Bitcoin Crosses $108k, US Spot ETFs Are The Largest Holder, MSTR To Enter Nasdaq-100
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Cliff-Notes:
- Bitcoin's second $100,000 breakout to a new all-time high of $108,315 has occurred amidst a transition from a leverage-driven surge to a solid foundation of spot buying, positioning the market for sustainable growth during this bull cycle—potentially driven by nation-state accumulation.
- Cyclical valuation metrics like the MVRV Z-Score suggest bitcoin is far from overheated, with substantial room for growth until it approaches the levels seen in prior market tops.
- Spot bitcoin ETFs are driving unprecedented institutional demand—now, as the largest holder of BTC, they have established themselves as a foundational source of buy-side pressure in the equity market.
Bitcoin managed to scale the formidable $100,000 sell wall as discussed in my last post, breaking the level thanks to a great deal of leverage before flash-crashing all the way back down to the low-$90k range, and now above the level once more, this time on a firmer foundation. Before we explore the dynamics at play that sent bitcoin beyond $100,000 and will take it much further during this bull market, let's take a look at the macro environment to understand how the next year in markets will likely unfold.
This morning, the Fed cut rates by 25 bps as expected, and is only pricing in two 25-bps rate cuts next year compared to 3 or 4 just a few months ago. This is an admission that the US economy is stronger than anticipated, inflation is higher than anticipated, and growth expectations into next year are so high that the every-meeting cadence of rate cutting is unwarranted.
The Summary of Economic Projections for December 2024 is as follows:
- GDP expectations for EOY 2025 are revised UP
- Unemployment expectations for EOY 2025 are revised DOWN
- PCE inflation expectations for EOY 2025 are revised MUCH HIGHER
The economy is solid, it justifies a higher neutral rate. The year-end 2025 target is 4.00%, and the long-run target rate is now 3.5%. Policy rate expectations via the 2y UST yield and growth & inflation expectations via the 10y UST yield are higher after the SEP release and Fed rate decision:
Overnight Index Swaps are pricing in 50 basis points worth of cuts between now and next October, bringing the Fed's main policy rate down to just 4%, which would be its lowest level in 2.5 years. Rate cuts amid a robust economy are not cause for concern. The Fed has also proven that it can move swiftly should economic data about-face and deteriorate, meaning markets shouldn't experience a protracted bear market if the economy begins moving in the other direction. My base case for 2025 is a continued bull market in risk assets given a still-robust and dynamic economy, a supportive Fed, and expanding liquidity conditions amid an expanding money supply and interest rates coming down:
Now let's dissect bitcoin's break of $100k. The open interest and funding rate on perpetual BTC futures contracts spiked and drove bitcoin over $100,000 the first time around, leading to an unstable base that got liquidated when price moved in the other direction. As price fell and new stops were hit, more leveraged longs were forced out of their positions, and bitcoin flash-crashed all the way down to $91,000. These leveraged longs were wiped out to the tune of ~$5 billion in contracts.
Bitcoin has spent the last 12 days building up a more robust base of spot-buying, as seen by a huge reduction in OI and the funding rate. When bitcoin was breaking $100k the first time around, there was ~$33 billion in OI and a funding rate of 0.07% every 8 hours. As BTC began its second break of $100k, OI was ~$1.5 billion lower, and the funding rate dropped commensurately to 0.01%—its historically normal level—indicating that this $100k breakout is driven by a firmer base of spot BTC buyers rather than leveraged longs opening up new positions.
With very little froth in the market, bitcoin is in a much healthier position to stay above $100,000 now that price action is increasingly dominated by spot:
Despite the 6-figure all-time high, bitcoin is still quite far from being considered historically overvalued and due for a market top. MVRV compared bitcoin's spot price to its realized price, the average price that bitcoin moved on-chain, in order to gauge whether the spot price is over/undervalued to its "fair value." The score is further normalized by dividing this difference by the standard deviation of the market cap over time, providing a cumulative measure of how extreme the market value is compared to realized value—this gives us the MVRV Z-Score.
Bitcoin's MVRV Z-Score, currently at 3.48x, suggests the market is far from overheated at its ~$104,000 price. Historically, this metric has marked significant market tops at much higher levels. In 2017, bitcoin's MVRV Z-Score peaked at 11.7x during the height of the bull run, while in 2021, it reached 7.5x before the market corrected. This consistent pattern indicates that bitcoin typically becomes overvalued—and closer to a top—when the MVRV Z-Score approaches 7x or beyond. If history is a guide, bitcoin still has considerable room for growth before nearing historical overvaluation levels, suggesting the current market phase is more akin to a mid-cycle surge than a terminal top. As investor sentiment and demand for bitcoin continue to climb, a potential Z-Score peak this cycle could exceed 7x, signaling further upside before the market approaches the critical "overheated" zone. Bitcoin would exceed $200,000 at this level:
Bitcoin above $100,000 will likely be met with a huge surge in retail demand beyond the like of what we've witnessed before. As news chyrons become more frequent during this bull run, vehicles like the spot bitcoin ETFs will allow these bull market participants to come from investment accounts, retirement accounts, pension funds, and the like—a variable that wasn't present during prior bull markets.
