Bitcoin needs catalyst for $100K, gold going higher, ETH still undervalued

In a few years, finance wonks and crypto advocates will look back to 2024 and agree that it was the year Bitcoin went mainstream and saw mass adoption within traditional finance. The incredibly successful launch of the spot Bitcoin ETFs, MicroStrategy CEO Micheal Saylor’s plan to buy $42 billion in Bitcoin, and Bitcoin rallying to a new all-time high are just a few of the major milestones of the year.

Brian Russ: I absolutely think it will be the case where you’ll see wealth management firms and asset management firms start to show to their client base that had they diversified into Bitcoin or a combination of Bitcoin and Ethereum within their 60/40, that it would have enhanced their returns dramatically. And I think as that research starts to come out, those big registered investment advisers are going to push their customers into getting off of zero.

So that's pretty compelling, right? And I think as you see more of this research come out, you’ll see more, whether it’s individuals, family offices, institutional investors who are sitting on the sidelines say, look, let's put half a percent in or let's put 5% in.

BR: I think you've got to separate out speculative commodities like precious metals and then utility commodities like gold and copper. Let's say, for example, if we focus in on the precious metals market. I think it's really a big part of this more or less anti-dollar trade. So what I think confuses people is that, we oftentimes think of gold and silver as hedges and risk-off types of instruments. But if you look back through history, that really hasn't been the case.

There were massive sell offs in the precious metal markets in 2008, as well as in March of 2020. So they can actually be sources of liquidity during those periods of time when assets are sold in the face of a crisis. And what I've noticed over the years is that gold and silver have their own set of drivers. They don't often act like hedges, per se. They're not really that insurance policy. Traditionally, we've seen the US Treasury market and US dollars serve as better hedges to crisis or recession. And what's interesting to me about the precious metals market is if you go all the way back to the dollar unlinking from gold back in 1971. I think we are now right smack in the middle of the third bull market in precious metals.

It's difficult to say where you would mark the start of this precious metals bull market, but I think it's reasonable to say that March of 2020 is a good time, right? Because we had this once in 100 year viral pandemic crisis followed by the bazooka stimulus. And so that was a ton of money that was just pushed into the system. I think we expanded M2 by something like 50% over the course of 18 to 24 months with all the stimulus as well as the monetary policy that the Federal Reserve was engaged in. And I think we're probably about midway through that story.

So that puts us about 4 or 5 years into what could be a decade-long bull market in precious metals. I think when you combine the factors around COVID-19 and the stimulus-response, the fiscal deficits that we touched on, the presidential election, which we expect to be a catalyst for deeper fiscal deficits, these sort of Lyn Alden, nothing stops this train dynamic of deeper and deeper deficits, of this becoming a reflexive thing. I think you've got really just a sentiment shift around the dollar as a store of value assets. And so there's more space for competition here. And precious metals are one part of that competition. And, of course, Bitcoin has been another exciting part of that competition as well.

BR: Yes, I do. I actually like it more here than I did at ETHDenver, which would have been in February of this year. I try to look at a confluence of factors that cross over fundamentals. Sentiment, positioning, liquidity and technicals. And when I look across those factors, I think things are slightly better now than they were back then. You know, the fundamental story to me remains intact. If you look at daily active wallets across the L1's, they're up something like 800% over the last 3 to 4 years. That was some research that Dan Tapiero had done. If you look at the recent A16z State of Crypto report, they've got L1 monthly active crypto addresses interfacing with L1 at 220 million, which is an all-time high and kind of increasing at an increasing clip.

If you look at some of the developments as it relates to the Ethereum infrastructure, transaction fees are way down. Obviously, the shift from proof-of-work to proof-of-stake is significant. That happened a few years ago, so if you look at the fundamentals, the story just continues to get better. If you look at the price, like technicals, it's been relatively weak compared to, let's say, Bitcoin. So the ETH to Bitcoin cross or is compared to Solana, which is Ethereum's top competitor, at least in market cap terms. You know, sentiment just follows price, so right now, I think we're in a negative sentiment period for Ethereum.

And the narrative is that L2s are parasitic and that there are some real challenges to the Ethereum roadmap. I think some difficult and good questions are being asked. I am, however, despite having presented a traditional valuation model and having spent the vast majority of my career in TradFi, not convinced that fundamentals are really the key driver right now.

I think we’re still pretty early stage with this technology where it requires some seeing in the dark. There's a potential monetary premium to some of these assets, where Ethereum can be looked at as a solid piece of collateral that can be used within DeFi or other pockets of the blockchain ecosystem generally. And then I think you could go so far as to say there’s a memetic premium that could be added to a lot of these assets.

So what’s the memetic premium of Vitalik and the Ethereum ecosystem? The community of people? I mean, if you go around to any of these conferences, there are a lot of them are sold out. There’s just a ton of sponsors, a ton of money, a ton of people, a lot of energy, a lot of developers. All those metrics by every fundamental metric, things get better in the ecosystem. I think the roadmap is going to take time. Time will tell if the L2 scaling solution is the right solution for Ethereum. And if it's not, I think the protocol and the foundation are smart enough to know that they'll pivot it.