In an appearance on CNBC’s “Fast Money” on March 28, Mark Yusko, the founder and CEO of Morgan Creek Capital Management, shared his thoughts on the cryptocurrency market.
Yusko’s forecast for Bitcoin is notably bullish, predicting a potential rise to $150,000 within the next year. This projection is underpinned by a mathematical model that applies Metcalfe’s Law to determine a fair current value of around $50,000 for Bitcoin. With the imminent halving event (expected around April 20, 2024), which will reduce the reward for mining new blocks, Yusko anticipates an adjustment in Bitcoin’s fair value. He says that unique to this cycle is the additional transaction fees from ordinals and inscriptions, suggesting a post-halving fair value adjustment to $75,000. Yusko believes that historical patterns post-halving indicate a surge in interest and investment, potentially driving the price to double its fair value, culminating in the $150,000 target.
According to a report by The Daily Hodl, he said:
“So we look at the fair value today from the Metcalfe’s Law model… that gives us around $50,000. The halving occurs in three weeks. What a halving does is it cuts the block rewards, the amount of money that’s given to the miners to secure the network. If those rewards were to get cut in half, as they do, many of the miners would struggle. So historically what has happened? The price rises, the fair value rises. So that would push it to $100,000.
“But this time it’s a little different in that instead of just block rewards, we get transaction fees because of ordinals and inscriptions. So let’s say the fair value only goes to $75,000 this time. Then post-halving you get a lot of interest in the asset, a lot of people FOMO (fear of missing out) in and we normally go to about two times fair value in the cycle … So in the last cycle fair value was $30,000, we got to as high as $69,000. This time, I think probably two times because there’s less leverage. So that gets us to $150,000.“
Yusko elaborates on the mechanics expected to fuel this price surge. According to Yusko, the upcoming halving will slash the daily supply of new coins from 900 to 450, concurrently with an anticipated increase in demand, partially driven by the US-listed spot Bitcoin ETFs. This imbalance between supply and demand is projected to escalate the price. Yusko envisions a more exponential growth towards the end of the year, with historical trends suggesting a peak around nine months post-halving, likely aligning with the holiday season.
While Bitcoin remains the focal point of Yusko’s analysis, he also delves into other aspects of the crypto ecosystem. He mentions the impact of regulatory challenges on the market and highlights his interest in mining companies and chip makers like AMD and Nvidia. Despite high valuations in these areas, Yusko sees significant potential.
At Morgan Creek Digital, the emphasis is on investing in private companies within the crypto sector, with liquid tokens comprising a smaller portion of their portfolio. Beyond Bitcoin, Yusko is optimistic about the prospects of Ethereum, Solana, and Avalanche, among others. Despite Bitcoin’s dominance and its characterization as a superior form of digital gold, he believes in the exponential growth potential of smaller projects.
Yusko reveals Morgan Creek Digital’s approach to investment in the crypto space, aligning more with a venture capital model than active trading. Their strategy predominantly involves long-term holding, though they strategically exit positions in response to specific developments, as seen in their handling of Solana and Coinbase stock.
