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Is the Bitcoin Bull Run Over?

Posted on by The INO.com Team

Bitcoin (BTC) prices recently surged above the $52,000 mark, pushing its market capitalization back over $1 trillion for the first time since December 2021. The rally in the prices of the flagship cryptocurrency is due to anticipation building around the impending 'Bitcoin Halving' in April this year and the sustained inflow of USD into spot Bitcoin exchange-traded funds (ETFs).

Primary Drivers Behind Bitcoin’s Price Increase

Spot bitcoin ETFs are driving BTC’s recent surge. In January 2024, the U.S. Securities and Exchange Commission (SEC) approved the listing and trading of 11 spot bitcoin exchange-traded product (ETP) shares after years of repeated rejections.

Bitcoin ETFs recorded another strong week, with net inflows exceeding $2.2 billion from February 12 to 16. As per Bloomberg analyst Eric Balchunas, the combined volume was higher than inflows received by any other among the 2,400 ETFs available in the U.S.

According to data from BitMEX Research, BlackRock’s iShares Bitcoin Trust (IBIT) received the most capital, accumulating positive flows of $1.6 billion over the last week. “$IBIT alone has taken in $5.2b YTD, which is 50% of BlackRock’s total net ETF flows, out of 417 ETFs,” stated Eric Balchunas.

Among the spot Bitcoin ETFs holding billions of dollars in assets, Fidelity Advantage Bitcoin ETF (FBTC) witnessed considerable inflows, amassing $648.5 million from February 12 to 16. The Ark 21Shares Bitcoin ETF (ARKB) gathered around $405 million in the same period, while the Bitwise Bitcoin ETP Trust (BITB) garnered $232.1 million in capital inflows.

However, outflows from the Grayscale Bitcoin Trust (GBTC) are hampering the combined performance of the other newly approved spot Bitcoin ETFs. Between February 12 and 16, the fund saw withdrawals of around $624 million. Since its conversion from an over-the-counter product to a spot ETF on January 10, Grayscale’s fund has witnessed more than $7 billion in capital outflows.

The other new ETFs are majorly driving Bitcoin’s recent price gains. The cryptocurrency is up approximately 91% in the past four months, ending on February 15.

Also, growing anticipation around a cryptic-sounding event known as “the halving,” which is to take place on April 19, 2024, is one of the primary drivers behind Bitcoin’s surge. The “halving” is a feature in Bitcoin’s protocol that automatically reduces the rate of Bitcoin production. Generally, it pushes the price of bitcoin higher.

The price rise of the world’s largest cryptocurrency was also buoyed by expectations of interest rate cuts later this year as inflation eases.

Google Trends Show a Decline in Bitcoin Interest

Recently, Bitcoin’s price jumped above the $52,000 mark; however, fascination with cryptocurrency seems to be diminishing. Google Trends data suggests a subdued level of interest, with the search term “bitcoin” scoring just 36 out of 100 in global metrics over the last 90 days.

That is a sharp contrast to the excitement seen about three years ago when Bitcoin first exceeded the $50,000 level, with Google Trends showing a score of 71 out of 100 for the search term “bitcoin” during that period.

Even with the introduction of spot bitcoin ETFs on January 11 this year, the search term “bitcoin” on Google Trends peaked at a score of 100. But since then, there has not been a significant surge in interest, with the search term “bitcoin” being steady at a score of 36 out of 100.

Despite high valuation, the declining fascination with bitcoin suggests a potential consolidation and maturation of the crypto market, where investors are more cautious in their approach or a shift in the public’s focus. While institutional investors have entered the scene, retail investors appear less engaged.

To regain the attention of the retail crowd, Bitcoin might need to surge to even greater heights.

Future Of Bitcoin Price Trajectory

The recent surge of Bitcoin to levels not witnessed in more than two years has sparked debate among analysts on the sustainability of the upward momentum. While some analysts expect this rise to be followed by a correction, others believe the bull run will continue.

According to Swissblock analysts, Bitcoin may signal a correction in the short term. Analysts wrote that the momentum of Bitcoin, which has paused at the key resistance mark of $52,000 following a recent rapid ascent of nearly 33% over the past few weeks, could indicate “a pullback” as they consider the increase potentially unsustainable.

Despite a short-term dip, Swissblock analysts added that any forthcoming pullback could be a buying opportunity if BTC holds its support near the $47,500 level. The report advises investors to consider any correction as a potential entry point for long-term positions.

Despite warnings of a potential correction, some analysts continue to be positive about Bitcoin’s future trajectory. 10x Research analysts expect a price target of $57,500 for the next surge, indicating that the uptrend in BTC could continue beyond the current resistance level.

