IBIT: We're At The Top (Double Downgrade)

Summary I am downgrading IBIT from strong buy to hold as Bitcoin's major tailwinds are now fully priced in after a 600% surge from the bottom in ￰0￱ leverage and debt-driven corporate buying introduce fragility, making the ecosystem vulnerable to cascading liquidations if prices ￰1￱ computing poses a real, near-term threat to Bitcoin's security, with protocol upgrades likely to be logistically and technically ￰2￱ $114k, remaining upside is limited and risks are underappreciated; I'd rather forgo more gains than risk a sharp drawdown at these levels. Co-Authored by Noah Cox and Brock Heilig Investment Thesis I am lowering my rating on iShares Bitcoin Trust ETF ( IBIT ) from a strong buy to a hold.

A big reason for this double downgrade is because of the fact that Bitcoin’s price has already surged roughly 600% from its cycle low of ~$16k to about $114k, which validated much of my earlier bull case. It’s clear to me that most tailwinds I previously identified - rapid money supply expansion, favorable U. S. policy, and growing institutional adoption - have materialized and now appear fully baked into Bitcoin’s ￰3￱ my last article , I projected a price target of $148k for Bitcoin, assuming another 50-100% ￰4￱ $114k, I believe those catalysts have largely run their course (while not pushing the price of the world’s largest cryptocurrency to the level I had hoped for).

I’ve also noticed that global liquidity conditions, which once propelled Bitcoin, are beginning to shift (Bitcoin’s price is no longer tracking as closely with the increase in the M2 money supply). On top of this, there appears to be growing leverage within the Bitcoin ecosystem, especially debt-driven corporate purchases, which I believe introduces fragility for ￰5￱ has been in a 4 year boom-bust cycle basically since its ￰6￱ fear is that we are at the peak of this cycle. Normally, the adage for Bitcoin would be to hold till the next bull ￰7￱ fear is that this might be the last bull ￰8￱ threats like quantum computing were not central to my prior thesis, but they now cast a really longer-term shadow over Bitcoin’s core ￰9￱ we take into account all of these factors, it means that at $114k per Bitcoin, investors face significant downside if conditions ￰10￱ this, shares are double downgraded from a strong buy to a ￰11￱ I’m Doing Follow-Up Coverage The biggest reason for my follow-up coverage of IBIT is because of what I think are red flags that have risen since the last time I wrote on the Bitcoin ￰12￱ market has shifted from predominantly spot-driven accumulation to heavy debt-funded buying from treasury companies, which changes the risk profile.

On-chain data also suggests that a price slip could trigger cascading liquidations, unlike the earlier, more organic demand ￰13￱ red flag I’ve seen come about is that companies are betting the balance ￰14￱ firms like GameStop, MicroStrategy, Bit Digital, and Block have increasingly financed Bitcoin purchases via ￰15￱ example, GameStop’s $1.3 billion convertible bond issuance in March was a big sign of euphoria, prompting a 25% drop in the company’s stock once risks became ￰16￱ previous article was contingent on the thesis that there were assumed strategic, unlevered Treasury allocations, not this level of corporate ￰17￱ shift from organic to leveraged demand means the easy money from holding Bitcoin (and by extension IBIT) has been made and that further gains would come on borrowed capital and potentially borrowed ￰18￱ Risk One of the best-case studies in Bitcoin’s risk is ￰19￱ company holds over 600,000 Bitcoin - which is nearly 3% of the total ￰20￱ Bitcoin is financed by roughly tranches of convertible bonds and preferred shares that now pay cash dividends .

I wrote about this with Strategy ( MSTR ) but this does not feel ￰21￱ financing has set MicroStrategy up with more than $8 billion in debt and interest obligations that hinge on Bitcoin’s price remaining ￰22￱ shareholders enjoyed ~167% stock gains as Bitcoin rose, a downturn could really hurt the company and trigger a forced sell-off, risking broader market contagion. It’s true that none of the Bitcoin that Strategy in particular is secured to debt, but at the end of the day, if any of their obligations default (such as a convertible bond or preferred stock preferred dividends), that could become a cascading ￰23￱ Digital ( MARA ) is a different ￰24￱ and other miners took high-interest loans secured by Bitcoin or mining rigs to expand ￰25￱ of this, a meaningful Bitcoin decline could lead to distressed collateral ￰26￱ bull markets, leverage acts like rocket ￰27￱ bear markets, it becomes gasoline on a ￰28￱ Hacking Problems Quantum hacking is starting to become a huge threat to Bitcoin’s ￰29￱ relies on the ECDSA (elliptic curve digital signature) algorithm, which conventional computers cannot break (requiring ~ 2^128 operations ).

