The bull case for bitcoin is fairly straightforward. Risk assets are on the up and up again, and bitcoin’s leading the way. It’s outperforming growth stocks at an unusually powerful pace this past month, something that in the past has preceded big breakouts for crypto. Even the heady narrative of currency debasement and hyperinflation still rings true for some, with stagflation the number one concern among investors. But forget the fantasies about what bitcoin’s utility may one day be – that doesn’t matter. What matters is that bitcoin history tells us that if it breaks out higher past a previous record, it pays to chase the rally. And in case you haven’t noticed, people are pretty hyped about this new ETF. It’s an undeniably bullish cocktail.
Now, the bearish take.
Firstly, the price action in bitcoin is not quite as bullish as it was the last time it was approaching an all-time high. RSI – the technical momentum measure that I identified as a red flag back at $65k in April – is flashing yellow. Momentum today is much more muted than the last time bitcoin was surging toward an all-time high. Bitcoin was on fire this time last year as it screamed toward the $20k record, notching RSI levels as high as 90. Today, RSI is 72. It’s not nearly as alarming as in April when RSI was downtrending, but it might make the hurdle over $65k a bit harder to clear.
There’s a bigger issue, though. For this thesis, let’s make the assumption that the vast majority of people are interested in buying bitcoin because they think it will make them money: to sell it to the Next Guy. Let’s also establish that the debut of the bitcoin ETF marks the full integration of bitcoin into the investing marketplace. With the ETF, bitcoin is now completely accessible to anyone who has any interest in the asset. You don’t have to have an account with a strictly crypto broker, make a digital wallet or have enough money in your account to trade futures. And the most important development: your advisor can do it for you with the simple – fully legal – punch of a button. The barrier to entry in bitcoin is now zero.
If bitcoin is, in fact, about selling to the next guy, an ETF is not a long-term bullish catalyst. In fact, it’s the opposite. It is as close to a formal a beginning to the end of the “adoption” narrative as there is. The ETF vehicle is as entry-level as it gets. The first step for new investors. The everyday person. The consummate Next Guy. With a ton more bitcoin ETFs on the way, the pool of remaining “next guys” to sell to will begin to shrink rapidly. For bitcoin whales and devout coiners who’ve been awaiting this moment for years, the ETF screams Mission Accomplished. For many, that likely means time to take profit.