Tag: Bitcoin

MicroStrategy stocks (MSTR) have become a unique market case closely linked to Bitcoin’s performance. But how sustainable is this strategy?

Under Michael Saylor’s leadership, MicroStrategy has transformed its business model to integrate Bitcoin deeply. As the largest corporate holder of Bitcoin, MicroStrategy has created a unique connection between its stock price (MSTR) and the cryptocurrency’s value. This article examines the risks and opportunities of this strategy and evaluates whether the approach can be sustained in volatile markets.

MicroStrategy’s Bitcoin holdings: a bold business model

MicroStrategy holds over 402,000 bitcoins, valued at approximately $38.3 billion. The company finances these purchases through innovative convertible bonds, allowing investors to convert bonds into shares or claim repayment at maturity. This model effectively positions MicroStrategy as a proxy for Bitcoin investments.

Key Highlights:

• Convertible Bonds: These bonds help MicroStrategy raise capital for Bitcoin purchases without direct risk to investors.
• Stock Price Multiplier Effect: Historically, MicroStrategy’s stock price has risen 3–5x relative to Bitcoin’s growth. For example, a 10% BTC increase could lead to a 30%-50% rise in $MSTR.

The link between MicroStrategy Bitcoin holdings and stock value

MicroStrategy’s stock performance reflects Bitcoin’s market trends. As of today, the company holds Bitcoin worth $36 billion, yet its market cap exceeds $83 billion. This multiplier effect makes $MSTR an attractive investment for those seeking leveraged exposure to Bitcoin.

Additionally, MicroStrategy recently announced a $42 billion Bitcoin purchase plan over the next three years, reinforcing its commitment to this strategy.

Risks of MicroStrategy’s Bitcoin strategy

Despite the impressive returns, this model is not without vulnerabilities. Below are the primary risks:

1. Interest Rate Sensitivity: Rising inflation and interest rates could make financing through bonds more expensive.
2. Bitcoin Price Drops: A significant BTC downturn could rapidly devalue $MSTR shares. For instance, a 10% BTC decline might trigger a 30%- 50% drop in MicroStrategy’s stock price.
3. Unsustainable Debt: Failure to meet stock price targets could compel MicroStrategy to repay bondholders in cash, requiring it to liquidate Bitcoin holdings.
4. Market Impact: Forced sales of Bitcoin could further depress BTC prices, creating a negative feedback loop that affects MicroStrategy and the broader crypto market.
5. Systemic Risk: MicroStrategy holds 1.84% of all Bitcoins, and its collapse could destabilise the cryptocurrency ecosystem.

Can MicroStrategy trigger a crypto market collapse?

While an extreme scenario where MicroStrategy triggers a crypto market crash is conceivable, it remains unlikely. Bitcoin has become a resilient asset, and even if MicroStrategy faced significant challenges, the cryptocurrency market is robust enough to weather the storm.

In a more plausible scenario, MicroStrategy might experience a steep stock price decline without needing to liquidate its Bitcoin reserves. However, this would still serve as a cautionary tale for heavily leveraged strategies tied to volatile assets like Bitcoin.

Conclusion

MicroStrategy’s Bitcoin holdings strategy offers a high-risk, high-reward opportunity. For investors, $MSTR provides leveraged exposure to Bitcoin’s performance, but it also carries risks tied to market volatility and financial obligations. While the company’s bold approach has yielded impressive returns, potential vulnerabilities warrant careful consideration.

Bitcoin’s value might not hinge on MicroStrategy, but the inverse could hold true: MicroStrategy’s fate is deeply tied to Bitcoin.

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The latest Bitcoin news reveals that Senator Cynthia Lummis has proposed converting part of the USA’s gold reserves into BTC.

In recent days, the cryptocurrency landscape has been shaken by not only a dramatic price surge but also by significant news concerning Bitcoin, primarily from the United States. Wyoming Senator Cynthia Lummis has introduced a bill proposing the conversion of a portion of the U.S. gold reserves into Bitcoin.