10x Research analyst Markus Thielen has an optimistic outlook on Bitcoin, arguing that its solid liquidity and rising demand for Bitcoin futures could push its price to $57,500. He cited historical patterns before previous block reward halvings as supporting evidence for further upside potential.

In addition, institutional cryptocurrency exchange FalconX observed “extraordinary” trading volumes supporting the uptrend in early 2024, like those seen during the March 2024 regional banking crisis.

FalconX analysts also noted that historically low volumes after price increases have sometimes indicated false breakouts in crypto markets, but liquidity conditions around the January rally have generally remained strong.

Bottom Line

In January this year, the Securities and Exchange Commission finally approved 11 spot bitcoin exchange-traded funds to start listing and trading on U.S. exchanges. The growing success of U.S. spot bitcoin ETFs turned investor sentiment more optimistic, allowing Bitcoin to exceed the $52,000 level, marking the first time it has hit this price since late 2021.

Also, the value of all the bitcoin in circulation, or market cap, grew above $1 trillion after the price surge.

According to Nigel Green, Founder and CEO of deVere Group, the introduction of the spot Bitcoin ETFs provides a new avenue for institutional investors to cautiously enter the cryptocurrency market, representing a significant step toward broader adoption and acceptance.

“This approval by the financial regulator of the world’s largest economy is a landmark moment for bitcoin and the wider crypto market and boosts prices in the long-term, even if there’s a sell-off in the near-term,” said Green. “The approval of bitcoin ETFs represents a resounding institutional validation of the cryptocurrency, marking a departure from its initial reputation as a speculative and volatile asset.”

Further, Bitcoin prices are strengthened by the upcoming “halving,” the supply-restricting event written in Bitcoin’s code that occurs every four years and is set for April 2024.

The recent introduction of spot bitcoin ETFs signifies a major development in the integration of bitcoin into mainstream investment options, possibly attracting a wider array of investors beyond conventional crypto enthusiasts.

But the relatively muted response to bitcoin’s increased value, as indicated by Google Trends data, suggests that the crypto market might be transitioning into a more mature and consolidating phase, wherein investors exercise more caution and discernment.

The drastic shift in sentiment could point toward an evolving landscape for cryptocurrencies, where factors beyond price appreciation play a more substantial role in market dynamics and investor behavior.

Amid declining public interest, investors grappling with the decision to wait or sell bitcoin should consider their risk tolerance, investment horizon, and market outlook. Staying informed, implementing risk management techniques, and diversifying one’s portfolio can help navigate the dynamic cryptocurrency market.

Investors should stay abreast of cryptocurrency news, regulatory developments, and market sentiment, which can provide insights into future trends and potential catalysts for price movements. Also, it is advisable to keep an eye on institutional interest and adoption, which can help gauge the long-term potential of Bitcoin.

Can These 2 Natural Gas Stocks Heat up Your Portfolio This Winter?

Posted on by The INO.com Team

During the winter months, energy prices typically experience favorable conditions due to increased heating demand in colder weather, which widens the gap between supply and demand. The use of natural gas tends to reach its peak at the beginning of the winter season as households and office buildings turn to heaters.

The Energy Information Administration (EIA) raised U.S. natural gas consumption estimates by 230 MMcf/d to 93.28 Bcf/d for the fourth quarter of 2023 and by 240 MMcf/d to 104.22 Bcf/d for the first quarter of 2024.

Colder U.S. Conditions Drive Energy Prices Higher

Natural gas prices yesterday added to Tuesday’s gains and reported a 4-week high. Gas prices surged Wednesday on forecasts for colder U.S. temperatures, which would drive heating demand for natural gas. Forecaster Maxar Technologies said that a storm next week will bring wintry conditions to the nation’s eastern half and snow in the Midwest from June 8 to June 12.

On the other hand, the U.S. Climate Prediction Center stated that there is a greater than 55% chance the present EI Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on gas prices. As per AccuWeather, El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.

Last Thursday’s weekly EIA report was bullish for natural gas prices as natural gas inventories for the week ended December 22 declined by 87 Bcf to 3,577 Bcf, a larger draw than expected 79 Bcf decline; however, less than the 5-year average draw of – 123 Bcf.

As of December 22, natural gas inventories were up 12.1% year-over-year and 10% above their 5-year seasonal average, signaling adequate gas supplies.

Record U.S. Oil and Gas Production and Exports

Winter weather can be a significant tailwind for natural gas prices, with colder temperatures more supportive of heating demand, particularly from residential and commercial segments. But with high gas inventories, a price rally may not persist this winter.