The spot bitcoin ETFs have purchased a net 130,000 BTC on behalf of their clients over the last 6 weeks. The $-value of their AUM rose $53.35 billion over the same period, raising the total value of their holdings by 79.1%, more than any other ETF product in the United States over that same period. As retail demand continues to surge, expect the sales departments at these ETF issuers to ramp up their activity as well. Now that spot bitcoin has entered the equity market, the ETFs have been and will continue to be one of the most evergreen sources of buy-side pressure that bitcoin has ever seen.
Imagine the calls that financial advisors are getting from clients right now. And the huge marketing blast from Blackrock & other ETF issuers. We're going much higher:
The US spot bitcoin ETFs have now passed Satoshi Nakamoto in total bitcoin holdings, making them the single-largest bitcoin holder in aggregate—these investment vehicles managed to hit this milestone just one month shy of being a year old. If the first-inning performance of these vehicles is any indication, demand for bitcoin in traditional finance has been pent up for quite some time. And with MicroStrategy's convertible notes being oversubscribed at every turn, both equity and debt investors are taking on bitcoin exposure at a fervent pace. The spot bitcoin ETFs, updated as of today, now hold 1,135,000 BTC on behalf of their clients, over 35,000 more than Satoshi Nakamoto:
A tweet of mine from 18 months ago was recently sent to me. At the time, Larry Fink said that bitcoin was "ditigizing gold", and at the time, bitcoin was $592 billion and gold was $12.68 trillion, or roughly a 21.4x difference.
Currently, bitcoin is $2.1 trillion and gold is $17.886 trillion, only an 8.51x difference. Bitcoin has appreciated nearly 3x into gold's size in just 18 months, and it has plenty more monetary premium to soak up before it overtakes it. This corroborates the thesis I've put forward that bitcoin will demonetize gold both as the two assets grow and BTC outpaces it, but also as capital from gold flees directly into bitcoin.
This thesis is further validated by the trend in assets under management in both the gold and bitcoin ETFs over the last several months during their shared bull market.
The total assets in the spot Bitcoin ETFs are now 55% of the value of known gold ETF holdings. Since October 30th, the total AUM across all known spot gold ETFs shrank from $233.7 billion to $218.7 billion as total AUM across the spot bitcoin ETFs rose from $72.4 billion to $120.7 billion. Despite both spot prices rising, the AUM in their spot vehicles is diverging. Out with the old, in with the new:
This is the type of price action that screams "buy program" from one or many global superpowers. There's a credible rumor circulating that the UAE has accumulated 300,000 to 400,000 bitcoin, and if that's true, the United States has some catching up to do at only 198,109 bitcoin in its holdings.
Pair that with a rumor of Russia pursuing a bitcoin reserve strategy, and the United States has its work cut out for it when President Trump gets back in the White House next month. He may have a shortcut, thanks to the Bitcoin Policy Institute.
A brand-new Draft Executive Order for the US' Strategic Bitcoin Reserve has been assembled by Matthew Pines and the BPI team, which fits into the United States' existing Exchange Stabilization Fund framework. If Trump is serious about playing ball and accumulating bitcoin before Russia or another one of our enemies can, all he has to do is have this officially drafted, and sign it. A plug-and-play Strategic Bitcoin Reserve within hours of taking the oath of office, if he'd like to.
As if there weren't enough good news for bitcoin already, MicroStrategy is set to join the Nasdaq-100 on December 23rd.
MicroStrategy's Nasdaq-100 inclusion means every index fund or ETF tracking the Nasdaq-100, such as QQQ which is the world's 5th-largest ETF at $325 billion, will allocate to MSTR. As investors bid QQQ, they indirectly bid up MSTR’s price, funneling passive capital into a company whose core strategy is acquiring bitcoin. As MSTR’s price rises due to QQQ inflows and direct inflows that will occur as a byproduct of its QQQ inclusion making it more mainstream, its weighting within the Nasdaq-100 increases. Higher weightings result in more capital allocated to MSTR during periodic rebalancing, amplifying the demand for its shares. MSTR's playbook has been consistent: issue stock or debt and use the proceeds to buy bitcoin. Higher stock valuations driven by passive flows empower MSTR to raise even more capital, accelerating its accumulation of bitcoin. A reflexivity TLDR:
Pension funds. Endowments. Insurance companies. Sovereign wealth funds. 401k and IRA participants. Your grandma. All of these cohorts are buying QQQ every single week. Now, all of them are bidding bitcoin.
And there's nothing that anti-BTC financial advisors can do to stop it. They could stop allocating to QQQ, but then in a few months, they'll have to stop allocating to IVV, VOO, and SPY once the FASB rule changes and MSTR gets added to them, too. Bitcoin eats the passive index fund market, on its way to eating the world.
With the equity market bidding up the spot ETFs and fix income oversubscribing to every one of MicroStrategy's convertible offerings, one thing is for certain: demand for bitcoin has never been so high, and it's only going to grow. This is only the beginning of the bitcoin trojan horse making its way into every nook and cranny of traditional finance until bitcoin financial products are available in every single asset class. We've entered the financialization phase of bitcoin's monetization—the sky is the limit for where the asset goes from here.
Take it easy,
Joe Consorti
Theya is the simplest way to take full control of your bitcoin. With our flexible multi-sig vaults, you decide how to secure your keys.
Whether you prefer keeping all keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple devices, it's always Your Keys, Your Bitcoin.
Get started with Theya on the App Store or via our Web App.