For the full copy of this report in PDF format, click this link.
Crypto investors received a late Christmas present with the price of Bitcoin reaching new all-time highs early this morning briefly touching $28,580. Bitcoin has risen by 75% since our last upward price target revision and now sits at ~$28,000 or 12% above our most recent $25,000 target. Despite the rise in prices and valuations, we believe the conditions remain in place for a continued rally in Bitcoin and crypto more broadly over the next 6-12 months. Institutional & corporate buying, regulatory de risking and retail stimulus demand are factors that have led to an increase in positive momentum, which we believe can continue. As such, we’re revising our valuation model estimates higher and raising our price forecast to $40k representing ~50% upside from current levels.
- New Buyers, Regulatory De-Risking & Stimulus: Institutional investors and corporations are entering crypto and are acting as a new source of demand. We view recent FINCEN & SEC proposed regulation and enforcement actions as long term positive de-risking events that highlight the growing regulatory clarity and U.S. government stance on Bitcoin, albeit not all crypto assets, which should lower the risk premium and bolster capital flows. The latest U.S. stimulus package should boost personal savings and could lead to greater retail crypto investment (Slide 2). For these reasons, we believe Bitcoin prices can go higher and are raising our target to $40,000 (Slide 3).
- Fourth Bitcoin Bull Market Cycle Still Remains Intact: We continue to believe Bitcoin is in its fourth bull market cycle, which we now see in its 4th or 5th innings vs. the 3rd or 4th innings we discussed at the time of our prior target update report. We believe our new 6 to 12-month target of $40,000, which offers 50% upside from current levels, is conservatively reachable, while reaching $100k+ during the full cycle is historically not outside the realm of possibilities (Slide 4).
- Valuations Becoming More Expensive But Can Go Higher: Bitcoin’s price has risen by nearly 4x during the year. The gains in price have come alongside increased fundamental traction and valuation multiple expansion. Our two metrics for tracking supply (Grider Book Value) and demand (Wallets/Users) fundamentals have risen by ~33% while valuations investors have been willing to pay have risen by roughly 175%. This implies a large portion of the gains have come from multiple expansion (Slide 5), but we believe this cycle will go longer (Slide 6), and while trailing multiples are nearing the higher end of their historic range (Slide 7), forward multiples based on our estimates make current prices appear more sustainable (Slide 8).
- Increasing FY21 Economic Estimates & Raising Outlook: Our FY2021 fundamental forecasts now call for Bitcoin’s Book Value to reach $29.7B (41% growth) and Book Value Per Share (BTC) to reach $1,569 (39% growth) (Slide 9). Our new target applies a 26x P/B multiple, which we view as conservatively reachable because it’s in line with the +2 Std. Dev. lifetime multiple where 6M forward returns turned negative during the prior two cycles. We believe the possibility for further, more speculative multiple expansion back to prior cycle highs of ~70x is possible, which could lead to BTC prices north of $100k (Slide 10).
- What are the downside risks? Prices have had a significant run and profit taking may slow or reverse the rally. Crypto regulatory actions against unregulated exchanges, certain DeFi or ICO projects, and enhanced stable coin restrictions are possible during Q1. We wouldn’t view these events as long-term negatives for Bitcoin, but if such events unfold, they may negatively impact broader market sentiment and prices.
Bottom Line: 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 $25,000 to $40,000, while again noting that we recommend investors seeking to add exposure should favor pull backs given the recent run and corresponding higher valuations.
Key slides from this report…
Bitcoin Breaking New Highs & Our $25k Target (Slide 2)…
![CRYPTO BLAST (Grider): Raising Outlook $40K: Bitcoin Reaches Target But Upside Remains](https://cdn.fsinsight.com/wp-content/uploads/2020/12/Image1-1024x801.png)
Increasing Bitcoin Price Target: $40,000 (Slide 3)…
![CRYPTO BLAST (Grider): Raising Outlook $40K: Bitcoin Reaches Target But Upside Remains](https://cdn.fsinsight.com/wp-content/uploads/2020/12/image2.png)
Fourth Bull Market Cycle Still Underway (Slide 4)…
![CRYPTO BLAST (Grider): Raising Outlook $40K: Bitcoin Reaches Target But Upside Remains](https://cdn.fsinsight.com/wp-content/uploads/2020/12/image3.png)
Prices Increasing Alongside Fundamentals & Valuations (Slide 5)…
![CRYPTO BLAST (Grider): Raising Outlook $40K: Bitcoin Reaches Target But Upside Remains](https://cdn.fsinsight.com/wp-content/uploads/2020/12/image4-1024x793.png)
Forward P/B Multiples Still Reasonable Based On Our Forecasts (Slide 8)…
![CRYPTO BLAST (Grider): Raising Outlook $40K: Bitcoin Reaches Target But Upside Remains](https://cdn.fsinsight.com/wp-content/uploads/2020/12/image5-1024x796.png)
Conservative Target is $40k But $100k+ Is Historically Possible (Slide 10)…
![CRYPTO BLAST (Grider): Raising Outlook $40K: Bitcoin Reaches Target But Upside Remains](https://cdn.fsinsight.com/wp-content/uploads/2020/12/image6.png)