According to a prediction by crypto analyst Timothy Peterson, the price of Bitcoin could surpass 100k.
Peterson is the founder and manager of investments at Cane Island Alternative Advisors, and his analysis starts from the monetary policy of the Federal Reserve of the USA.
Summary
Bitcoin price prediction at 100k
Peterson’s hypothesis is that if yields fall within a range of 6 to 7%, the price of Bitcoin could reach $100,000 by the end of this year, or at the latest by the end of next year’s second quarter.
Peterson indeed considers the US high yield rate an excellent indicator to estimate the future trend of the price of Bitcoin in the medium term, although he did not say how likely he believes a drop below 7% is.
At this moment it is at 7.54%, already significantly lower than the 9.62% of October 2023.
However, it has been consistently above 7% for more than two years, so it does not seem so simple for it to return below this threshold in the short term.
According to Peterson, the price of Bitcoin will not be able to exceed the historical high of 73,800 dollars by the end of 2024 if the US High Yield Index Effective does not fall below 7%.
Bitcoin Price: The underlying dynamics of the 100k forecast
It all depends on the interest rates.
Currently in the USA interest rates are quite high, and everyone expects the Fed to eventually lower them.
Some believe that a first cut is possible as early as September, while others believe that we have to wait for the conclusion of the presidential elections on November 5th to see one.
The fact is that the reduction of interest rates generally leads to a consequent increase in the high yield rate, and since the majority seems to agree on a possible start of rate cuts by the end of the year, Peterson’s prediction is not at all certain.
A reduction in interest rates generally leads to lower returns for investors in safe-haven securities such as bonds and term deposits, prompting them to shift their focus to higher-risk assets, such as Bitcoin.
The situation therefore appears to be quite uncertain, and according to Peterson, it will remain so at least until the early November elections.
The High Yield Index
The ICE BofA Single-B US High Yield Index Effective Yield (BAMLH0A2HYBEY) is a daily index that represents the effective yield of the ICE BofA US Corporate B Index, which is a subset of the ICE BofA US High Yield Master II Index that replicates the performance of US dollar-denominated corporate debt with a rating below investment grade, publicly issued in the US domestic market.
This subset includes all titles with a specific investment grade rating B.
For example, when in March 2020 the financial markets collapsed due to the beginning of the pandemic, this index quickly went from 4.99% to 12.39%, only to drop below 4.5% during 2021 probably thanks to the Fed’s QE.
So when the Fed’s monetary policy is expansionary, this index tends to decrease, while when it becomes restrictive it tends to rise.
Indeed, during 2022 it started to rise again, even reaching above 9.8% in September of the same year.
Since then, it has remained consistently high until November 2023, when it started to decrease a little bit.
In theory, such descent could still be ongoing, but it is very slow.
Actually, to tell the truth, it seems to have stopped in 2024.
The lowest point of this descent was reached at the end of December 2023, at around 7.3%, which is at the same time a figure significantly lower than the peak of 2022, but still decidedly very high compared to the minimum of 2021.
During 2024 it actually rose above 8% in April, but now it has returned close to 7.5%.
Before the possible Fed rate cut in September or November, theoretically it could still go down.
Note that these minimum levels are still the lowest since the High Yield Index Effective rose in 2022.
The relationship with Bitcoin
However, this reasoning does not seem to be in line with what happened in 2023 and in the first months of 2024 to the price of Bitcoin.
Indeed, if in 2022 while BAMLH0A2HYBEY was rising the price of Bitcoin was falling, during 2023 BAMLH0A2HYBEY remained stable for many months, but in the meantime the price of BTC has risen significantly, going from $20,000 to $34,000.
During the November 2023 descent of BAMLH0A2HYBEY, the price of Bitcoin rose, but this rise continued also in February and March 2024, when BAMLH0A2HYBEY remained almost still.
However, in April BAMLH0A2HYBEY rose from 7.38% to 8.04%, and at that moment the price of Bitcoin dropped from $68,000 to $60,000.
Probably the two price increases of BTC occurred while the High Yield Index Effective was not moving were due to factors external to traditional financial markets, and perhaps specifically related to crypto markets.
Now that this momentum seems to have run out, there is once again an apparent inverse correlation between BAMLH0A2HYBEY and the price of Bitcoin.
