– Research from Fidelity Investments
“Institutions are more aware of these [crypto market] developments now than they were six or twelve months ago. The people we talk with are actively scanning and observing what’s going on, and considering how this technology would impact their business, and — ultimately — financial markets.”
Bitcoin has officially bottomed out, and the bull case is currently being made as it has historically performed with incredible strength following washouts like 2018 typically sending prices to new all-time highs. While the past is neither an indicator of future performance or returns, Bitcoin and crypto assets as a whole have seen a powerful move upwards in the past couple of months. The asset class also is experiencing a lot of interest from many reputable individuals and traditional financial institutions that are starting to realize and understand their value, which was not the case during the last run up in prices that put them practically on everyone’s radar. People are increasingly coming around to the idea of buying into Gold 2.0, bitcoins are its digital manifestation as an asset with a store-of-value that is independent of any nation or government. It is fully possible that it’s poised to become a newly adopted reserve currency that’s held in significant quantities by governments and institutions as part of their foreign exchange reserves.
In general, the short-term performance of Bitcoin and the crypto asset market has been bolstered by worries of the U.S.-China trade war, interest rate and inflation tensions, the riskiest credit market in history, as well as other uncertainties globally that are presenting them as an anti-fragile, uncorrelated safe haven asset class. Prices broadly may have gotten some help too with Blockchain Week in New York City this month as many of the best and brightest in the sector were hosted at conferences, meetups, and summits discussing the technology and their roadmaps for the future. It still seems sort of odd that out of all the possible places that New York would be the gathering place of so many interested parties and investors despite the state’s regulators harsh enforcement history in this sector. If there was to be a logical choice for the Crypto Capital of the World, it would be Chicago. It’s a great option as a city with a deep pool of talent, rich commodity and trading history, as well as its physical location in the Midwest of the United States with an abundance of culture and diversity at the heart of both the East and West coasts (Wall Street and Silicon Valley) in one central spot.
The long-term outlook on Bitcoin and the crypto asset market is solid too with plenty of opportunity for continued growth and expansion into a broader, more mature asset class that can be taken serious and regulated appropriately as such. One of the primary concerns in the previous year that was raised from large capital allocators hesitant to enter the arena was custody, and there’s never been better infrastructure and solutions than ever before available to individuals as well as institutions. Next, payments with Bitcoin and crypto assets were deemed as suspect by many serious investors on the fence about them after hitting all-time highs and just this month the rollout of SPEND™ proving their write-offs on the technology’s potential wrong again. The only places that have been left out of the crypto love are asset management and banking, and it’s conceivable that the tech and its advancements will become very vogue and sought after over next the couple years as customers and clients want to get in on the action and cost savings. For these reasons and more to be explained, Bitcoin (in particular, with its block reward halving in less than a year) and the crypto asset market as a whole are primed to garner increased demand and reach new heights along the way.
Bitcoin virtually represents digital gold as a store of value, and it presents an amazing value opportunity considering the market value of $150 Billion for bitcoin relative to the market for gold at $8 Trillion. If the market capitalization’s were to find parity at $8 Trillion dollars, the value of a bitcoin would be roughly worth $450,000 using current prices. It doesn’t seem all that unrealistic either if you take into account bitcoin’s performance over the past decade, and the fact that it offers superior aspects like portability, a controlled supply (it’s been proven mathematically there will never be more than 21 million bitcoin in existence), and inflation predictability. To illustrate that last point, there will be 656,250 bitcoins mined as well as added onto the blockchain next year in 2020 and 328,125 bitcoins will be mined as well as added to the ultimate total supply in 2021, and Bitcoin will continue on a predetermined inflation schedule (you couldn’t possibly predict gold’s inflation with such accuracy). Bitcoin will be the superior store of value relative to gold for that reason as well as its ease of transport and protections against censorship and seizure. Plus, despite Luddites arguing that the yellow metal offers higher durability during an event that may shut down the Internet the fact is that bitcoin satellites exist (meaning Internet isn’t completely necessary to use Bitcoin’s network and the public-ledger or blockchain stays up-to-date for everyone around the globe regardless of a connection).
The crypto asset market is having a great month! Bitcoin’s strong performance has been leading it upwards starting May around $5,300 and almost hitting $9,000 before fading back to around $8,700 at the time of this writing. Month-to-date that puts Bitcoin’s return on investment over 60 percent, not to mention, it’s up over 130 percent year-to-date. The uptrend that I spoke of last month is still very much intact, and I’m very confident in the bull case for bitcoin in both the short and long-term time frames. Three basic scenarios that can imaginably play out over the next month in order of likelihood would be: (A) The rally continues to play itself out with institutional and retail FOMO sends Bitcoin over $10,000 before mid-June; (B) Prices capitulate back to a support between $8400 and $7700 before moving higher and pushing across $9,000 to test $10,000 in late June; (C) The worst-case scenario breaking the trend with a drop in prices that sink well below $7000. The logarithmic chart used to generate these predictions can be seen below with the same presets as last month for the bollinger bands and linear regression (R-squared = 0.93102207). The bull case for bitcoin’s long-term value proposition is rooted in its fundamentals, institutional interest, and increasing demand ahead of the block reward halving next year.
