Bitcoin is on a tear. Since the start of the year, it is up 200%. Since its low in December 2018, it is up 256%.
The burning question is: how high can it go this time?
Bitcoin hitting $20,000 was a fast and dirty affair at the end of 2017, with a quick spike up and not a lot of volume.
And of course there was the relentless news coverage and ridiculous talk of HODL and Lambos and what not.
So what about this time? Is history going to repeat itself?
I say yes, but not in the same way. I see Bitcoin going well over $20,000 in the near future, and a much more mature cryptocurrency market, in regard to both the trading and the participants.
A Look At The Chart
Bitcoin charts are tough to read coming from a stock perspective.
There is no true intrinsic value. It isn’t a company that can be sold for its parts — equipment, buildings, patents, etc.
Nor does it create value, like a company refining raw materials or making widgets or whatever.
It is tough to read, but that is just because we have less of some types of information and more of others, and we certainly have great charting data here.
What truly drove prices through the roof last time around were liquidity issues. Namely, there was a lot of undisciplined buying interest and nowhere near enough sellers.
It is very hard to see in a normal chart because the last price swing completely blew out a normal scale, but Bitcoin has been through the process of finding support and ramping up like this several times before.
We’re clearly at the start of a rebuilding phase. You can see similar breakdowns, bottoms, and upswings through the full chart once you switch to a logarithmic scale.
That alone isn’t enough for me, but other signs are pointing to a much healthier uptrend.
A More Mature Market
One of the big signs for me is a much healthier market for Bitcoin and cryptocurrencies in general.
Bitcoin now accounts for around 60% of all value held in cryptocurrencies. That is a major development considering it was virtually 100% until several years ago. In particular, Ethereum, XRP, Monero, Litecoin, and a couple others are up in their “market share” so to speak.
That should provide for less crowding in Bitcoin as investors return, as they are starting to. Sure, when people crowd into one trade it is good for quickly driving up prices, but it is also massively a destabilizing factor.
A bit slower of a rise for less volatility this time around would be a good thing.
We’re also seeing a lot more institutional interest in cryptocurrencies.
I’ve seen some talk of how Google searches for “bitcoin” are only around 10% of what they were in 2017. That shows that the price movement is not being driven by retail investors this time.
Meanwhile, as of June 24, there were 5,997 open Bitcoin futures contracts on the CME, marking an all-time high.
At 5 bitcoin per contract, that represents about $340 million of open contracts. Futures trading didn’t even start at the CME until mid-December 2017 — after the peak.
This has a calming effect on short-term price swings as large investors can mitigate some risk, just like options for equities. Once again, after the last mania, this is a good thing.
Better Ways To Invest
There are a slew of other things I could talk about. Hash rate is way up, making mature cryptocurrencies more secure than ever.
Transaction volume, block size, low fees, an upcoming reward halving for Bitcoin, global macroeconomics, etc. The list is longer than I care to elaborate upon.
But I absolutely must mention this: As investors, we’re in a much better place to invest in cryptocurrencies than ever before. This is because we don’t have to go it alone.
Part of the market being far more mature now than in 2017 is that companies with expertise and experience are up and running, and they’re looking for investors.
These companies can mine cryptocurrencies at a fraction of the cost of others, and well below the current market value.
We can essentially buy into Bitcoin and other cryptos at a discount with the security of a stock.
It’s a win-win situation, and I’ll defer to Nick for the details.