If approved, this initiative could mark a historic shift in the economic and financial trajectory of the United States and the world.

A New Era for State Reserves

Senator Lummis’ proposal aims to create a “Strategic Bitcoin Reserve” for the United States by converting a fraction of the country’s vast gold reserves into BTC. Currently, the United States holds the largest gold reserves in the world, totaling over 8,000 metric tons. Germany ranks second with 3,352 tons, followed by Italy with 2,452 tons.

According to the latest financial report by the Bureau of the Fiscal Service, the U.S. holds approximately $5.4 trillion in assets, while liabilities amount to $42 trillion. Of this, $26.5 trillion represents public debt and its associated interest. Lummis’ proposal includes the accumulation of 1 million BTC for 20 years, aiming to support the dollar against its gradual and inevitable devaluation.

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A strategic Bitcoin reserve: Trump’s vision

The bill, widely discussed in Bitcoin news outlets, comes months after former U.S. President Donald Trump announced his intention to establish a “Strategic Bitcoin Reserve” to strengthen the country’s financial position. During his campaign, Trump accepted cryptocurrency donations, participated in Bitcoin 2024—the world’s premier cryptocurrency conference—and pledged to make the United States a global leader in blockchain technology.

Additionally, Trump has stated plans to dismiss Gary Gensler, the current chairman of the Securities and Exchange Commission (SEC), known for his regulatory stance against cryptocurrencies.

A historical parallel: Bretton Woods

This proposal recalls 1971, when the United States abandoned the Bretton Woods Agreement, effectively ending the gold standard. The introduction of a Strategic Bitcoin Reserve could serve as a “third chapter” in the Bretton Woods saga, established in 1944, heralding a new era in global monetary history.

It’s worth noting that since the abandonment of Bretton Woods in 1971, the U.S. dollar has lost approximately 98% of its value. Establishing an alternative asset or store of value to support the dollar might be necessary.

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A global influence

The U.S. proposals are already impacting other nations. In Poland, Sławomir Mentzen, a candidate in the 2025 presidential elections, has pledged to create a Strategic Bitcoin Reserve if elected. A long-time cryptocurrency advocate, Mentzen revealed that he invested all his savings in Bitcoin in 2013, showcasing his confidence in its potential.

These recent political initiatives in the United States and Poland indicate the growing acceptance of Bitcoin as a state-level store of value. If implemented, these proposals could mark a turning point in global economic history, redefining the role of cryptocurrencies in the international financial system.

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What is a Bull Market and Altseason?

Navigating a crypto bull market and altseason can be both exhilarating and challenging for investors. Historically, these cycles have presented significant opportunities, but managing these favourable moments isn’t easy. This guide offers practical strategies to help you approach the bull market and altseason, helping you avoid common pitfalls driven by emotions such as greed and unchecked optimism.

Before diving in, note that while we reference historical data, past events may not replicate exactly in future cycles.

When do Bull Markets and altseasons begin?

Determining when a bull market or an altseason begins takes a lot of work. Typically, each cycle starts with Bitcoin’s price moving upwards, sparking widespread predictions. However, understanding the timing of a market cycle is often more valuable than chasing arbitrary price targets.

Key indicators to monitor include Bitcoin dominance, which reflects BTC’s market weight relative to other cryptos, and the ETH/BTC ratio, which compares Bitcoin’s performance to Ethereum. Another essential metric is the time elapsed since the last Bitcoin halving event, which often correlates with shifts in market phases.

The crypto market cycle and the role of Bitcoin halving

The crypto market cycle is closely tied to Bitcoin’s halving events, which occur approximately every four years. Halving halves the mining rewards, effectively reducing BTC’s supply growth. Each halving has historically set off a new cycle, usually lasting about 1,000 days. Peaks generally occur a year after the previous all-time high (ATH).

Bitcoin’s market cycles usually follow this structure:

• Bull Market: A prolonged upward trend, with BTC leading initially.
• Altseason: Often a sub-phase within a bull market where alternative cryptocurrencies, or “altcoins,” outperform Bitcoin.

