Bitcoin - The bull run's first domino falls

The first domino of the bull run has fallen. U.S. companies will soon be able to account for their Bitcoin holdings at their fair value.

FASB Approves Bitcoin

Highly anticipated accounting rules have been unanimously passed by the Financial Accounting Standards Board (FASB). Companies holding Bitcoin will soon be able to report their holdings at their fair value, using ‘Fair value accounting.’ Here’s the explanation.

Bitcoin is currently considered by accountants as an intangible asset. This category includes things like trademarks, patents, etc. In other words, things that are rarely traded and whose value seldom fluctuates.

Unfortunately, while Bitcoin’s depreciation must be accounted for, the same is not true for its appreciation… Losses count, but gains do not!

Gains can only be recorded after the sale of Bitcoin. This poses a problem for companies like MicroStrategy that have no intention of parting with their holdings. Hence, the letter from MicroStrategy’s CFO to FASB last May. Andrew Kang wrote:

“Fair value accounting would enable us to provide investors with a more relevant view of our financial condition and the economic value of our Bitcoin holdings. This would facilitate investors’ ability to make informed investment decisions.”

MicroStrategy CEO Michael Saylor expressed his satisfaction at being heard:

“Bitcoin will soon be accounted for at its fair value. This FASB accounting rule update removes a major obstacle to the adoption of Bitcoin by companies as a treasury asset.”

This rule will take effect in December 2024. However, FASB has agreed that multinational corporations will have the option to apply them earlier.

Domino Day

The first domino we talked about in July has fallen. The next one will be the halving. In other words, the Bitcoin supply will be cut in half starting next May.

Exactly 3.125 bitcoins will be created every ten minutes, down from the current 6.25 bitcoins. Anticipation of this supply shock has always triggered bull rallies in the past.

Previous Bitcoin halving events have coincided with bull markets ramping up.

But will the macro conditions be ripe for that next year in May?

~ If we are past the initial shock of a recession.
~ If a spot BTC ETF is approved.
~ If QE is back on the menu.

Then the planets will… pic.twitter.com/g5dEEKiSMF

— ecoinometrics (@ecoinometrics) September 6, 2023

Other dominoes must fall for a complete alignment of the stars in favor of a new record above $100,000 for a Bitcoin. The first of these is the famous ETF.

It’s no longer a question of if, but when this ETF will come to fruition. The outcome of Grayscale’s lawsuit against the SEC could speed things up, especially now that the giant BlackRock has joined the fray.

Lastly, let’s remember the famous saying from Max Keiser: “You can’t taper a Ponzi.” Just look at the Bank of Japan to see what the future holds on both sides of the Atlantic.

The BoJ holds more than 53% of the public debt (which represents 263% of GDP). The Fed, on the other hand, holds 15%. So, there’s room for maneuver…

The Fed has smaller balance sheet as a percent of GDP than the ECB, BOJ and PBOC.#AnInconvenientTruth pic.twitter.com/WPLCCZw7V2

— Santiago Capital (@SantiagoAuFund) April 10, 2023

If the United States enters a recession in the coming months, some envision that the Fed could bring out its printing press.

Others may argue that the current rise in oil prices makes this scenario unlikely. However, nothing prevents the Fed from printing money while keeping its rates high, especially as Saudi Arabia is divesting from US debt…