With Bitcoin (BTC-USD) surpassing $64,000 for the first time since 2021, Fundstrat Global Advisors Head of Digital Asset Strategy Sean Farrell says the rally reflects a “FOMO [fear of missing out]” mindset as investors buy in.
Farrell notes Bitcoin thrives in "looser monetary conditions," and with the Fed easing tightening, more investors are "detaching" from "macro headwinds" and buying into the cryptocurrency’s climb. This self-reinforcing dynamic is powering Bitcoin higher.
He adds that reasoning "varies" for investing in the currency: some see Bitcoin’s "global network" as enabling decentralized currencies, while others view it as a portfolio diversifier.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
SEAN FARRELL: What do you think is behind this latest surge or is this just sort of what Bitcoin and specifically in crypto more broadly does here with the cycles it goes through?
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SEAN FARRELL: Yeah. Thanks for having me on. I think the official terminology for the number go-up feature that you mentioned is FOMO.
JULIE HYMAN: Right.
SEAN FARRELL: But yeah, I think last time I was on here, we were talking about some macro headwinds that occurred. In the beginning of Q1, we had a repricing of rates. We had a rethinking of the frequency and timing of Fed cuts.
And we had a large Treasury issuance. And this was putting a lot of upward pressure on rates, a lot of downward pressure on liquidity conditions. And Bitcoin being this hedge against monetary debasement naturally does well looser monetary conditions, better liquidity conditions.
And well, we're kind of past that. But frankly, seeing how equities are performing, seeing how their assets are performing, and pairing that with the incredible inflows that we've seen in these ETFs. It's hard for me to not say we've kind of detached from at least in the immediate term macro.
And we are, as you alluded to, we're kind of seeing this number grow up technology work in real-time as these salespeople at BlackRock and other large asset managers start to bring this new cohort of people into Bitcoin and see Bitcoin as a mainstay in their portfolio.
JOSH LIPTON: I'm interested, Sean, when you talk to maybe your friends and family. And maybe they ask you why should I move into Bitcoin. I'm interested, Sean, some of the reasons you tell them.
Do you tell them store of value, digital gold, simply it's an exciting technology? Maybe all three. What are the reasons, Sean, you would explain to them?
SEAN FARRELL: Yeah, so the reason to own Bitcoin varies depending on who you're talking to. I think if you're talking to somebody in the west, you could say that you are investing in a global network that is already powering a better currency for people in the Global South, you know. I mean, we made all-time highs in Nigeria, and you know, Argentina, and whatnot a very long time ago.
So there's that element, the fundamental element. But then if you also look at it just from an investment-- if you look at it from a portfolio perspective, and what it actually serves, as I mentioned earlier, it's a hedge against monetary debasement. And so if you can see a world in which over the long-term fiscal deficits start to compress, we start seeing a more austere government, monetary conditions tighten for some prolonged period of time.
In other words, the dollar somehow starts to retain its value, then, in that case, you'd probably want to be bearish Bitcoin. But to me and to most logically thinking people, that's not a very high probability scenario.
JULIE HYMAN: Sean, what is the best way to invest in it, you know, now especially that you have some new products on the market? And I would ask this also in light of the fact that we're talking on a day where Coinbase had an interruption, right? So with the view that even at this level of maturity, that's still it seems the system can get overwhelmed sometimes.
SEAN FARRELL: Yeah, absolutely. I mean, look, I think my cop-out answer is it depends on your risk tolerance level of whether you want to be very high touch if you're trading in and out of position. So it depends on really what your personal risk tolerance is, But I kind of preach a diversity of custody solutions.
And so like I do have some Bitcoin on Coinbase. I do have some my brokerage account now in the form of ETFs. I do have some self-custody, such that I can use it in DeFi.
And I don't have to-- I'm not operating at the whim of a centralized service. So that's kind of what I would preach, in general.
But, you know, I think I wouldn't let a single Coinbase outage kind of deter you from using their service. We saw outages across a bunch of exchanges. And it's actually happens during every buying or selling frenzy.
They kind of just get dosed. But it's a good sign. It's very bullish because it means that people are coming back into the market for the first time in a long time.
JOSH LIPTON: Sean, I want to get you out of here on this. There's another event coming up here the so-called Bitcoin happens in April this-- kind of market dynamic happens every four years. Historically speaking, Sean, what has that event, the Bitcoin halving actually meant for Bitcoin? What's been the impact?
SEAN FARRELL: Yeah, so for the uninitiated, the Bitcoin halving is a programmatic decrease in the number of Bitcoin produced in per block new Bitcoin produced. So, essentially, the inflation rate gets cut in half. And the new Bitcoin coming to market is a lot less. It's 50% of what it was prior to the halving.
And so, obviously, that is a positive supply dynamic. It's positive for flows. You have half of the Bitcoin that was available for sale on a daily basis now for sale, right?
And so it's very constructive from a denominator perspective. But I think more importantly, kind of it also creates a narrative and it stimulates inflows. And so you actually have this bidirectional catalyst where you have both a narrative forming, along with these constructive supply-side effects.
And, you know, so far, there have only been a few halvings. But so far, we have 100% hit rate on incredible returns post-halving. So, yeah, it's certainly something that we are excited about.
JULIE HYMAN: Sean, finally, while I have you here, I've got to get a target from you. Always love the big numbers. And you guys at Fundstrat do a lot of good work on gaming out what the rest of the year is going to look like. Do you have an end-of-year target? And how close are we getting to it?
SEAN FARRELL: Yeah. Yeah, so we issued a target of 126,000 back in early January. Everyone can feel free to visit our research services to review our rationale and how we're thinking about things. But high-level, we have the optimal conditions from a Bitcoin-specific perspective.
We just discussed ETFs. We discussed the halving. And then we also have the high likelihood of easing monetary conditions.
We have rate cuts coming possibly tapering or cessation of QT. And, you know, obviously, Bitcoin likes easier financial conditions. So you kind of have this perfect storm of very suitable conditions for Bitcoin and other liquidity-sensitive assets to thrive.
JOSH LIPTON: Sean, thank you so much for helping us kick off the show today. Appreciate it as always.