U.S. oil and gas production has grown at a much faster pace, offsetting most of the OPEC+ efforts to push up energy prices by coordinated supply cuts.

Earlier, various OPEC+ oil producers announced voluntary production cuts totaling 2.2 million barrels per day (bpd) for the first quarter of 2024. Leading the cuts is OPEC's kingpin and the world’s biggest crude exporter, Saudi Arabia, which extended a voluntary oil output cut of 1 million bpd, priorly intended by the end of December 2023.

The U.S. is currently producing more than 13 million bpd of crude oil and is headed to a continued increase in the short and medium term. According to data from the EIA, U.S. output hit a new monthly record of 13.252 million bpd in September 2023 and kept the pace at 13.248 million bpd in October. As a result, the country’s crude oil exports also surged.

Meanwhile, U.S. LNG exports are breaking records. The U.S. exported more LNG during the first half of 2023 than any other nation, the EIA reported earlier this year. The average LNG exports during this period were 11.6 billion cubic feet per day (Bcf/d), up 4% from the first half of 2022. Also, October 2023 witnessed record LNG shipments, as per EIA data.

2 Natural Gas Stocks Which Could Benefit from Strong Winter Demand

With a $40.35 billion market cap, Cheniere Energy, Inc. (LNG) is an energy infrastructure company that mainly engages in liquified natural gas (LNG) related businesses in the U.S. The company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana and the Corpus Christi LNG terminal near Corpus Christi, Texas.

In addition, Cheniere Energy owns the Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with several interstate pipelines and operates the Corpus Christi pipeline, a 21.5-mile natural gas supply pipeline interconnecting the Corpus Christi LNG terminal with various interstate and intrastate natural gas pipelines.

On November 29, 2023, LNG and Cheniere Energy Partners, LP (CQP) announced that Sabine Pass Liquefaction Stage V, LLC entered a long-term Integrated Production Marketing (IPM) gas supply agreement with ARC Resources U.S. Corp., a subsidiary of ARC Resources Ltd. (ARX), a prominent natural gas producer in Canada.

Under the IPM, ARC Resources agreed to sell 140,000 MMBtu per day of natural gas to SPL Stage 5 for 15 years, commencing with commercial operations of the first train of the Sabine Pass Liquefaction Expansion Project. This deal will allow Cheniere to deliver high quantities of Canadian natural gas to Europe.

“We are pleased to build upon our existing long-term relationship with ARC Resources, and further demonstrate Cheniere’s ability to construct innovative solutions that help meet the needs of customers and counterparties along the LNG value chain while delivering value to our stakeholders,” said Jack Fusco, Cheniere’s President and CEO.

On November 2, LNG’s subsidiary, Cheniere Marketing, LLC, entered a long-term liquified natural gas sale and purchase agreement (SPA) with Foran Energy Group Co. Ltd, a leading natural gas company based in China.

Under the SPA, Foran will purchase nearly 0.9 mtpa of LNG for 20 years from Cheniere Marketing on a free-on-board basis for a purchase price indexed to the Henry Hub price, plus a fixed liquefaction fee. Deliveries will commence upon the start of commercial operations of the second train of the SPL Expansion Project in Louisiana.

Also, on October 30, Cheniere’s Board of Directors declared a quarterly cash dividend of $0.435 ($1.74 annualized) per common share, up nearly 10% from the previous quarter, paid on November 17, 2023, to shareholders of record as of the close of business on November 9, 2023. The dividend increase reflects the company’s commitment to return enhanced value to its shareholders.

LNG’s trailing-12-month gross profit margin of 86.74% is 83.3% higher than the 47.32% industry average. Likewise, its trailing-12-month EBITDA margin and net income margin of 85.84% and 50.83% are considerably higher than the industry averages of 34.76% and 13.93%, respectively.

Furthermore, the stock’s trailing-12-month ROTC and ROTA of 41.15% and 29.82% favorably compared to the respective industry averages of 9.30% and 7.49%.

In the third quarter that ended September 30, 2023, LNG reported total revenues of $4.16 billion, while its LNG revenues came in at $3.97 billion. Its income from operations was $2.76 billion, compared to a loss from operations of $3.02 billion in the previous year’s quarter.

Also, the company’s net income attributable to common stockholders came in at $1.70 billion, or $7.03 per share, compared to a net loss attributable to common stockholders of $2.39 billion, or $9.54 per share in the prior year’s period, respectively.

