In July and into August, cryptocurrencies continued to consolidate and digest the June yearly price high for bitcoin $BTC achieved on June 26. While bitcoin $BTC has recently been ranging between $10,000 and $11,000 ($BTC closed yesterday at $10,763.23, down ~ 20% from the yearly high closing price of $13,016.13 on June 26), strong altcoins have retraced over twice as much in US dollar terms: Litecoin $LTC closed yesterday at $75.20, down ~50% from yearly high of $141.90 on June 22; Ether $ETH closed yesterday at $196.57, down ~50% from yearly high of $320.06 on June 29.
Altcoin performance in bitcoin terms has been abysmal as the trend I identified in recent months strengthens – bitcoin dominance today sits at 69% (last achieved in March 2017); this number represents an increase in bitcoin dominance of nearly 20% since end March 2019. Depending on the next move for bitcoin, there could be another leg down for alts in bitcoin value below the multi-year support levels where many sit today.
I consider it a strong probability (70%) that we are at price lows for the current 4-year cycle and will see an extended breakout higher soon in bitcoin to test US$20,000 all-time price high with a possible extension in the coming weeks to the mid-US$30,000. Altcoins will continue to underperform during this time, but I expect very strong outperformance from a handful of the large cap alts to begin at any time as bitcoin approaches and surpasses its previous all-time high.
The remaining days of August and September are a crucial time. Events in Hong Kong and mainland China, Federal Reserve rate decision, precious metals, US Treasury yield curve and US equities are all at major inflection points. If the macro picture breaks down sharply, I think odds are 50/50 that cryptocurrency will be sold off initially providing a brief (single day/week) fantastic buying opportunity before exploding higher.
On August 16, Bakkt announced it is approved to launch its bitcoin physically settled futures contracts on September 23, 2019:
This news is very significant and means that a mechanism for institutions to buy and hold actual bitcoin will be live and online just in time to absorb capital flight if we see major risk-off sentiment engulfing the markets in the coming weeks. Never before has there existed an option to hold capital outside the banking system and legacy financial markets during a recession (or worse).
While the market infrastructure for cryptocurrency is new and largely untested, it is of historic significance that the world now has a choice and the ability to opt-out of what central bank planners and governments have done or plan to do in a crisis. Bitcoin is a bearer instrument fit for the digital age whose value is not dependent on the value of any other asset and bitcoin’s value does not require the performance of any other party (no counterparty risk).
The current market cap for bitcoin is only ~ US$260 billion. It will not take much inflow, especially in a market panic scenario, to cause a spectacular move. If this occurs, expect extreme volatility (20-40% daily swings easily), but generally we are probably at price levels that will never be seen again once bitcoin surpasses and sustains price above US$20,000.
I expect US$100,000 price to be reached for bitcoin this year, with a 2018-2022 cycle highpoint near US$300,000 as early as March 2020. The macro picture will determine if we see this earlier highpoint in 2020 or a slower rise peaking in 2021. While cryptocurrency continues to prove that its price is uncorrelated with other markets, in the current environment short term price moves have been positively correlated to gold, inversely correlated with equities, and have shown strong positive correlation with the weakening CNY first visible in April 2019.
The next decisive move on volume may come any day now, and will be a very significant event in confirming overall market trajectory for the next 6 – 12 months, as well as proving whether cryptocurrency (primarily bitcoin) will be seen as a safe haven from turmoil in other asset classes not to mention the political upheaval and capital flight (see Argentina, Italy, Ghana, Hong Kong… ) occurring in developing economies where local spot markets for bitcoin purchases are currently setting records.
But of course, it could all fail spectacularly and crash to zero.
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