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Key phases of a Bull Market

Everyone now knows that we are in a bull market. The price of BTC has just surpassed $90,000 and seems poised to continue rising. However, let’s take a look—drawing on historical data—at the main phases of past bullish cycles.

Phase 1: Bitcoin takes the lead

At the beginning of a bull market, Bitcoin typically absorbs the majority of new liquidity entering the market. Other cryptocurrencies, including Ethereum, often need help keeping up with Bitcoin’s explosive gains.

Phase 2: Ethereum gains momentum

Once Bitcoin’s price stabilises or reaches a local peak, liquidity matures into Ethereum. This marks the beginning of Ethereum’s outperformance relative to Bitcoin, often accompanied by gains in promising altcoins.

Phase 3: altseason begins

As Ethereum gains traction, confidence in higher-cap altcoins rises, igniting altseason. In recent cycles, altcoins with lower market capitalisations have experienced significant price increases during this period, driven by a renewed interest in diversifying beyond Bitcoin and Ethereum.

During the last bull market, the undisputed standouts were Solana (SOL), which rose by +1,200% from May to November 2021, and Avalanche (AVAX), which increased by +1,500% from June to December 2021.

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Phase 4: altseason peaks

The end of altseason often coincides with high-risk, explosive price movements in smaller, less established cryptocurrencies. This period is high in FOMO (fear of missing out) and requires caution. Once prices start to decline, it may signal the end of the bull market, and holding riskier assets can lead to substantial losses.

Why Ethereum often lags behind Bitcoin early in the cycle

Ethereum’s initial lag behind Bitcoin has become even more pronounced in recent cycles. This disparity is largely due to Bitcoin’s status as the most established and “safer” asset within the crypto space. During the early stages of a bull market, investors typically favour Bitcoin over altcoins, including Ethereum. This preference has been amplified with the launch of Bitcoin spot ETFs by major investment funds, enhancing Bitcoin’s appeal as a lower-risk investment.

A concept called “capital rotation” explains this pattern: initially, liquidity flows into Bitcoin, and as Bitcoin stabilises, investors begin to allocate funds to Ethereum and, later, other altcoins. For this reason, tracking Bitcoin dominance and the ETH/BTC ratio is crucial, as they often provide early signals of altseason onset.

Historical Timeline of Market Cycles

Examining the timing of previous cycles is helpful for effectively managing a bull market and all seasons. While exact patterns don’t repeat, they can offer valuable insights into potential timelines.

2017 Bull Market

• Halving Date: 11 July 2016, BTC price at $650.
• First ATH Post-Halving: 225 days later, on 21 February 2017, at $1,115.
• Peak ATH: 297 days after halving, on 15 December 2017, at $19,000.
• Overall Return: Approximately +2,800% from ATH to ATH.

2020 Bull Market

• Halving Date: 11 May 2020, BTC price at $9,000.
• First ATH Post-Halving: 216 days later, on 13 December 2020, at $19,200.
• Peak ATH: 330 days post-halving, on 8 November 2021, at $69,000.
• Overall Return: +259% from ATH to ATH.

2024 Bull Market

• Halving Date: 22 April 2024, BTC price around $65,000.
• First ATH Post-Halving: 195 days later, on 5 November 2024, BTC reached $80,000.
• Speculative Projection: Bitcoin might reach the peak ATH for this cycle around September 2025 if history repeats.

Ethereum’s Timeline

Ethereum, launched in 2015, has less historical data, but in the previous bull market, it exceeded its ATH from January 2018 to January 2021. If the pattern holds, Ethereum could reach a new ATH soon.

Conclusion 

A disciplined approach to timing and strategy can be a significant advantage during bull markets and altseasons. Remember that while the crypto market tends to follow cyclical patterns, these cycles don’t guarantee identical outcomes. Tracking market indicators like Bitcoin dominance and the ETH/BTC ratio can be instrumental in spotting the onset of altseason. However, as the end of the cycle nears, it’s essential to reassess exposure to high-risk assets to avoid potential losses when the market reverses.