During the quarter, the company generated a distributable cash flow of approximately 1.2 billion. As of September 30, 2023, Cheniere’s cash and cash equivalents stood at $3.86 billion, compared to $1.35 billion as of December 31, 2022.

For the full year 2023, the management expects consolidated adjusted EBITDA to be between $8.30 and $8.80 billion. The company’s distributable cash flow is projected to be in the range of $5.80-$6.30 billion.

CEO Jack Fusco commented, “Persistent volatility in commodity markets continues to reinforce the value of our commercial offering and the stability and visibility of our cash flows, and we are confident in achieving full year 2023 results at the high end of our guidance ranges.

“Looking ahead to 2024, construction on Corpus Christi Stage 3 continues to progress ahead of plan, and I am optimistic first LNG production from Train 1 will occur by the end of 2024,” Fusco added.

Analysts expect LNG’s EPS for the fiscal year (ended December 2023) to increase 519.5% year-over-year to $34.94. Further, the company’s EPS is expected to grow 23.3% per annum over the next five years. Moreover, Cheniere topped the consensus EPS estimates in all four trailing quarters, which is impressive.

Shares of LNG have surged more than 10% over the past six months and approximately 20% over the past year.

Another stock, Pioneer Natural Resources Company (PXD), could benefit from solid natural gas demand during the winter season. PXD operates as an independent oil and gas exploration and production company in the U.S. It explores for, develops, and produces oil, natural gas liquids (NGLs), and gas. The company has operations in the Midland Basin in West Texas.

During the third quarter of 2023, Pioneer’s continued operational excellence in the Midland Basin allowed the company to place 95 horizontal wells on production. More than 100 wells with lateral lengths of 15,000 feet or greater were placed for production during the first three quarters of last year.

In total, the company has more than 1,000 future locations with 15,000-foot lateral lengths in its drilling inventory.

On November 2, PXD’s Board of Directors declared a quarterly base-plus-variable cash dividend of $3.20 per common share, comprising a $1.25 base dividend and a $1.95 variable dividend. This represents a total annualized dividend yield of nearly 5.4%. The dividend was paid on December 22, 2023, to stockholders of record at the close of business on November 30, 2023.

PXD’s trailing-12-month gross profit margin of 52.23% is 10.4% higher than the 47.32% industry average. Moreover, its trailing-12-month EBITDA margin and net income margin of 48.07% and 26.22% compared to the industry averages of 34.76% and 13.93%, respectively.

Additionally, PXD’s trailing-12-month ROCE, ROTC, and ROTA of 22.32%, 14.57%, and 14.04% are higher than the respective industry averages of 19.99%, 9.30%, and 7.49%. The stock’s trailing-12-month levered FCF margin of 11.96% is 104.1% higher than the 5.86% industry average.

For the third quarter that ended September 30, 2023, PXD’s total production averaged 721 thousand barrels of oil equivalent per day (MBOEPD), near the top end of quarterly guidance. The company’s revenues and other income from the oil and gas segment came in at $3.46 billion. Cash flow from operating activities during the quarter was $2.10 billion, leading to a solid free cash flow of $1.20 billion.

However, the company’s net income attributable to common shareholders was $1.30 billion and $5.41 per share, down 34.4% and 31.8% from the prior year’s quarter, respectively.

As per the updated full-year 2023 guidance, Pioneer increased the midpoints of full-year 2023 oil and total production guidance with ranges of 370-373 MBOPD and 708-713 MBOEPD, respectively. But it decreased drilling, completions, facilities and water infrastructure capital guidance to $4.375-$4.475 billion.

Also, the company lowered full-year 2023 capital guidance for exploration, environmental and other capital to $150 million.

Street expects PXD’s revenue and EPS to decline 19.8% and 30.5% year-over-year to $19.50 billion and $21.25, respectively. But for the fiscal year 2024, the company’s revenue and EPS are expected to grow 14.8% and 8.8% from the prior year to $22.38 billion and $23.12, respectively.

PXD’s stock has gained nearly 12% over the past six months and more than 10% over the past year.

Bottom Line

Colder temperatures prompt households and office buildings to rely more heavily on natural gas as a heating fuel. As a result, natural gas prices witness a surge.

However, with natural gas inventors still above the five-year average, the prices may not witness a sustained rally this winter.

Despite relatively weaker prices, oil and natural gas production will continue to climb, creating ample growth opportunities for energy infrastructure companies. Amid this backdrop, investors could consider adding fundamentally sound energy stock LNG to their portfolio for potential gains.

However, given its mixed last reported financials and bleak near-term outlook, it could be wise to wait for a better entry point in PXD.