The monthly price history of bitcoin (available from 2011) gives a good picture of the cryptocurrency’s bear and bull phases over the past 8 years. It is very clear from this chart that a 4-year Cycle low occurred in December 2018 and a new bull market has been confirmed with the last candle (May 2019) open and close above the simple 9-month moving average. Accordingly, I expect bitcoin to continue higher over the next couple of years before the next Cycle top.
What we have seen this year has stunned most market observers and participants. Bitcoin has recovered 50% of its drop from ATH in 4 1/2 months. I expect $BTC to recover the remaining 50% to ATH within half that time or by August/September.
My target for the current parabolic rise underway since April is $13,000 in the month of June/July followed by a 40% correction and then a continuation upward after finding support in the $7,100 – 7,800 range (or higher).
Bitcoin continues to significantly outperform all other major assets this year with YTD gains as of May 31, 2019 of 60%, while Litecoin is up 258% and ether is up 90% over the same time period.
As the macro picture continues to deteriorate, it may be wise to re-balance a portfolio away from lower cap and speculative assets into an allocation that meets a few key criteria for maximum performance in a macro market crisis scenario.
Bitcoin reached 60% crypto market dominance during the month of May while alt coin values in bitcoin terms tumbled (meaning alt coins underperformed bitcoin even as their $USD value increased). This dynamic was in contrast to bitcoin’s strong performance in April when altcoins performed equally well, or better overall when valued in $USD AND $BTC.
Why? Simple. Bitcoin’s particularly strong performance in recent weeks is due to fear in traditional markets and new capital exiting other asset classes to purchase bitcoin (and other cryptocurrencies) as a safe-haven store of value. This new capital is investing for the long term. It is institutional or quasi-institutional money that is not interested in swing trading low cap pump and dump coins.
Accordingly, speculation in alternative coins was suppressed in May as current market participants sold alt coins for bitcoin to follow the new smart money entering bitcoin, and the top major alts such as Litecoin and ether. Going forward, I expect select alt coins to perform well, and out-perform bitcoin, but we will not see across-the-board, indiscriminate superior gains across the entire sector as occurred in 2017. 2017 market performance was largely determined by retail investors and speculators, even investors with significant capital to deploy due to early investments generally were not as sophisticated or constrained as the new money entering the market this year. This new capital base has different objectives, and fiduciary and regulatory obligations that will require directing investment to a select group of assets with appropriate “on ramps,” regulated trading platforms or products, and appropriate custody solutions.
Looking Ahead
In terms of catalysts for this year’s market performance, I am increasingly of the view that “Crisis/Black Swan” will be the major catalyst for cryptocurrency this year. The strong performance we see so far in the sector could be a canary in the proverbial coal mine of what’s to come due to:
• political risk (e.g., Brexit, Italian Bonds, Venezuela hyperinflation),
• currency crisis (e.g., Turkish lira, Citi says if a 25% tariff is implemented on Mexico, the MXN would need to fall between 42% and 59%),
• bank failures (e.g., Baoshang Bank seized by PBOC in May, Deutsche Bank – stock traded below 6.00 euro yesterday),
• equity market weakness (thank you trade wars, FANG anti-trust woes, TSLA) …
Other major categories driving growth will be “Regulatory Certainty & Institutional Market Infrastructure,” and “Corporate Blockchain Adoption & Retail Awareness.”
In any scenario, I see a strong possibility that Bitcoin can reach US$100,000 in 2019 with periodic 20-40% retracements along the way. Monthly performance may be quite volatile, but the overall trend will be higher until at least December 2020.
Total cryptocurrency market capitalization started 2019 at US$126 Billion and rose to US$272 Billion at May 31, 2019 for a YTD gain of 115%.
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