Yasuo Matsuda, Senior Analyst of Rakuten Wallet, talks about Bitcoin's scenario up to 2025

Bitcoin prices are influenced by the balance of supply and demand and uncertainty about fiat currencies.

In an exclusive interview with our magazine, a "Bitcoin market expert" who has accurately predicted the price of Bitcoin many times talked about the trends and price predictions of the cryptocurrency market up to 2025.

Currently, the cryptocurrency market is booming, led by Bitcoin, but how do you think it will progress in the future?

Matsuda Yasuo (hereinafter Matsuda): The price of Bitcoin has risen significantly since the launch of the spot Bitcoin ETF this year, but I think that more institutional investors will enter the market and the handling will expand regionally in the future.

For now, the market this year is influenced by the movement of spot Bitcoin ETFs. About 220,000 BTC of Bitcoin has been purchased through ETFs in the past three months (at the time of the interview).

In response, 80,000 BTC of Bitcoin has been issued. This difference of 140,000 BTC, or about 1.4 trillion yen, is the reason why Bitcoin has risen significantly in price because demand exceeds supply.

And what is noteworthy is who was buying this Bitcoin ETF. It was expected that the introduction of the ETF would lead to an increase in the participation of institutional investors, but in the first three months, it turned out that the majority of purchases were made by individual investors.

These individual investors are mainly from the so-called "baby boomer generation." As we enter an era of unstable value of fiat currency, Bitcoin is beginning to be recognized as digital gold not only by young people who are tolerant of new technology, but also by those who have been skeptical until now.

Institutional investors have also begun to allocate part of their portfolios that were formed with traditional assets, but I think their movements are just beginning. Institutional investors make investment decisions after carefully considering an exit strategy for how to sell assets as smoothly as possible, just as they do when purchasing assets.

Therefore, when a new product such as a spot Bitcoin ETF is released, they tend not to jump on it immediately, but to carefully check the track record before entering.

After that period, it is said that the number of institutional investors entering the market will increase in the second half of this year, about six months after the introduction of the Bitcoin spot ETF.

Seeing the success of Bitcoin ETFs in the United States, other countries are not just sitting idly by. In April, a cryptocurrency spot ETF was also approved in Hong Kong, and this trend will continue to spread in the future.

In this way, the base of Bitcoin investors will continue to expand between generations, from young people to baby boomers, in terms of investment entities, from individuals to corporations, and between regions, such as the United States, Asia, and Europe.

What do you think are the factors that are attracting demand for spot Bitcoin ETFs at this time?

Matsuda: There may be a supply and demand balance due to Bitcoin's halving, but I think the current distrust of fiat currencies and the move away from the dollar are also factors.

Looking back, the Nikkei average, Bitcoin, and gold all hit their all-time highs at almost the same time. As you can see from the rise in real estate prices, I think this is the result of many people moving to hedge their risks due to concerns about the relative decline in the value of fiat currencies.

It's still fresh in our memory that Bitcoin hit its highest value from 2020 to 2021, triggered by global monetary easing. The situation is essentially similar to the time when the value of fiat currencies became unstable due to monetary easing.

Please tell us if there are any factors that could have a positive effect on market trends in the future.

Matsuda: First of all, the US recession and interest rate cuts could have a positive effect. These are also related to the depreciation of fiat currency, which is one of the motivations for buying Bitcoin.

Lowering interest rates will reduce the incentive to hold US dollars, so I think this could be a major buying factor. However, there is one thing to be careful of, as many people are mistaken about the speculation surrounding interest rate cuts.

What do you mean by misunderstanding?

Matsuda: People often discuss employment statistics and economic trends as factors for deciding on interest rate cuts, but the Fed (Federal Reserve Board) is not using these as a reason to cut interest rates this year.

For example, when talking about GDP, many people talk not about nominal GDP but real GDP, which removes the effects of price fluctuations.

It should be the same even if you replace it with the policy interest rate, but for some reason many people only focus on nominal interest rates. What the Fed is currently looking at is real interest rates.

If the inflation rate falls, real interest rates rise, which has a negative impact on the economy and employment, so the Fed is looking to cut interest rates at the right time to avoid that situation.

There are various opinions about when the interest rate cuts will begin, with some predicting it will be around June or after the US presidential election, but in your opinion, when do you think they will occur?

Matsuda: Given the political background, it seems unlikely that it will be after the presidential election.

President Trump has publicly stated that he will fire Chairman Powell, so given the chairman's position, he has an incentive to start cutting interest rates before the presidential election.

If we focus only on the political aspect, it is likely that they will begin in September at the latest.

Conversely, are there any factors that could have a negative effect?

Matsuda: At the moment, it's the situation in the Middle East. It is often said that Bitcoin and gold are similar, but their characteristics are slightly different.

Gold is seen as a hedge in times of emergency, but Bitcoin is ultimately a risk asset. In recent years, Bitcoin has been incorporated into portfolios, and this has strengthened its character as a risk asset.

Therefore, its characteristic of being particularly vulnerable to war and conflict is becoming stronger.

When an armed conflict such as war occurs, investors try to protect their assets. What they do at that time is to try to reduce the amount of risk.

The quickest way to do this is to sell assets with high volatility, so Bitcoin is the first to be targeted.

