Macroeconomic environment and liquidity

On the 14th, crypto asset (virtual currency) service company Matrixport explained in its weekly market report the macroeconomic environment and liquidity favorable to the virtual currency market as an outlook for 2024. “Even if the SEC (U.S. Securities and Exchange Commission) does not approve a Bitcoin spot ETF in January 2024, it is likely that crypto prices will rise in 2024.”

Marcus Thielen, head of research at Matrixport, explained that while cryptocurrencies tend to struggle in environments with low liquidity, such as in 2022, they will grow when liquidity is expected to increase in the future. This is why Bitcoin, which fell last year, rose this year, he said.

The last Bitcoin bull market peaked in November 2021, when the US government’s “excessive stimulus in response to the coronavirus pandemic” led to high liquidity, which was suggested to be limited. Prices also bottomed out as hopes grew for the Fed to end its rate hike cycle, Thielen said.

The US Federal Reserve (FRB) has suspended interest rate hikes since July 2023, but this situation changed from January 2019, when the Fed raised interest rates consecutively in 2018 and then suspended them for seven months. It is said that it is similar to He noted that during that “pause,” Bitcoin rose nearly 300%.

connection:Prediction of Bitcoin reaching $125,000 in 2024, Matrixport analysis based on halving

American companies have ample surplus cash

Thielen said technology companies, which account for 28% of the U.S. stock market, have “nearly zero debt” and are “hoarding a lot of cash they don’t need.”

As examples, he cited Apple ($167 billion ≒ 23.7 trillion yen in cash and short-term investments), Alphabet ($150 billion ≒ 21.3 trillion yen in cash), and Microsoft ($121 billion ≒ 17.2 trillion yen in cash).

Overall, the top 13 companies in the SP500 have $1 trillion (142 trillion yen) in cash, but these companies generate sufficient cash flow, do not need cash, and benefit from the Fed’s high interest rates. He points out that he is earning 5.25% interest on this cash. That means these U.S. companies have $52.5 billion (7.4 trillion yen) of “free money” on hand each year, he emphasized.

connection:US stocks continue to rise on expectations for interest rate cuts next year, Coinbase stock price reaches highest since April 2022

Money market fund balances double

Furthermore, since the pandemic, the amount outstanding of money market funds (MMFs) in the United States has surged from $3 trillion (426 trillion yen) to $6.1 trillion (866.1 trillion yen).

Thielen said this means that about $370 billion (52.6 trillion yen) is currently paid in interest each year, or about $1 billion (142 billion yen) per day. And that money could “easily” flow into riskier investments such as stocks and cryptocurrencies, as well as MMFs, he said.

Bitcoin halving and presidential election

Thielen cited the 2024 Bitcoin halving and the U.S. presidential election as factors other than the macroeconomic environment that could affect Bitcoin prices.

The fourth Bitcoin halving is scheduled for around April 18, 2024, and the mining reward will be reduced from the current 6.25 BTC to 3.125 BTC. He noted that in past halving years, Bitcoin prices have increased by an average of 192%.

Thielen also believes that former President Donald Trump is “likely” to be re-elected, saying, “Trump’s policies will boost the U.S. economy and, along with it, the prices of U.S. stocks and cryptocurrencies.” There is a possibility that we will be able to do so.”

VanEck, a major U.S. asset management firm, also pointed out the possibility of Trump’s re-election in its 2024 forecast report. That political shift will increase momentum for SEC Chairman Gensler to change his regulatory approach, and we expect Bitcoin prices to hit record highs in November.

connection:Bitcoin expected to reach all-time high by November next year, with halving and US presidential election likely to be factors in the rise | VanEck Report

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