Bull Runs: A Combination of Conditions
Bull runs are similar to wildfires in that they require a specific set of conditions to occur. Just as a wildfire needs a long period of no rain, high temperatures, and high winds at the point of ignition, a bull run needs certain factors to align.
Bitcoin halvings, for instance, cause a drying up of its new supply (similar to no rain). They also draw increased interest in timing Bitcoin market entry (akin to high temperatures). However, to truly ignite a bull run, Bitcoin needs high winds and an ignition event.
The Winds of Change: Bitcoin's ESG Narrative
In the world of Bitcoin, the winds of change are blowing in the form of the Bitcoin ESG (Environmental, Social, and Governance) narrative. This narrative revolves around the impact of Bitcoin on the environment and society.
When the first large ESG Investment Committee backs Bitcoin for ESG reasons, it will serve as the ignition event that could power the next bull run.
The Problem: Soaring Demand for ESG Investments
According to a PwC report, ESG-focused institutional investment is projected to reach $33.9 trillion by 2026. However, the report also highlights a problem: the current demand for solid ESG investments exceeds the available supply.
ESG investors often struggle to find attractive ESG investment opportunities, with 30% of investors expressing difficulty in this regard.
Bitcoin is positioned to address this problem. Here's why:
The Opportunity: Bitcoin's Changing ESG Narrative
In 2023, the tide began to turn for Bitcoin's ESG narrative. Over a period of 53 days from August 1 to September 22, five key events helped change the narrative:
- KPMG Report concludes that Bitcoin supports the ESG imperative (August 1)
- Peer-reviewed research supports the idea that Bitcoin can be good for the environment (August 8)
- Cambridge acknowledges overestimation of Bitcoin energy consumption (August 30)
- Bloomberg Intelligence charts show Bitcoin mining leading decarbonization (September 14)
- Institute of Risk Management concludes that Bitcoin aids in the transition to renewable energy (September 22)
These reports and papers, produced by reputable researchers and organizations, concluded that Bitcoin is net positive as an ESG asset, rather than simply being "not as bad for the environment as we thought."
This changing narrative has the potential to become the high wind that Bitcoin needs to fuel a bull run.
What This Means for ESG Investors
Currently, there is an information asymmetry among ESG investors. The narrative has shifted based on new data, but many ESG investors are unaware of this information. As a result, they continue to believe the old narrative that Bitcoin is net negative for the environment.
When this information asymmetry is blown away by the high winds of the new Bitcoin ESG narrative, the consequences could be significant.
Willey Woo's analysis quantifies the potential impact on Bitcoin's market cap. If ESG investors were to deploy 1% of their 2026 Assets Under Management (AUM) into Bitcoin, the market cap could increase to $2.26 trillion. With a 2.5% deployment, the market cap could reach $3.87 trillion, more than 5 times the current market cap.
Even without considering this feedback loop, a 2.5% ESG deployment could catalyze a Bitcoin price of around $193,000 during a possible 2026 bear market.
It's important to note that these figures are simulations, not predictions. However, given Bitcoin's potential to become a greenhouse negative industry without offsets, it's likely that ESG investors will deploy a significant portion of their AUM into Bitcoin.
The Ignition Event
Confirmation of the changing winds in the ESG narrative came at the 2023 Plan₿ Forum, where the topic "Bitcoin is the World's Best ESG Asset" was discussed. The idea that Bitcoin is a valuable ESG asset has gained traction and support.
Bitcoin has demonstrated its ability to increase renewable energy capacity and reduce methane emissions, making it a timely solution to urgent global needs. In contrast, Ethereum's migration to Proof of Stake no longer addresses these environmental concerns.
Previously, Bitcoiners were on the defensive against ESG attacks, but they have now taken the initiative by sharing fact-based reports and inspiring stories about the positive ESG case for Bitcoin. This strategy has resulted in positive mainstream news coverage outweighing negative accounts by a ratio of 4:1. The 53 days of narrative flips further reinforced the changing perception of Bitcoin's impact.
As the approaching halving further reduces Bitcoin supply and investor interest continues to rise, the conditions are aligning for the ignition spark of large ESG fund deployment into Bitcoin.
ESG = NGU.
Daniel Batten, the founder of CH4Capital, provides infrastructure financing to Bitcoin mining companies powered by vented methane from landfills.
This is a guest post by Daniel Batten. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Frequently Asked Questions
How much of your portfolio should you hold in precious metals
To answer this question we need to first define precious metals. Precious metals refer to elements with a very high value relative other commodities. This makes them extremely valuable for trading and investing. Gold is by far the most common precious metal traded today.
There are also many other precious metals such as platinum and silver. The price volatility of gold can be unpredictable, but it is generally stable during periods of economic turmoil. It also remains relatively unaffected by inflation and deflation.
As a general rule, the prices for all precious metals tend to increase with the overall market. But they don't always move in tandem with one another. When the economy is in trouble, for example, gold prices tend to rise while other precious metals fall. This is because investors expect lower interest rates, making bonds less attractive investments.
