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Analysts' Insights

Analysts' Insights

Remain Bullish Bitcoin into Year-End – If Bitcoin stays above $35,500

- by Markus Thielen

Bitcoin has successfully tested the $35,000/$35,500 level which we determine as the key technical level into year-end. As long as Bitcoin stays above this level, we want to be long – even leveraged long through higher beta crypto exposure. This can be Bitcoin miners or simply Ethereum or other Altcoins. Our base case is still $40,000 to $45,000 by Christmas.

Bitcoin Dominance Indicator Signals another push higher for Altcoins

On October 26, Bitcoin’s dominance peaked out at 53.4% and has continued to decline. This shifts the focus towards Ethereum (and other Altcoins). BlackRock registering an Ethereum Trust in Delaware and filing for a spot Ethereum ETF with Nasdaq will continue to keep the attention on Ethereum (and Altcoins). For Ethereum to outperform, this indicator needs to decline again.

Bitcoin proxies: GBTC, MSTR, XRP expensive, while ETH, MARA, COIN, HIVE, IREN cheap

We notice a large divergence between listed Bitcoin (crypto) firms. Bitcoin proxies like Grayscale’s GBTC and MicroStrategy have become expensive as stock investors have no other alternatives right now. This also shows the significance if a BlackRock Bitcoin ETF is approved. Stocks that are cheap are within Bitcoin mining, Coinbase or even Ethereum.

What is expensive? Grayscale’s GBTC has become expensive - SELL

In our 2023 outlook report (published Dec 6, 2022), we expressed a bullish view for GBTC as a large investors could have taken control of this closed-end fund and potentially unlocked $4bn of value. Since the BlackRock Bitcoin ETF filing, the net-asset-value discount has narrowed from -40% to just -11%. Our regression model indicates GBTC is trading expensive relative to Bitcoin.

What is expensive? MicroStrategy has become expensive - SELL

MicroStrategy is often used an indirect way for stock investors to gain Bitcoin exposure. The company owns 158,400 Bitcoins with a value of $4.69bn and an average purchase price of $29,609. When the BlackRock Bitcoin ETF news came out, MicroStrategy traded at a -17% discount to Bitcoin and quickly moved to a +23% premium. Currently at +9% premium, it is time to sell.

Ethereum was +32% overvalued at the Merge, now -24% undervalued - BUY

This bull market has been about a repricing of liquidity as central banks are near the end of their rate hiking cycle and institutional adoption of Bitcoin appears to move forward. Ethereum struggled with a lack of DeFi engagement and minor interest in NFT minting. With a strong correlation to Bitcoin and at a -24%, Ethereum appears to be cheap now.

Marathon undervalued by -56%, previously sufficient discount- BUY

Marathon is the largest Bitcoin mining company and currently trades at a -56% discount to Bitcoin. Similar discounts in mid-2022 and early 2023 saw strong rallies in the shares. The mining company has not been cheaper than currently relative to the price of Bitcoin.

Written by Markus Thielen, Head of Research & Strategy at Matrixport. Author of Crypto Titans.

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Industry views and information shared do not represent Matrixport's position and do not constitute any investment advice.

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