To investors,
Bitcoin has been trading sideways for a number of weeks. This follows the euphoria from the bitcoin spot ETF approvals, along with the market-wide exhale post-halving.
As I previously shared with you all, bitcoin historically has not performed exceptionally well following the halving, so this is not necessarily an unexpected outcome.
But now there is a new narrative forming — is bitcoin ready to break out?
Twitter user TechDev_52, an entrepreneur and crypto analyst, shared some interesting charts over the weekend. First, we may be seeing a bitcoin breakout compared to M1 money supply. TechDev_52 writes:
“You're looking at the first breakout of Bitcoin against M1 money supply since March 2017 when it went historically parabolic for 9 months. Comparisons and trend projections involving 2021 may end up dramatically underestimating things. One interpretation: In 2021 Bitcoin was carried to new USD highs by increased money supply. In 2024 it’s gotten there on its own demand (and thus broke out against M1). Add the anticipated M1 growth this time and we likely see Bitcoin outpace expectations based in part on 2021.”
Next, the analyst points out “Bitcoin has only seen blow-off tops after breakouts against M1 money supply. And the longer its consolidated, the longer its run. This breakout follows the longest consolidation yet.”
Lastly, the analyst writes “Historic move imminent. Bitcoin’s 5-day bullish compression has reached its highest level in 8 years.”
Seems bullish, right? Maybe.
This analyst has a strong argument looking at bitcoin, the historical price performance, and M1 money supply. If you are unfamiliar with the insane M1 money supply growth over the last four years, here is a refresher:
But bitcoin seems to be overpowering the recent contraction in money supply. The asset has appreciated more than 50% year-to-date and we can see that each ETF is now seeing multiple day streaks of net-inflows.
It is impossible to predict whether bitcoin is going to break out at any given moment. However, it is very easy to see the structural tailwind at play for bitcoin.
The government is going to continue debasing the dollar. Wall Street will keep buying more bitcoin. Retail is not going to sell the bitcoin they already hold.
Illiquid supply. Increasing demand. Debasing currency denominating the asset.
The long-term perspective remains just as bullish as ever. Don’t get lulled to sleep. Don’t take your foot of the gas. Too many early bitcoin/crypto investors I know are celebrating being “right,” instead of realizing that we are in the early days of a systemic change in financial markets.
The best investors in the world press their winners. If you think bitcoin is a winner, and you start celebrating before you cross the end zone, things may not end as well as they could have otherwise.
Just ask the Cowboy’s Leon Lett what happens when you celebrate too early:
Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
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