Stay mindful of these cycles, adapt strategies accordingly, and remember to balance optimism with caution.

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Donald Trump is the new president of the United States

Donald Trump won the 2024 presidential election and returned to the White House. His decisive victory reflects a clear shift in American priorities, with voters drawn to his tough stance on immigration, expansive economic policies, and a more isolationist foreign policy. Trump will officially take office in January 2025, ready to lead with a strengthened Republican majority in Congress. Here’s a closer look at his win and what his administration could mean for America’s future.

How did Donald Trump win the presidency?

The U.S. electoral system is indirect, meaning American citizens do not elect the president directly. Instead, each state appoints a set of “electors” based on population. With 538 total electors nationwide, a candidate needs a majority—at least 270—to win.

In the U.S., most states operate under a “winner-takes-all” rule, meaning that the candidate who receives the majority of votes in a state claims all its electors (with Maine and Nebraska as exceptions). Key swing states—including Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin—played a critical role in Trump’s victory. Traditionally unpredictable, these states were ultimately decisive in the election outcome.

The role of swing states in Trump’s victory

Until election night, polling showed a close race, with neither candidate emerging as a clear frontrunner. However, in the early morning, Trump claimed enough swing states to clinch victory. With its 19 electoral votes, Pennsylvania was particularly important, where Trump won by a slim 2% margin. He also secured North Carolina with 51% and Georgia with 50.7%.

Currently, as votes are still being counted in a few remaining states, Trump has a solid lead with 266 electoral votes to Kamala Harris’s 219. He is also leading in other key states, meaning a Trump presidency is almost certain.

Key policies in Donald Trump’s agenda: immigration, economy, and foreign affairs

Now that Trump is set to lead, his platform promises significant changes. Americans voted for a shift in direction, so what does Trump’s agenda entail? His policies have been designed to appeal to a conservative base and are likely to have a broad impact given the Republican majority in Congress. This means he will have substantial freedom to enact his plans, both economically and socially.

Immigration: tighter policies and enforcement

Trump has pledged to take strong action on immigration, a top concern for 61% of Americans. His rhetoric on the campaign trail has been strict, portraying immigrants as a source of crime and economic burden. Trump’s vice president, J.D. Vance, has even suggested that the administration could pursue one of the largest deportation plans in recent history. This policy could lead to a major crackdown on immigration, though Trump will need to consider constitutional protections.

Economy: protectionist policies and crypto-friendly initiatives

On the economic front, Trump has promised protectionist policies, including tariffs aimed at reducing dependence on foreign goods, particularly from China. His approach could lead to what some experts call a “trade war,” potentially impacting international markets and raising prices domestically, which could further strain inflation rates.

Trump’s stance on cryptocurrencies, particularly Bitcoin, has drawn attention. His administration has hinted at using U.S.-held Bitcoin reserves to bolster the national economy and supporting BTC mining in the U.S. The initial market reaction has been positive, with Bitcoin surging to an all-time high of $75,000 following the election news. Some states, like Florida, have already supported Bitcoin, proposing to include it in public pension funds. Other areas, like Michigan and Wisconsin, have begun to invest in Bitcoin ETFs.

Foreign policy: a shift toward isolationism

Regarding international relations, Trump’s foreign policy is expected to take an isolationist approach. He has indicated that he may scale back economic support to Ukraine, potentially destabilising U.S. relations with NATO allies. During Biden’s presidency, the U.S. gave Ukraine approximately $174 billion in aid. Trump’s stance could mean a significant shift, reducing American involvement in global conflicts and focusing on domestic priorities instead.

Trump’s administration has also signalled support for Israel in the Middle East but may reduce the scope of U.S. involvement. His approach could reshape U.S. alliances, especially in Europe, where many countries rely on U.S. support for strategic stability.

What’s next for Trump’s America?

As Donald Trump prepares to re-enter the White House, America is set for substantial changes. His policies on immigration, the economy, and foreign relations reflect a bold vision aimed at strengthening U.S. interests and security, albeit with potential challenges in terms of international diplomacy and market stability.