Therefore, the current worst-case scenario is that the current local conflict will spread globally, and if the possibility of this increases, the psychology of "let's reduce the risk a little" will come into play, and Bitcoin will tend to be sold.

Important trends in the US presidential election

What is the most important event to watch in 2024?

Matsuda: It's the US presidential election. In my opinion, "If the Republicans win, buy Bitcoin. If the Democrats win, sell Bitcoin." It depends on which party elects the president, but which party holds the majority in Congress is extremely important as it could completely change the legal position of cryptocurrencies.

What price level do you expect Bitcoin to be at by the end of 2024 and throughout 2025?

Matsuda: There are several scenarios, but I expect that the full-scale price rise will occur in 2025, and that it will rise to around $125,000 to $175,000. In Japanese yen, that would be about 18 million to 25 million yen.

The halving is a Bitcoin-specific topic to watch in 2024. Not just for Bitcoin, but the value of anything is determined by supply and demand.

Everyone knows that the halving will change the supply and demand balance, so the current Bitcoin price is also due to the increased movement to buy in advance.

By the time this magazine is released, the halving will be complete and the situation may be somewhat clear, but it is expected that there will be some selling after the halving this time as well.

However, it is also true that the nature is a little different this time. Marathon Digital, a major US mining company, revealed that its break-even point is $46,000.

At the moment, Bitcoin is around $64,000, which is well above the break-even point. Considering these points, the price rose significantly before the halving due to Bitcoin spot ETFs, so it is possible that selling will calm down compared to past halvings.

However, this does not mean that there will be no dumping at all. Taking into account all kinds of influences, the market will likely be sluggish or in a stalemate for the next six months to a year.

I think that once we get out of this cycle, the price of Bitcoin will start to rise significantly.

The aforementioned forecast price until 2025 is calculated based on the assumption that the price at the time of the halving will be $50,000, and that it will increase 2.5 to 3.5 times from there.

However, due to the influence of Bitcoin spot ETFs, the price was around $64,000 at the time of the halving, so if institutional investors' purchases of ETFs become more active in the future, we believe that an upward revision will be necessary.

Incidentally, we expect the price at the end of 2024 to change significantly depending on the outcome of the aforementioned US presidential election.

Specifically, if the Democrats win, we expect it to be "$50,000 (approx. JPY 7 million) at the end of 2024 and $125,000 (approx. JPY 18 million) by 2025," while if the Republicans win, we expect it to be "$90,000 (approx. JPY 13 million) at the end of 2024 and $175,000 (approx. JPY 25 million) by 2025."

However, considering the Bitcoin spot ETF, we will need to revise the forecast upwards a little more in either scenario.

Please tell us what period of time you think is important for the Bitcoin market going forward.

Matsuda: The biggest factor is the US presidential election, but the tendency for Bitcoin rallies to start six months or a year after the halving is also important to note. It depends on the US policy, but personally, I think the period from November this year, when the presidential election will be held, to around April 2025 will be a period to watch.

If you want to follow altcoins, is Ethereum the only choice at present?

What do you think about the trends of Ethereum?

Matsuda: Personally, I think that Ethereum is the only choice for altcoins to follow as an investment target.

This is because the spot Bitcoin ETF has brought in a new investor base, and Bitcoin itself has become influenced by the trends of the overall financial market.

Taking into account the movements and situations of such investors, Ethereum is currently just barely entering the market as a plus one to Bitcoin.

What do you think about the trends of altcoins overall, excluding Ethereum?

Matsuda: From the perspective of financial market investors, I think Bitcoin and Ethereum are viewed as something different from other altcoins.

This is because they are the top two in terms of market capitalization, but I think there is a reason for this. It is because of the nature of "respecting the original."

What I mean is that most altcoins are improvements on Bitcoin and outperform it in terms of performance, but unless the degree of improvement is dramatic, they tend to be viewed harshly as "Bitcoin imitations."

Therefore, I think that the element required for altcoins that will attract attention in the future is unique "originality." In that sense, Ethereum has overwhelming originality among altcoins.

Also, I think it is of course a good thing to try hard to find the so-called "next Ethereum," but I don't think it is viable as an investment.

Betting on such grass coins is like treasure hunting, so I recommend investing only within your means.

Finally, please tell us if there is something to be aware of when investing in the current cryptocurrency market.

Matsuda: This is something I always say, but the first thing is to "not spend money that you will spend tomorrow." This is not limited to cryptocurrency investments.

On the other hand, the most important thing is to "think carefully about what you are betting on now."

In the case of Bitcoin, you should clarify your stance, such as whether you are expecting its advanced nature or whether you are buying it as an antithesis to fiat currency from the perspective of digital gold.

This will make it easier to consider the timing of buying and selling. Also, I think that thinking about your investment stance once again will be useful for future asset management.

Interview date: April 16, 2024

Profile

◉Yasushi Matsuda

Senior analyst, Rakuten Wallet Co., Ltd.

Majored in international monetary systems at the Faculty of Economics, University of Tokyo. Engaged in sales and trading of foreign exchange and bonds at Mitsubishi UFJ Bank and Deutsche Bank Group. Since 2018, he has been analyzing and forecasting the cryptocurrency market at a cryptocurrency exchange, predicting that it will peak at 8 million yen in 2021 and 5 million yen by the end of the year, which was almost accurate. He has been in his current position since January 2022.