Don’t look now, but Bitcoin (CCC:BTC-USD) is finally breaking out after a multi-month slump.
Bitcoin peaked in November above $60,000. But since then, the crypto has consistently dropped in price and fallen into a very well-defined downtrend. And each attempt to break out of that downtrend has failed…
Until last Friday, when Bitcoin broke the resistance level on this slump in an emphatic fashion and shot above the critical $40,000 level. The rally hasn’t slowed since then. As of this writing, Bitcoin has pushed above $44,000.
Of course, the question on everyone’s mind is if this Bitcoin Breakout is the real deal or not.
For what it’s worth, we’re pretty bullish on Bitcoin here and now.
To be clear, we do not think it is “green shoots” for the crypto going forward. The Fed and inflation will continue to pose challenges. And those headwinds will create choppiness for the foreseeable future — and prevent us from seeing Bitcoin pull off a multi-hundred-percent rally in months as it has done before.
However, we have confidence those issues will end up being resolved favorably. And in the meantime, there is enough fundamental firepower to push Bitcoin back toward $60,000.
Bitcoin Breakout Catalysts
Specifically, we believe Bitcoin has five major catalysts on the horizon that will help extend and potentially even accelerate this breakout:
- Acceleration of the NFT Boom. The NFT boom that started in 2020 and accelerated in 2021 is losing no steam in 2022. Last week alone, Sports Illustrated announced it will launch NFT collectibles from Muhammad Ali, Wayne Gretzky and more on Polygon; GameStop (NYSE:GME) announced it will launch an NFT marketplace with Immutable X; and pop singer Justin Bieber bought a Bored Ape NFT for $470,000. We firmly believe that NFT hype and activity will only expand in the coming months.
- Acceptance of the Blockchain Metaverse. Last week, rebranded Meta (NASDAQ:FB) stumbled in its first earnings report under its new name. A big part of the stumble was the fact that Meta, for the first time ever, broke out financials for its metaverse business — and Wall Street saw that the company is losing a lot of money in that endeavor. Investors freaked out. Meta stock plunged. Yet, despite Meta losing more than $200 billion in market cap last week — the biggest plunge in Wall Street history — metaverse tokens actually rallied. Decentraland(CCC:MANA-USD) popped 27% last week. The Sandbox (CCC:SAND-USD) rose 16%. Axie Infinity (CCC:AXS-USD) grew 13%. Theta Network (CCC:THETA-USD) jumped 14%. All those coins have kept rallying this week. The impressive resilience of metaverse tokens amid Meta’s wipeout underscores a belief we’ve had for a long time: The metaverse should — and likely will — be built on the blockchain. We believe the world will increasingly accept the idea of blockchain metaverses in 2022, providing further buying support for cryptos.
- Continued Web3 progress. Last week, Opera (NASDAQ:OPRA) released the beta version of its Web3-based Crypto Browser Project. The browser is intended to be a hub where users can search for decentralized applications. While we do not believe Opera will end up reigning supreme in this space, the move by the search giant does illustrate growing enterprise interest in developing the tools for Web3. That’s bullish for the whole space. Also of note, major VC firm Sequoia Capital just led a huge $450 million investment in Web3 developer Polygon. Our belief is that Web3 will go from “concept” to “reality” in 2022, a shift which should help push the crypto markets higher.
- Positive regulatory developments. In what may ostensibly appear as bad news, this past week, India announced a 30% tax on income from cryptos and NFTs. However, we actually view this as great news on the regulation front. It shows that India — one of the biggest critics of crypto — is unwilling to ban it and, instead, is pivoting toward a policy of regulation. That’s bullish. We believe the best outcome for crypto regulation is a situation where governments impose loose regulation. That will attract the most mainstream interest. Harsh regulations will kill the industry. No regulations will limit adoption. But loose regulations will spark mainstream adoption. And so far, loose regulation appears to be the path most governments are choosing.
- Sustained robust adoption trends. Data on cryptocurrency adoption remains very encouraging, and we were especially enthused by a chart from Finbold this past week (shown below). It illustrates the long growth runway ahead for crypto adoption in the U.S. Emerging economies — like Thailand — are hovering around 20% crypto adoption rates. The U.S. is below 15%. And that’s bullish because U.S. users are power users — with relatively deep pockets. Each percentage point of adoption gain in the U.S. is tremendously valuable to the whole crypto ecosystem. And if users do continue to adopt cryptos in 2022 — something we believe is very likely — then that will add a ton of buying firepower into the crypto space.
Position for the Breakout
Overall, we feel positively about the current Bitcoin breakout and believe it sets the stage for cryptos to outperform in the coming weeks.
To find out how we’re positioning ourselves to profit big in this breakout, click here.
My colleague and good friend, Charlie Shrem, believes that we aren’t just in the early stages of a big Bitcoin breakout — but that we are in the early stages of a new digital currency opportunity that will end up being bigger that Bitcoin itself.
And he would know. After all, he bought Bitcoin back when it was trading for just $5.
And tonight at 7pm EST, Charlie is going to share this opportunity with an exclusive group of folks at his Insider Summit. More than that, he’s also going to reveal his top crypto pick to capitalize on this huge opportunity. To reserve your seat to this special event, click here.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.