Bitcoin (BTC) has the potential to see significant gains with the introduction of the BlackRock exchange-traded fund (ETF), according to investor and analyst Charles Edwards. In an interview with Cointelegraph, Edwards, the founder of quantitative Bitcoin and digital asset fund Capriole Investments, discusses the current state of BTC price action. Despite the volatility of shorter timeframes, Edwards believes that the overall narrative of cryptocurrency becoming a recognized global asset class remains unchanged.
When Edwards was last interviewed in February, the price of Bitcoin was around $25,000. Today, BTC is not only 20% higher, but its NVT ratio is also at its highest levels in a decade. However, Edwards explains that the NVT ratio is currently trading at a normal level and does not provide much insight into the valuation of Bitcoin.
Edwards maintains his previous perspective that Bitcoin is in a “new regime” and expects upward momentum to continue over the next 12 months. However, he acknowledges that the relative value opportunity is slightly diminished at present due to major price resistance at $32,000. Edwards suggests that a clear break above $32,000, a mean-reversion to the mid-$20,000s, or a return to on-chain growth would signal a more favorable short-term outlook.
Regarding Bitcoin miners, Edwards notes that they have been selling BTC at higher levels, likely to cover operational costs and take advantage of the price rally. While miner sell pressure can impact prices, the diminishing share of miners in the network reduces this risk factor.
In terms of U.S. macro policy, Edwards believes that the Federal Reserve will likely implement one or two more rate hikes in 2023, but any net change in the Fed’s plan would lean towards a pause. He points out that the considerable stress in the banking system and the decline in inflation could influence future decisions.
The correlation between Bitcoin and risk assets, as well as its inverse correlation with the strength of the U.S. dollar, has been declining lately. Edwards explains that Bitcoin has historically shown periods of both positive and negative correlation with risk markets, and these correlations come in waves. He anticipates that as Bitcoin becomes a multi-trillion-dollar asset, it will exhibit a more consistent positive correlation with gold, which has a highly negative correlation with the dollar.
Regarding regulatory pressure, Edwards believes that the fears from early 2023 have been exaggerated. Bitcoin has already been classified as a commodity and has received support from industry and government. While there may be uncertainties regarding altcoins, the overall direction for the asset class is positive.
Edwards sees the approval of the BlackRock ETF as a significant milestone for the industry. The approval would provide the regulatory seal of approval and attract a new wave of capital into the market. It would also make it easier for institutions to include Bitcoin in their balance sheets without concerns about custody or entering the crypto space. Edwards compares the potential impact of the Bitcoin ETF to the launch of the gold ETF in 2004, which led to a massive bull run for gold.
In conclusion, Edwards remains optimistic about the future of Bitcoin, emphasizing its potential for long-term growth and recognition as a global asset class.