Nick Chong · 6 days ago · 2 min read · Insights via Grayscale Investments
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Despite the rallies in Bitcoin and the stock market, the past three months have been the worst months for the economy since the Great Recession, maybe even earlier. Dozens of millions have become unemployed, revenues have fallen off a cliff, and there is growing social unrest as different groups address the COVID-19 pandemic in different ways.
In the face of all this, Bitwise’s global head of research, Matt Hougan, said in an investor letter titled “May 2020: Welcome to Crypto’s Fourth Era” that the past six weeks have “been among the most eventful—and bullish—in crypto’s history.”
Why the past six weeks are among Bitcoin’s best
Backing the strong assertion that the past six weeks have been among Bitcoin and crypto’s best, the analyst pointed to a number of trends indicating that the intrinsic values of cryptocurrencies, especially Bitcoin, have risen dramatically over this time frame.
They are as follows:
- Crypto assets are outperforming stocks: As reported by CryptoSlate previously, markets analyst Josh Rager observed that Bitcoin has outperformed the S&P 500 by approximately 30 percent since the March lows. Altcoins have registered similar gains. Analysts say this trend strengthens the likelihood investors will buy cryptocurrencies in the future.
- Central banks and governments are printing more money than ever before: In response to the economic impact of the COVID-19 pandemic and the lockdowns, governments and central banks around the world have printed trillions of dollars to keep economies afloat. The White House alone signed off on a $6 trillion stimulus package. The increase in the generation of fiat money is a positive catalyst for Bitcoin, which is relatively scarce.
- Bitcoin’s third halving arrived: Last week, Bitcoin’s third block reward halving came to pass, reducing the new supply of the cryptocurrency by 50 percent. Assuming consistent demand, the decrease in supply should boost the value of BTC.
- Institutional players continue to adopt Bitcoin: The past few months have seen a number of strong signs indicating the institutional adoption of cryptocurrencies — such as the rising open interest in the CME’s Bitcoin futures, Grayscale’s Q1 report, or comments from Fidelity indicating “pipeline” growth in their crypto business. The epitome of this trend was billionaire hedge fund manager Paul Tudor Jones announcing his support for Bitcoin on CNBC and in a note distributed to his clients.
- China and Libra move forward with digital currency projects: And finally, showing that the world is embracing digital currency, both the People’s Bank of China and the Libra Association are moving forward with their respective projects. These projects are unlikely to be interoperable with decentralized blockchains, though, as Paul Tudor Jones wrote, “The most compelling argument for owning Bitcoin is the coming digitization of currency everywhere, accelerated by COVID-19.”
What comes next for the crypto space?
With the past six weeks being some of the most bullish ever for cryptocurrency as the analyst suggested, the pressing question of what comes next has been raised.
According to Hougan, the recent trends confirm that Bitcoin and crypto are entering their “Fourth Era” — the fourth large market cycle that will see the very fabric of the industry change dramatically.
Hougan predicted there will be three core trends that will define this next era:
- Bitcoin will be widely owned as a “normal macro asset”
- Crypto market infrastructure will “continue to improve”
- Digital assets will go “mainstream” with the introduction of Libra, central bank crypto, etc.
What he didn’t indicate, however, is how these Fourth Era trends will translate into movements in the value of cryptocurrencies, especially Bitcoin.
But there wasn’t meant to be a price prediction as a takeaway. As Hougan indicated, the core point of his report is to illustrate that in the coming few years, cryptocurrencies will become mainstream assets and technologies:
“By the end of the Fourth Era, we believe bitcoin and other cryptoassets will be treated as normal investments by most investors. They won’t be owned by everyone, any more than everyone owns REITs or MLPs or tech stocks or gold, but they will be considered mainstream.”