However, a powerful quantum computer running Shor’s algorithm could solve this in polynomial time (exponentially less time than a classical computer). This means they can derive private keys from public keys within ￰30￱ a Bitcoin address’ public key is revealed, I believe a quantum owned by an attacker will compute the private key and steal ￰31￱ would be devastating for the ￰32￱ concern looks like it will be ￰33￱ have been recent warnings that quantum computing breakthroughs may arrive sooner rather than ￰34￱ May, ￰35￱ Orlova (researcher at Google) suggested error-corrected qubits capable of breaking ECDSA could appear some time between 2027 and 2030 - years earlier than prior ￰36￱ implication is that the Bitcoin ecosystem may need to transition to quantum-resistant algorithms within the next 5-7 years, not ￰37￱ would also show up just as Bitcoin starts its next bull run ￰38￱ could kill the next bull ￰39￱ no new bull run, there is really no long-term reason to own ￰40￱ if we don’t talk about quantum brute force hacking the whole blockchain, core legacy Bitcoin wallets are often ￰41￱ suggest that over 60% of Bitcoin resides in vulnerable addresses from legacy ￰42￱ quantum computers reach critical capability, attackers could (and will) empty wallets using pure mathematics, undermining trust in the ￰43￱ wallets will have to be ￰44￱ is the core ￰45￱ against these quantum attacks requires a fundamental protocol upgrade.

Really, this will be a logistical nightmare (coordinating updates across miners, exchanges, wallets, etc.) There are also technical trade-offs, a timing dilemma, or really (because let's face it) hard fork ￰46￱ about Satoshi Nakamoto’s ￰47￱ the mysterious founder’s wallet is exposed since it used the older “ pay-to-pubkey ” architecture that exposed the wallet's public key during ￰48￱ could be one of the biggest forks in the history of Bitcoin. I really don’t think this will go ￰49￱ proposals indicate that there is a huge chunk of the blockchain that will have to be essentially frozen so that quantum computers don’t hack these wallets and dump this Bitcoin on the open ￰50￱ I believe Bitcoin's recent range of $112k to $124k in recent weeks represents euphoria, which is roughly 7-8x above the bear-market low of $16k.

At $114k, Bitcoin’s market cap is about $2.4 trillion . It's one of the top 10 largest assets on the ￰51￱ cycles show post-peak drawdowns of 70-80%. Treasury companies could be the catalyst that kicks off that downside. Bitcoin’s price is closely tied to the global M2 money ￰52￱ M2 surged through 2024 and 2025, forecasts project a global liquidity peak by ￰53￱ of today, in mid-2025, I think the easiest liquidity-driven gains are behind ￰54￱ pivot toward liquidity tightening will be bad news for Bitcoin.

I also think cycle timing will play a big factor ￰55￱ halving is a known catalyst to drive Bitcoin's price upward. Historically, peaks occur about 12-18 months ￰56￱ of the time of this writing, we are about 16 months past the ￰57￱ a fresh fundamental catalyst, the odds favor a plateau or a ￰58￱ I mentioned earlier in this article, my former Bitcoin price projection was $148k. However, at this point, a run from ~$114k to $148k (~29.8% further upside) would require either a liquidity surge or a new narrative drawing sidelined ￰59￱ this, I view ~$124k as a de facto ceiling for Bitcoin in this cycle, barring any major ￰60￱ I am a hold, I don’t know what the fair value of Bitcoin is at this point.

I don’t think the remaining upside potential is worth ￰61￱ Thesis A quick note on the Bitcoin community’s main counter ￰62￱ enthusiasts all the way up to Strategy’s own Michael Saylor state that the core financial system will be faced with these same quantum ￰63￱ core logic is the following: Legacy finance will face the same quantum threats we will…. …so why are we singled out? The key difference between Bitcoin and legacy finance: legacy finance is regulated and centralized, which makes upgrades to cryptography related to quantum ￰64￱ key cybersecurity agencies like NIST (National Institute of Standards and Technology) have identified Post Quantum Algorithms for widespread usage to upgrade legacy IT networks in banking, Web 2 internet, ￰65￱ top of this, many post quantum encryption methods are more bandwidth intensive to encrypt each packet of ￰66￱ estimates indicate that this could mean up to 10x more bandwidth is ￰67￱ a centralized network, this is manageable (but costly).

On the Bitcoin side? Decentralized and ￰68￱ can’t force anyone to comply with quantum ￰69￱ top of this, each node in the Bitcoin network will need to upgrade its hardware to handle post-quantum bandwidth needs. That’s a big ask. I don’t know if the blockchain will ￰70￱ While Bitcoin has had an incredible run, I am double downgrading my stance on IBIT from a strong buy to a hold.

I believe that the easy gains have been booked, and the balance of factors is now really net neutral (or even cautious). At $114k per Bitcoin, chasing the rally from here is ￰71￱ of the bull case is already baked in, and I think rising risks are underappreciated. Bitcoin’s long-term fundamentals remain intact only if they can figure out how to perfect encryption against ￰72￱ timing of a cycle top is nearly ￰73￱ is a chance Bitcoin could spike to $130k before reversing course yet ￰74￱ hold rating means I’m not trying to time the top, but I am recognizing the fact that the number of risks is ￰75￱ the end, at these levels, I’d rather forgo some upside than risk getting caught in a sudden drop.