With bitcoin breaking $30k for the first time, cryptocurrency experts provide a commentary on their take about the future of the digital currency.
Q3 2020 hedge fund letters, conferences and more
A number of crypto market experts have weighed in on what they believe is driving the current bull run, including Ripple’s XRP being removed from cryptocurrency exchanges across the US and institutional investors turning to digital assets. The commentary also touches on the likelihood of a BTC ETF launching this year and how a positive upturn in the traditional economy could impact the booming bitcoin space.
This is part three of a multi-part series on Seth Klarman, value investor and manager of Boston-based Baupost Group. Part one can be found here and part two can be found here. To ensure you do not miss the rest of the series sign up for our free newsletter. In part two of this series Read More
Bitcoin Breaks $30K, Enters Into A New Phase Of Price Discovery
Craig Russo, Director of Innovation at Polyient, the front-running infrastructure underpinning prosperous, decentralized virtual economies, said:
“Bitcoin has entered into a new phase of price discovery, largely driven by amplified institutional interest in the digital asset. We have not yet seen peak retail participation, as highlighted by the low search and social activity relative to 2017. Retail participation, coupled with accelerated institutional participation, will likely continue to drive the bull market in Q1. Bitcoin successfully cemented itself as a legitimate asset in 2020 and will continue to be adopted across the financial industry, regardless of any positive shift in the traditional global economy.
With the removal of XRP from most major cryptocurrency exchanges with United States users, we believe that there will be substantial capital outflows into Bitcoin and Ether. Ultimately, this should add further fuel to the ongoing rally.
We are beginning to see publicly traded corporations adjusting their treasuries to adopt Bitcoin as a reserve currency. Ultimately, this is driving massive interest and demand among institutions as they position for a broader adoption of this approach.
Barring any substantial macro downturn or action taken by a state regulatory agency, we see the Bitcoin bull market as sustainable through the first half of 2021. There will be high volatility during this period and we anticipate negative price action periods, as seen with other Bitcoin price discovery events.
Despite the price rally, the Bitcoin market is still very thin and there is potential for enormous volatility if BTC whales begin to dump. This is always a lingering threat as any movement in the genesis wallets will definitely shake investor confidence. However, right now we aren’t overly concerned as this is a low-likelihood outcome given the nature of these wallets.”
Accelerating Institutional Adoption
Konstantin Richter, CEO and Founder of Blockdaemon, said:
“The latest Bitcoin surge can be explained by a host of factors: accelerating institutional adoption, Bitcoin as an inflation hedge and new on-ramps to millions of users through platforms such as that of PayPal. However, a significant and slightly overlooked factor has been that of the Bitcoin halving. The halving means that 300K Bitcoin will be minted this year, compared to 600K in previous years. Since a significant portion of existing Bitcoin is illiquid, 300K is far too little supply for the exponential demand coming from institutions and triggered by the global covid crisis (new financial assets are needed to hedge against inflation). This represents an example of the flywheel in motion–half the supply and a probable doubling in demand, which in turn drives further demand due to price increases.
Bitcoin cycles are inherently unpredictable: regulatory changes in certain key countries could have a significant effect–specifically those driving institutional interest like the US. As well as that, it is difficult to predict the behaviour of crypto whales who can influence price and might put a damper on the current flywheel. That said, I believe the next big hurdle for Bitcoin is $50K. Between $30-50K, there may be a significant amount of asset liquidation, so I think that will be a harder number to achieve this year. With that hurdle cleared, I believe that we will see $100K in 2022.”
A Target Range Of 100K By Q1 2022
Seamus Donoghue, VP Sales and Business Development of METACO, said:
“The Bitcoin bull move is only just starting. I believe Bitcoin will be in the target range of 100K by Q1 2022. The current narrative is digital gold and the first major milestone will be matching the market cap of the physical gold market–$11-12 trillion. An equivalent BTC market cap would mean a BTC price of $550,000 to $600,000. This would however only be the first milestone as we expect two broader narratives to increasingly emerge: firstly, the institutional allocations out of fixed income into Bitcoin. The fixed income market with roughly $17 trillion in negatively yielding debt would be better referred to as “fixed loss”. The typical 60/40 equity and bond allocation is no longer fit for purpose given the negative, or near zero yield of the bond allocation–government bonds no longer insulate the overall portfolio from the typically higher risk of equity holdings and instead introduce an asymmetric risk of capital loss.