Stay updated on the latest in U.S. politics and policy changes with Young Platform, where expert insights keep you informed about key developments in America and beyond.

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The FED meeting on 7 November: the US central bank cut rates by 25 basis points. Discover the impact on markets and future rate expectations

The Federal Reserve met on 7 November 2024 to decide on interest rates. Since the FOMC did not meet in October, what happened after the 50 basis point cut in September? Could the combination of Donald Trump’s victory and the reduction in the cost of money further boost the price of Bitcoin?

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Economic indicators are influencing Fed decisions.

Before analysing what happened at the 7 November 2024 FED meeting, it is good to list the economic indicators that the US central bank assesses before deciding on interest rates.

One of the main objectives of the Fed’s monetary policy is to contain inflation. When prices rise excessively, the central bank raises interest rates to curb and stabilise demand. From August to October, the consumer price index (CPI), the main indicator used to estimate inflation, fell 50 basis points to an annual rate of 2.4 %, down from 2.9 %. 

This slowdown in inflation was made possible by the restrictive monetary policies implemented by most Western countries in the past two years. Since, today, the situation seems to be under control, central banks are proceeding with progressive interest rate cuts in order to stimulate the economy after having previously cooled it down.

Employment and, thus, the health of the labour market also plays an important role in the Fed’s decisions. In recent months, the unemployment rate has been stable at around 4.2%, but if it had risen, it would have been necessary to intervene with a tighter plan of interest rate cuts. However, since this did not happen, the Fed could, and probably will, proceed gradually.

Finally, when the Fed decides on interest rates, it also considers Gross Domestic Product (GDP). Excessively fast economic growth may fuel inflation, while weak growth may suggest the need for economic stimulus, such as rate cuts. In October, economic growth in the US slowed, and the Fed responded with a 25 basis point rate cut.

Has the election of Donald Trump affected rates?

The election of Donald Trump did not affect the Federal Reserve’s November meeting, whose decision was in line with expectations on interest rates. Some experts thought that the FED might leave rates unchanged given the new US president’s willingness to apply tariffs on goods from abroad, particularly from China, which might raise inflation again in the future.

However, the majority still expected a 25 basis point cut, which, in fact, happened. Polymarket, the crypto world’s leading prediction market, effectively summarised the consensus view, which, as with the presidential election, guessed correctly.

Gregory Daco, Chief Economist of Ernest Young, one of the world’s leading consulting firms, was also of this view, stating on Wednesday: “Declining inflation and wage and productivity growth should favour a gradual recalibration of the Fed’s monetary policy with a 25 basis point rate cut after the election.”

November 2024 FED meeting: the impact on the market

It is very difficult to estimate the possible impact of the rate cut at the Fed’s meeting on 7 November 2024, mainly because it comes after the two most important days of the year. Wednesday saw the conclusion of the US elections, in which Donald Trump emerged as the winner, who will return to Capitol Hill after the Democratic interlude of the last four years.

Had Kamala Harris won, the situation would probably have been different. Still, the Republicans in power from January onwards will be the ones who have also won a majority in Congress. What has happened and all the promises associated with a new Trump mandate have caused the price of major assets, especially Bitcoin and Tesla shares, to explode upwards. Less than twenty minutes after the opening of the markets, spot ETFs on Bitcoin recorded $1 billion in volume, while on the day of 7 November, the absolute record of capital inflows was $1.38 billion.

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However, the last word has yet to be said. Regarding the crypto world, what happened this week seems to have rekindled the bull market, which was abruptly interrupted in April after the all-time highs (ATH) were reached—historical highs which, again, have been updated in recent hours. Analysing the stock market, one can see that the main indices, above all, the S&P 500 and NASDAQ, have been recording bullish price movements at a very sustained pace for quite some time.

In short, the million-dollar question related to the FED meeting on 7 November is one: will the interest rate cut make the markets rise further, especially Bitcoin? Or will the major assets slow down after the bull run of the last few days?

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