After breaching more than $73,000 per token for the first time in its history, Bitcoin (BTC-USD) has since declined to the $63,000 level. While that’s a relatively modest dip (at least in the crypto world) for such a highly-valued asset, it’s one that has garnered plenty of attention from bears.
That said, other companies and investors are looking at this dip as a reason to buy. MicroStrategy (NASDAQ:MSTR) recently announced plans to add to its debt pile, in order to buy Bitcoin. Given this recent dip, perhaps the company will make out like a bandit once again. We’ll see.
But it’s clear that there are plenty of headwinds behind Bitcoin right now, driving a narrative of a supply/demand imbalance that should increase its price. On the one hand, approvals of spot ETFs by the Securities and Exchange Commission has added plenty of demand to this already-hot crypto. On the other side of the equation, supply is about to be constrained via the upcoming halving event next month.
Let’s dive into these factors and more to explore why Bitcoin looks like a buy around current levels.
Euphoria Stage
Bitcoin surged over 200% in the past year, hitting a record $73,000 on March 13, prompting a sentiment shift towards euphoria. Glassnode analysts observed this significant wealth transfer from long-term to new holders, signaling a bullish phase.
Alternative data indicates market sentiment reached an extreme greed level of 81, akin to a phase of “euphoria,” driving fear of missing out (FOMO) sentiment among investors. Glassnode highlighted a significant shift in investor behavior, noting that capital inflows into this sector may have been overheated.
That could certainly be the case. Long-term Bitcoin investors have certainly reaped some big gains over the past two years, and some profit-taking is likely in order. So, this recent dip can be explained away rather simply.
However, short-term investors may continue to hold for some time, and put additional capital into Bitcoin given its recent momentum. With big players like MicroStrategy looking to add $500 million worth of Bitcoin, there’s no shortage of buyers out there right now.
Everyone is Buying Bitcoin
As mentioned, MicroStrategy’s recent proposal to issue more debt to buy Bitcoin is the most notable driver of bullish sentiment among many Bitcoin holders. The company’s recent move, announced on March 13, follows a recent $800 million offering for the same purpose and potential corporate needs.
The company first offer $600 million, and it was then increased to $700 million. An additional $100 million was also discussed but is subject to some terms. Now sitting in MicroStrategy’s treasury, it now holds a total of 205,000 Bitcoin, valued at more than $15 billion. MicroStrategy aims to reach 1% of Bitcoin’s total supply.
The notes are convertible into cash, MicroStrategy’s class A common stock, or a mix of the two. MSTR’s stock surged 10.85% to $1,766 on March 13, marking a 254% increase since February 6. Boosted by Bitcoin’s rally, MSTR has been among Nasdaq’s top performers.
Peter Schiff, another prominent advocate for gold and alternative assets, now admits regret over not buying Bitcoin in 2010 when introduced to the asset class. In a March 13 interview with Raoul Pal, he expressed wishful thinking about investing early in Bitcoin. Schiff and Pal debated Bitcoin’s potential, contrasting Schiff’s earlier dismissal of it as a “pure ponzi.”
Schiff admits considering a Bitcoin investment in 2010 but dismissed it as “ridiculous” despite potential gains. He concedes he would’ve relied on others’ buying behavior and felt like a genius but remains critical of Bitcoin’s fundamentals. Although Bitcoin’s rise may affect gold’s market share, Schiff warned of challenges cashing out during price drops.
2024 is Bitcoin’s Year
After the SEC approval for BTC ETFs plus the most anticipated halving, Bitcoin is poised to dominate the digital assets market. These changes influenced supply and demand dynamics, shaping Bitcoin’s role in global finance accessibility.
The SEC’s ETF approval simplified Bitcoin investment for traditional investors, enhancing liquidity and legitimacy in the eyes of established financial institutions. This will make Bitcoin surge, initiating a “buy” signal for investors.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