The second narrative is that of Bitcoin as the new emerging non-sovereign internet native payment solution–the internet of value. Both of these narratives could drive Bitcoin’s capitalisation into the multi trillions. The trajectory will not be a straight line and Bitcoin will see 10-30 percent retracements along the way but a crash (as we saw in 2018) is no longer in the cards.
The fall of XRP demonstrates the newfound strength of the crypto market, if the SEC’s legal challenge against Ripple had taken place in 2017, the news would have crashed the entire crypto market and we would have seen a flight of capital out of crypto. It is a sign of the market maturing that despite the SEC`s pursuit of XRP, the total crypto market cap has risen continuously since the news broke–with BTC leading the market. Instead of running away from crypto XRP holders have switched into more credible cryptos such as Bitcoin, Ethereum and Polkadot.”
Bitcoin Could Peak Between $50K And $60K
Rachid Ajaja, CEO and Founder of AllianceBlock, the first globally compliant decentralized capital market, said:
“In Q1 2021, Bitcoin could peak between $50k and $60k. Bull runs usually last for around 3 years, so we can probably expect it to be 2023 before we see massive corrections.
Any kind of crash is likely to be outside the sphere of macroeconomics, or potentially as a result of an issue with miners or dramatic overpricing that needs correcting. Any crash we do see will not be as drastic as those that we have seen before, thanks to increased network effects and institutional involvement.
Gold is not as important as it used to be. We live in a digital world and bitcoin can do everything gold does except more effectively as a divisible store of wealth, as it is easier to both store and transfer.
It is unlikely that Bitcoin whales – those who hold enough BTC to impact price – are going to be selling any time soon. Bitcoin is experiencing a supply shock at the moment, and miners can’t keep up with demand. For this reason, it’s unlikely that any whales will relinquish BTC liquidity until the price is closer to $100k+.
As the global economy attempts to recover following the 2020 downturn, investors are now seeing higher potential yields across the emerging cryptocurrency market, particularly in bitcoin and emerging defi.
It’s likely we’ll see an ETF either this year or next, especially with the new administration coming into office in the United States, which appears to be more supportive of the crypto space. The introduction of an ETF would make bitcoin much more accessible for institutional investors, while also increasing the legitimacy of Bitcoin as an investment in the eyes of a wider audience.”
$54K Around Valentine’s Day
Nicholas Pelecanos, Head of Trading at NEM
“If Bitcoin continues to rally at its current rate, I believe we could see a price of $54K around Valentine’s day. We could see a higher price than this by the end of Q1; $74K is also on my radar. However, I have the sense a pull back from $54K would leave the Bitcoin price to consolidate around $35K.
Based on previous cycles we could be in for a year or so of extreme bullishness. In the adoption cycle I believe Bitcoin is heading into the early majority segment which is characterized by steep growth, so this bull market could last a while longer than previous cycles. With all cycles, the crash comes from the madness of the crowd, there won’t be a catalyst news story, the market will just run out of buyers. Remember the old wall street adage: “When the shoe shining boy is giving you stock tips, it’s time to get out”. The point being that the masses of retail money are usually the last to enter the market, and offer a warning sign of potential downturns.
This latest bull run is also likely to increase the prospect of a Bitcoin ETF. With the continued narrative of Bitcoin as an inflation hedge also driving momentum, it is a case of when rather than if such an ETF will be created. With clearer regulation and more institutional players entering the space, the biggest hurdle in the way of an ETF is being able to quote a real price of Bitcoin and having it free of manipulation. As more Bitcoin is traded on regulated exchanges we will trend towards a real, fair price for Bitcoin to make such a possibility a reality.”