Bitcoin Talking Points
- It was a little over a year ago that legendary Macro trader Paul Tudor Jones came out in support of Bitcoin in a very big way, highlighted in these articles in the piece entitled, Bitcoin Breakout: BTC to Fresh Highs, Near 10k as PTJ Makes Bull Case.
- Much has happened since that article was published a little over 13 months ago. But this morning saw Paul Tudor Jones give a wide-ranging interview on CNBC ahead of this week’s FOMC rate decision in which he once again opined on the crypto currency and its possible place in investors’ portfolios.
It’s been quite an eventful past year. But, it was just about 13 months ago now that I began looking at Bitcoin in these articles, and that was helped along by one of the most prominent Macro traders in existence, Mr. Paul Tudor Jones. At the time, Gold prices had already started to run and the Fed’s printing press was in high gear. Bitcoin was trading below 10k at the time but Paul Tudor Jones very openly embraced Bitcoin in a note titled The Great Monetary Inflation.
Paul Tudor Jones was in the news again this morning as he dropped a number of noteworthy quotes, speaking on the upcoming FOMC meeting and how this is the most important rate decision of Jerome Powell’s career. But, he also made a bull case for Bitcoin and its place in his portfolio, with the below direct quote from this morning’s interview:
I like Bitcoin. Bitcoin is math and math has been around for thousands of years, and two plus two is going to equal four and it will for the next two thousand years.
He went on to say that he likes Bitcoin as a portion of his portfolio, similar to Gold, commodities or cash. He said the he wants to have around 5% in each, calling Bitcoin a ‘portfolio diversifier.’
And another comment from a little later in the interview, when asked about his opinion of government regulation of cryptocurrencies:
It costs more to mine gold energy-wise than it does Bitcoin. Clearly, I’m concerned about the environmental impacts of Bitcoin. If I was king of the world, I’d ban Bitcoin mining, just because the environmental impact and then make the ecosystem figure out a way to do it without expanding the supply anymore.
Driven at least partially by these comments, Bitcoin inclined back-above the 40k handle this morning, the first time BTC has traded above that psychological level so far in June trade. But, now that the cryptocurrency has made a fresh higher-high, the question is whether further highs await ahead of that really key FOMC rate decision on the calendar for Wednesday.
Bitcoin (BTC/USD) Four-Hour Price Chart
Chart prepared by James Stanley; Bitcoin on Tradingview
Musk Tweets Optimism for Re-Adoption
What had become one of Bitcoin and, in-turn, crypto’s main drivers in Q1 quickly became a detriment in Q2. Elon Musk jumped on the crypto theme in a very big way, much of which was disseminated through his personal twitter account. Perhaps one of the bigger items and this is something that may one day be remembered as a crypto hall mark was his announcement that Tesla was putting $1.5 billion of Bitcoin on Tesla’s balance sheet.
The move turned out to be quiet prescient as the profit from that trade accounted for a large chunk of Tesla’s Q1 profit, but I digress. The second part of that push was that Tesla would begin accepting Bitcoin as payment for product, essentially treating the cryptocurrency like an actual currency. This was seen as a huge step in normalization of cryptocurrencies but it was shortly after that Musk made a quick reversal of that decision, citing the environmental impact from Bitcoin mining.
This enflamed many on social media as it likely wasn’t news to Musk about the proof-of-work concept necessary to mine Bitcoin. Since then, however, he’s continued to tweet on the topic of crypto currencies but it appears as though there’s been less focus on Elon tweets of recent.
This weekend brought another supportive tweet from the Tesla CEO in which he said the company would begin accepting Bitcoin as payment when there’s confirmation that a reasonable amount of Bitcoin mining is being driven by clean energy, and he used the 50% marker for his definition of ‘reasonable.’
Bitcoin Daily Price Chart
Chart prepared by James Stanley; Bitcoin on Tradingview
Has Bitcoin Bottomed?
Bitcoin spent three weeks threatening a breakdown, holding support just above the 30k marker. This was also accompanied by continued lower-highs, giving the appearance that bears were building in anticipation of a breach of that psychological level.
This weekend broke that pattern, however, as this fresh higher-high has negated the recent trend of lower-highs and prices perking back above the 40k marker highlight bullish potential in the near-term. Of course, a major contention around that premise is the Wednesday FOMC rate decision, similarly opined on by Paul Tudor Jones in this morning’s interview.
His case was that if the Fed continues to say that inflation is transitory and that they’re undeterred by last week’s 5% print, he’s bullish on markets such as gold, commodities and crypto; and if he’s thinking this way he’s likely not alone.
On a shorter-term basis, bulls holding this momentum will be key ahead of that FOMC rate decision if Bitcoin is going to shrug off the recent pullback. Below, I’ve outlined a couple of spots of near-term support potential, each of which can keep the door open for topside scenarios.
Bitcoin (BTC/USD) Hourly Price Chart
Chart prepared by James Stanley; Bitcoin on Tradingview
--- Written by James Stanley, Senior Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX