bitcoin (BTC-USD) It surpassed $57,000 intraday on Tuesday, the first time the digital asset has reached that milestone in more than two years. The cryptocurrency is up almost 30% so far this year in 2024 alone, ahead of the bitcoin halving event in April.
Benchmark CEO and Senior Research Analyst Mark Palmer joins Yahoo Finance to discuss its long-term strategy. forecasts for bitcoin as cryptocurrency prices rise.
When asked which companies are best positioned to take advantage of the crypto asset, Palmer explains: "I have to go back to MicroStrategy (MSTR) simply because if you look at the correlation coefficient between bitcoin and MicroStrategy, it is 0.94. So if someone can go out and buy bitcoins in the market, that's fine, but many institutional investors in particular don't have the ability to do that based on their mandates, so this offers an attractive alternative and, again, on a leveraged basis. There is also a strong options stack around MicroStrategy and the stock itself is marginal so it can't be hedged effectively with a spot bitcoin ETF, but it can be hedged very effectively with the capital structure around MicroStrategy.
For more expert insights and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's Note: This article was written by nicolas jacobino
Video transcript
BRAD SMITH: Bitcoin... we'll start topping $57,000 this morning for the first time in over two years. We are seeing that it is now trading around $56,811.24 to be exact. The rally was largely attributed to demand for spot Bitcoin ETFs plus investments from MicroStrategy, which raised more than $155 million in Bitcoin in recent weeks.
To learn more about the rally, we turned to Mark Palmer, benchmark managing director and senior research analyst. Mark, it is always a great pleasure to receive some of your ideas and analysis here. In particular, you are focused on MicroStrategy. But if we come together, what we are seeing, because much of the MicroStrategy story now also depends on Bitcoin. What does Bitcoin need to do to achieve some of the goals you have set for MicroStrategy?
PALMER BRAND: Yes. Good to talk to you. Our assumption is that the price of Bitcoin will reach $125,000 by the end of 2025, which as you can see from the stock, the price of Bitcoin had been around $57,000. So that's a big step.
But why are we confident that this will happen and that it will benefit MicroStrategy? Really, it all comes down to supply and demand. As you mentioned, there has been significant demand for Bitcoin since the nine spot Bitcoin ETFs were launched following the approval of that structure by the SEC in January.
It's been amazing in terms of the volumes we're seeing across the board. At the same time, we are approaching a milestone in the Bitcoin ecosystem, the so-called halving, which is scheduled to occur at the end of April.
Approximately every four years, the mining rewards paid to Bitcoin miners are cut in half. This has happened three times in Bitcoin's history in 2012, 2016, and 2020. And in each case, we saw a rally toward the halving, and then a larger rally over the next year and beyond.
This is, again, simply a reduction in new supply. It is really crucial to the mechanism behind Bitcoin, because it controls inflation, which is where Bitcoin is seen as an alternative to the US dollar and other inflationary currencies.
SEAN SMITH: Mark, so you also have early approval, potentially, here. Ether applications, which could be another catalyst for cryptocurrencies. Overall, when we talk about this rally, whether or not it has staying power, what do you think the upside potential is going to look like for some of these cryptocurrencies?
PALMER BRAND: Well, again, in this context we mainly focus on Bitcoin. But we're seeing a setup like we've never seen before. Now I say never seen. The history of Bitcoin only goes back to 2008, 2009. But still, we have seen some massive rallies and pullbacks.
In this sense, we have the confluence of not only the halving, but also one of the biggest tailwinds we have seen in this space, the widespread adoption of cryptocurrency by institutions. And of course, Bitcoin is that rare asset class in that, as far as retail trading goes, it actually led the demand for the first decade of its existence. It's really now that there is an opportunity for institutional investors to come in.
MicroStrategy is one way to do it for institutional investors. Frankly, we see some benefits compared to spot Bitcoin ETFs in that regard, simply because MicroStrategy is still wasting free cash flow from its software business using it to buy more Bitcoin.
It has issued $2.2 billion in debt use. The profits from this will go towards the issuance of Bitcoin. Therefore, it is a unique vehicle in that sense and is not simply a passive investment. It is a company that is actively positioning itself to make a smart leveraged bet on Bitcoin.
BRAD SMITH: Mark, which crypto-related companies, perhaps, or even crypto platform companies based on your analysis in this industry, are best positioned to really capitalize on any upside from this rally within cryptocurrencies?
PALMER BRAND: Well, again, I have to go back to MicroStrategy simply because if you look at the correlation coefficient, the correlation between Bitcoin and MicroStrategy is 0.94.
So if someone can go out and buy Bitcoin on the market, that's fine. But many institutional investors, in particular, do not have the ability to do so under their mandates. Therefore, this offers an attractive alternative and, again, on a leveraged basis.
There is also a solid stack of options around MicroStrategy. And the actions themselves are marginal. Therefore, it cannot be hedged effectively with a spot Bitcoin ETF. You can protect yourself very effectively with MicroStrategy's capital structure.
SEAN SMITH: Alright. Mark Palmer, thank you very much for joining us here this morning. We appreciate your time again. Bitcoin just above $57,000.