However, when an economy is strong, the reverse effect occurs. Investors choose safe assets such Treasury Bonds over precious metals. They are more rare, so they become more expensive and less valuable.
Therefore, to maximize profits from investing in precious metals, you must diversify across multiple precious metals. Furthermore, because the price of precious Metals fluctuates, it is best not to focus on just one type of precious Metals.
How do I open a Precious Metal IRA
First, decide if an Individual Retirement Account is right for you. To open the account, complete Form 8606. To determine which type of IRA you qualify for, you will need to fill out Form 5204. This form should be completed within 60 days after opening the account. You can then start investing once you have this completed. You might also be able to contribute directly from the paycheck through payroll deduction.
If you opt for a Roth IRA, you must complete Form 8903. Otherwise, the process will be identical to an ordinary IRA.
To be eligible to have a precious metals IRA you must meet certain criteria. You must be at least 18 years of age and have earned income to qualify for a precious metals IRA. Your annual earnings cannot exceed $110,000 ($220,000 if you are married and file jointly) for any tax year. Contributions must be made on a regular basis. These rules are applicable whether you contribute through your employer or directly from the paychecks.
You can invest in precious metals IRAs to buy gold, palladium and platinum. However, physical bullion will not be available for purchase. This means you won't be allowed to trade shares of stock or bonds.
Your precious metals IRA can be used to directly invest in precious metals-related companies. This option is available from some IRA providers.
However, there are two significant drawbacks to investing in precious metals via an IRA. First, they don't have the same liquidity as stocks or bonds. This makes it harder to sell them when needed. Second, they don't generate dividends like stocks and bonds. Also, they don't generate dividends like stocks and bonds. You will eventually lose money rather than make it.
Are You Ready to Invest in Gold?
The answer will depend on how many dollars you have saved so far and whether you had gold as an investment option at the time. If you are unsure of which option to invest in, consider both.
Gold is a safe investment and can also offer potential returns. This makes it a worthwhile choice for retirees.
Gold is more volatile than most other investments. Because of this, gold's value can fluctuate over time.
This doesn't mean that you should not invest in gold. This just means you need to account for fluctuations in your overall portfolio.
Another advantage to gold is that it can be used as a tangible asset. Gold can be stored more easily than stocks and bonds. It can also be carried.
As long as you keep your gold in a secure location, you can always access it. You don't have to pay storage fees for physical gold.
Investing in gold can help protect against inflation. Gold prices are likely to rise with other commodities so it is a good way of protecting against rising costs.
You'll also benefit from having a portion of your savings invested in something that isn't going down in value. Gold tends to rise when the stock markets fall.
Another advantage to investing in gold is the ability to sell it whenever you wish. You can easily liquidate your investment, just as with stocks. You don't even have to wait until you retire.
If you do decide to invest in gold, make sure to diversify your holdings. Don't place all your eggs in the same basket.
Don't buy too many at once. Start by purchasing a few ounces. Continue adding more as necessary.
It's not about getting rich fast. Instead, the goal here is to build enough wealth to not need to rely upon Social Security benefits.
Although gold might not be the right investment for everyone it could make a great addition in any retirement plan.
What is the Performance of Gold as an Investment?
The supply and the demand for gold determine how much gold is worth. It is also affected negatively by interest rates.
Gold prices are volatile due to their limited supply. There is also a risk in owning gold, as you must store it somewhere.
Statistics
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
External Links
investopedia.com
cftc.gov
forbes.com
irs.gov
How To
The History of Gold as an Asset
Gold was a currency from ancient times until the early 20th century. It was popular because of its purity, divisibility. uniformity. scarcity and beauty. In addition, because of its value, it was traded internationally. Because there were no internationally recognized standards for measuring and weighing gold, the different weights of this metal could be used worldwide. For example, in England, one pound sterling was equal to 24 carats of silver; in France, one livre tournois was equal to 25 carats of gold; in Germany, one mark was equal to 28 carats of gold; etc.
In the 1860s the United States began issuing American currency made up 90% copper (10% zinc) and 0.942 gold (0.942 pure). This led to a decrease of demand for foreign currencies which in turn caused their prices to rise. In this period, large amounts of gold coin were minted by the United States, which caused the gold price to drop. The U.S. government was unable to pay its debts due to too much money being in circulation. They decided to return some of the gold they had left to Europe.
Many European countries began accepting gold in exchange for the dollar because they did not trust it. After World War I, however, many European countries started using paper money to replace gold. The value of gold has significantly increased since then. Even though gold's price fluctuates, it is still one of the most secure investments you could make.
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By: Daniel Batten
Title: Why The New ESG Narrative About Bitcoin Will Power The Next Bull Run
Sourced From: bitcoinmagazine.com/markets/why-the-new-esg-narrative-about-bitcoin-will-power-the-next-bull-run
Published Date: Fri, 01 Dec 2023 17:00:00 GMT
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