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Bitcoin price thoughts: $30,000 or $300,000?

Also, analyzing MOVE regimes and improving TBL Liquidity.

Nik Bhatia

Aug 15

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Dear Readers,

Goldman Sachs bought bitcoin. This headline is simultaneously small ($400 million isn’t a lot of money) and enormous (Goldman buying bitcoin spot ETFs, for itself or for clients, sets a precedent), fitting in perfectly with our consolidation outlook. We’ll explore the risk outlook for bitcoin on both the upside and downside, and discuss allocation strategies.

The Bitcoin Layer is turning a corner as we step up our quantitative analysis. In an effort to bring more actionable data to you, we dove head-first into the Kaufman-Howell-Salomon school of liquidity, research that is finally paying dividends. Our liquidity model is now up to 52% correlation with the S&P 500—as it becomes more successful in capturing the change in asset prices, lessons from the repo market grow in importance. Today’s letter will feature the essential concept of wholesale banking. Let’s begin.

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Institutional adoption

One of the most bullish market dynamics in place for bitcoin is the greater fool theory. No, we don’t believe those that buy bitcoin are fools, but the price does depend on the next person joining the network at a higher price. This is far from the scammer’s Ponzi scheme, in which returns are always promised but sourced from a new fool. In bitcoin, the fools are well aware of what they are buying instead of being roped in by the surety of returns.

The twist here is that bitcoin holders don’t view themselves as the next fool, but people ahead of their time. Mostly, these holders don’t even make their holdings available to the next fool—because they realize new entrants are actually smart.

I say all this about the greater fool theory because when we think about the institutional adoption of bitcoin, each investing house is looking at its neighbors.

This news, while a tiny amount of money in the grand scheme, will influence more surrounding Goldman and Morgan, two stalwarts of global investment banking. When we think about $1 trillion coming for 1 million BTC, the numbers are mind-bending...

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