The cryptocurrency market is seen trading around $210 billion valuations for the last week. After the dramatic fall in the valuations of altcoins ten days back, Bitcoin has turned out to be the ultimate hope of investors which can turn the market sentiment positive.
While recently speaking at CNBC’s Trading Nation, bitcoin bull and co-founder of Fundstrat Global Advisors – Tom Lee – said that he is still firm on his BTC target of $20000 before the year-end.
— CNBC's Fast Money (@CNBCFastMoney) August 25, 2018
During the discussion, Lee also talked of some sort of correlation between the Bitcoin price and the emerging market charts on the S&P 500 index. He noted that both – cryptocurrency and emerging markets have been on a downtrend after picking up earlier this year. Lee expects both of them to recover saying:
“Until emerging markets begin to turn, I think in some ways that correlation is going to hold and tell us that sort of the risk on mentality is those buyers aren’t buying bitcoin.”
Lee presented a chart to correlate the two indicators. The first is “hedge funds” that rent emerging market stocks. These hedge funds “risk on and risk off” and at the time of risk off, “bitcoin also suffers because they risk off.”
The another, he says, is the wealth effect which connects the two indicators. The wealth effect indicates the impact of stock behavior on Bitcoin buying. Investors, who are going through a downfall in emerging markets, have little money to invest in Bitcoin and “that affects the network effect because you can’t buy bitcoin,” Lee says.
However, Lee talks that the mainstream Bitcoin trading market is still facing challenges about how the digital currency is being stored. Lee also believes that hedge funds have a bigger role to play in the cryptocurrency markets as certain exchanges have managed to attract them successfully:
“I do think in 2018, trading has shifted. I do think hedge funds are playing a role right now.”
He also stated that the latest announcement of launching the Bakkt platform is a “big deal” which could potentially drive more institutional investors to the crypto space. “It’s one day settled,” he explained. “Pretty soon we’ll see potential for custody products around that to develop.”
Venture Capitalist Anthony Pompliano Predicts Bitcoin Fall to $3000
Founder and partner at Morgan Creek Digital Assets, Anthony Pompliano predicted that Bitcoin could fall as low as $3000 while dodging its bullish positions. After thoroughly examining the past data, Pompliano highlighted parabolic price movements over the years in the price of BTC. He said:
“Parabolic increases in price continue to take longer — each parabolic run is measured from the last all-time high to the new all-time high. The first rapid price appreciation took just over 300 days (2010-2011) and the second took over 900 days (2011-2013). The last parabolic price increase peaked at ~$20,000 (2013-2017) and took almost 1,500 days to complete.”
Pompliano says that an extrapolation of this trend shows that Bitcoin is unlikely to hit the next high before 2000 days of its currency high of $20000. This means that one cannot expect Bitcoin to make another ATH, anytime before 2023. He also compared bear market patterns where he states that the first bear market in 2011 lasted for 160 days, the second one between 2013 and 2014 lasted for 400 days. Considering the same pattern, the existing bear markets will continue for 650 days.
This means that the crypto market recovery is still not due until the third-quarter of 2019. Pompliano said that it could mean a high level of “pain and discomfort” for investors. He further adds:
“It is never fun to admit that you were wrong about something you said publicly. However, it is important to constantly test your own assumptions and beliefs. As I’ve tested myself over the last few weeks, it became obvious that I needed to gather better data and rebuild the prediction model.”
Pompliano says that Bitcoin price can further correct by 50% from the existing levels and will go around $3000 before making any sort of high to $10000.