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Crypto continues to be in a secular bull market. Bitcoin has rallied 3x since we issued our initial outlook following the mid-March sell-off, with prices today bursting to ~$16,700 or 1% above our FY-2020 target of $16,500. We are maintaining our bullish view on crypto and releasing our new FY-2021 fundamental economic financial model estimates, which we are applying to revise our price target upward to $25,000 (Slide 2).
- Macro Thematic Thesis Remains Strong: Bitcoin has been the best performing among global assets 8 out of 10 years since inception and leads in 2020 by 98% YTD (Slide 3). Outlook remains strong and we’re maintaining our recommendation for investors to overweight crypto as a core portfolio holding at 1-2% or a 10-20x OW vs. current size at 0.1% of assets (Slide 4).
- Fourth Bull Market Cycle Remains Intact: Crypto economies move in macro boom and bust business cycles like traditional economies. As the U.S. drives the global economy, Bitcoin, the largest among peers, is the bellwether and driver of the crypto economy. It has seen three macro market cycles with astonishing returns, excessive valuations and over 80% price declines. We continue to believe Bitcoin is in its fourth bull market cycle, which we now see in its 3rd or 4th innings (Slide 5).
- Growing Central Bank Assets, Mining CAPEX & Users: Crypto emerging market price cycles follow mechanical cause and effect incentive relationships between capital flows, accumulated fixed investment, and human capital productivity. Bitcoin price has been highly reflexive to major central bank balance sheet growth, which has increased $18T since 2009. Bitcoin’s $310B market cap has captured 1.7% of this value, and we estimate an accumulated $20B of mining CAPEX (our proprietary Grider Crypto Book Value metric which has served as a price floor) has been invested in the digital economy, while crypto users have grown above 100M (Slide 6).
- Price to Book Valuation Multiples Support Higher Prices: Our proprietary Grider Price to Crypto Book Value Multiple, which compares Bitcoin’s Market Cap (Price) to its accumulated mining CAPEX/revenue (Book), has been a very reliable predictor of cycle movements since it was first published in January 2018. Multiples are 3X off cycle lows, but by no means excessive, and we believe given the currently strong market fundamentals this cycle will go longer (Slide 7). Current Bitcoin P/B multiples sit at 15.4x, which are above the lifetime average of 9.4x but well below +2 std. dev. or 26.1x, where 6M forward returns turned negative during the prior two cycles (Slide 8). Grider P/B multiples and Bitcoin forward returns have had a stronger relationship than PE multiples and S&P 500 stock returns, and 3M, 6M & 1Y returns from current 15x P/B averaged 26%, 69% & 49%, respectively, with 6M and 12M returns at or above the 50% upside implied by our FY-21 target (Slide 9).
- Introducing Bitcoin FY21 Economic Estimates & Raising Outlook To $25,000: Our FY20 fundamental forecasts call for Bitcoin’s Book Value to reach $27.5B (35% growth) and Book Value Per Share (BTC) to reach $1,454 (32% growth) (Slide 11). Other than our prior model released in May 2020 (Report), we believe this is the first of such sell-side forecasts. Our target applies a 17.2x forward P/B, which is slightly under +1 std. dev. lifetime valuation of 17.8x, but below prior cycle highs of 69.
- More Liquidity & A Weaker Dollar Offer Macro Tailwind For Growth: Prior cycles have coincided with central bank balance sheet growth and a weaker dollar, both conditions are in place today that we see as catalysts for meeting our target (Slide 10).
Bottom Line: Bitcoin is within 1% of our 2020 economic and price forecasts. Conditions are in place for a continued rally in crypto prices over the course of the next year. We remain bullish and are raising our Bitcoin price target from $16,500 to $25,000, while noting that we recommend investors seeking to add exposure should favor pull backs, especially given the recent run.
Key slides from this report…
Price Target: Increasing Bitcoin Outlook: $25,000 (Slide 2)…
![CRYPTO BLAST (Grider): Bitcoin Reaches Target: Issuing FY-21E & Increasing Outlook: $25K](https://cdn.fsinsight.com/wp-content/uploads/2020/11/image-19.png)
Tactical View (6M -12M): Fourth Bull Market Cycle Still Underway(Slide 5)…
![CRYPTO BLAST (Grider): Bitcoin Reaches Target: Issuing FY-21E & Increasing Outlook: $25K](https://cdn.fsinsight.com/wp-content/uploads/2020/11/image-20.png)
Inflection Points: Valuations Have Room For Continued Expansion (Slide 7)…
![CRYPTO BLAST (Grider): Bitcoin Reaches Target: Issuing FY-21E & Increasing Outlook: $25K](https://cdn.fsinsight.com/wp-content/uploads/2020/11/image-21.png)
Macro Tailwinds: More Liquidity, Weaker Dollar, Higher Valuations (Slide 10)…
![CRYPTO BLAST (Grider): Bitcoin Reaches Target: Issuing FY-21E & Increasing Outlook: $25K](https://cdn.fsinsight.com/wp-content/uploads/2020/11/image-22.png)
Bitcoin Forecast: Issuing FY 2021 Fundamental Economic Estimates (Slide 11)…
![CRYPTO BLAST (Grider): Bitcoin Reaches Target: Issuing FY-21E & Increasing Outlook: $25K](https://cdn.fsinsight.com/wp-content/uploads/2020/11/image-23.png)