coinbase a little bit more? It's not up because it's

09:57 seen as a more diversified stock. What do you mean by that?

10:01 Well, it is it is still doing well. It is up. But the other stocks that I mentioned,

10:06 that the Bitcoin miners and the MicroStrategy are seen as pure plays. I mean, MicroStrategy

10:11 in particular is almost seen as an ETF substitute. And for many years before these ETFs began

10:17 to trade, it really was like the only true ETF substitute out there. Coinbase and this

10:23 is a much more diverse story. Coinbase has been working for years to sort of diversify

10:31 its revenue sources away from from trading fees in particular, which once were 90, I

10:36 mean, 97, 98, 99 percent of its total revenue. They wanted to not be as vulnerable to market

10:43 cycles. And then even within trading, they've been actively trying to diversify trading

10:48 attention away from Bitcoin to Ether and then other altcoins where there aren't necessarily

10:53 this ETF substitute. So from a Coinbase perspective, I mean, some of these other sources of revenue

10:59 include staking fees where they will stake assets on behalf of clients, which basically

11:04 means they post them as collateral to network for the right to process transactions, safer

11:08 networks and get rewards. They have a whole custody business. They launch their own new

11:12 blockchain called Base where they generate fees from there. One of the actually the biggest

11:17 extra source of revenue outside of trading fees is from stablecoin revenue. They're a

11:22 joint issuer of the world's second largest stablecoin called USD coin with Circle. I

11:27 believe right now it has a market cap somewhere of twenty seven billion dollars or so. And

11:32 a lot of that is they generate profit from that because they can take that money and

11:37 then invest it in short term treasuries and other cash equivalents and generate returns,

11:42 especially right now, like four to five percent annually. And the overhead for that particular

11:47 product is pretty small. So all those different ways Coinbase is, excuse me, all those different

11:53 ways is helping Coinbase to diversify its its revenue sources. But that also means its

12:00 growth, its stock movement should be smoother than the Bitcoin miners. But during acute

12:04 periods like this where there's a lot of focus just on Bitcoin, it's likely to underperform

12:10 some of the more pure plays.

12:11 OK, well, thank you so much for joining me today, Steve.

12:15 Great. Thanks, Rosemary.

12:16 Bye.

12:17 Bye.

12:18 Bye.

12:19 Bye.

12:20 Bye.

12:21 Bye.

12:22 Bye.

12:23 Bye.

12:24 Bye.

12:25 Bye.

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