Notable Bits of News:
AT&T is the First Mobile Carrier to Accept Payment in Cryptocurrency – (AT&T) The world’s largest provider of mobile telephone services, and the largest provider of fixed telephone services in the Unites States will now accept crypto assets through a payment process for cryptocurrency, BitPay. It sparks the question if this will be a major tipping point that pushes other corporations into FOMO adoption of crypto. The company has limited the acceptance to bill payments only and has not specified whether customers will be able to purchase smartphones and other accessories online or in AT&T’s brick and mortar stores.
Bitcoin Price Up Nearly 50% Since US Congressman Urged To ‘Ban Bitcoin’ – (Bitcoinist) This also comes with news of famed Nobel Prize winning economist, Joseph Stiglitz, saying in an interview that he “thinks we should shut down the cryptocurrencies.” It’s unclear if Congress is the subject who he’s referring to as “we,” but like Stiglitz in an infamous speech given on May 9th Brad Sherman called for a ban on the purchase and mining of bitcoin by US citizens. The market showed that their calls held little water because the truth is they may be impossible to stop or shutdown, and the price action continued to be bullish despite the negative statements.
Bitcoin is a Demographic Mega-Trend: Data Analysis – (Blockchain Capital Blog) In a blog post published by Spencer Bogart, Partner at venture capital firm Blockchain Capital, according to a new survey conducted by Harris Poll, 11% of Americans own bitcoin marking a major awareness increase since 2017. They used a statistically significant sample of the American population (conducted between April 23, 2019 and April 25, 2019), and the findings showed that they had gained more knowledge about bitcoin in terms of awareness, familiarity, perception, conviction, propensity to purchase, and ownership. Compared to another survey they conducted in October 2017, the results outline that bitcoin is a “mega-trend” that is being led by the younger generation in the 18-34 year age range. Interestingly, the older demographics showed they had heard of bitcoin but failed to match the other aspects where the younger age groups excelled.
Robinhood’s Free Crypto Trades Powered by Chicago’s Jump Trading – (Bloomberg) One Chicago trading firm that’s made headlines as an early mover in the space and known for having a profitable shop, Jump Trading, LLC, is helping Robinhood Market Inc.’s trading application for crypto. Robinhood saw its customer base double after adding crypto asset trading last year. It’s a promising sign of faith from respected, traditional financial players especially given that the offering is still not provided in every state because it is so new.
HODL Bitcoin Proves Itself (Unlike Altcoins): This Man Had Lost Almost 50 BTC From Investing in 50 Different Altcoins In 2017 – (CryptoPotato) If only he took the practical advice of just HODL-ing bitcoin and using DCA (“dollar-cost averaging“) strategies, but this one investor highlighted his views that newer coins only have one good cycle where investor’s timing is critical for a successful exit. For this individual, specifically, altcoin diversification from his original bitcoin holdings was not a prudent strategy for which he paid for dearly even though he believed they had “great” technology. The truth is many of them have seen very low volumes, have been delisted from major crypto asset exchanges, or barely shown any signs of life if any at all.
Bitcoin ETFs: Wait May Continue Even Longer – (ETF Trends) In a document that was released on the morning of May 20th, 2019, the SEC expressed its decision to exercise its right to delay (yet again) its decision by another 90 days. This sets the deadline back to August 19th, despite recent research suggesting that an ETF in the U.S. would be the preferred vehicle for 58% of American investors to access the world’s largest cryptocurrency. It is certainly obvious that the SEC is in no hurry to make any decisions too quickly, and they are doing their best job possible to understand the market and gather as much knowledge and information available to them.
New Research: Institutional Investments Likely to Increase over Next 5 Years – (Fidelity Digital Assets Blog) In a blog post before a report earlier this month by Bloomberg announcing Fidelity’s intentions to trade crypto for institutional clients “within a few weeks,” it made noteworthy news because it meant they would go beyond their custody business that’s live and enter the market of crypto trading businesses for institutions (though they emphasized they would be essentially serving as an agent). Seven out of ten respondents found some aspect of digital assets attractive and there was such positive feedback from institutional investors, the company said they are seeing interest from crypto funds and other early movers as well as family offices, endowments, pensions, and foundations. That’s almost as powerful as their survey conducted by Greenwich Associates between November 26, 2018 and February 8, 2019 correspondingly saying that 22% of institutional investors have some exposure to digital assets and almost half surveyed (47%) viewed digital assets as “having a place in their portfolios.”
Grayscale to Investors: Drop Gold – (Greyscale Investments Blog) In their new campaign promoting the emergence of Bitcoin and crypto assets as a viable digital asset class that will serve as the future of money, a strong call to action tells investors they should reassess their gold holdings in their portfolio and reallocate that capital by investing in Bitcoin to reap the benefits of a diversified investment strategy. It, at the very least, provided some comedy and debate around the “Bitcoin vs. Gold” contest. The campaign is more than a commercial and hashtag because they are also educating people and potential investors about their flagship product, Greyscale Bitcoin Trust, at DropGold.com.
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