Crypto analysts of late have been pumping out grandiose predictions for how high Bitcoin could go in the near term, but the overwhelming majority of these claims are based on technical charts alone, with an occasional reference to significant events that are also transpiring in the crypto marketplace. The latest consensus is that $6,000 will happen soon, and $10,000 could follow soon thereafter.
The “Technicals”, however, do not move markets. Fundamental forces are what shape pricing behavior, and, if you aggregate the power of seven major themes, the combined fundamental force, according to one analyst, could drive Bitcoin past the $20,000 mark, and soon. Crypto prices, however, are currently retreating, due to a controversy involving Tether and Bitfinex. Bitcoin prices have fallen 7% in overnight trading.
Technical charts for Bitcoin today are quite compelling in what they are signaling. The positive signs include a predominant “Pennant and Pole” pattern, a “Golden Cross”, oscillating indicators that claim overbought conditions are no longer present, and lastly, a sudden explosion of volatility after a long slumber in the lowlands. The concurrence of so many favorable “green lights” at one time has tempted many an analyst to put his or her foot down hard on the accelerator and head for high ground.
But wait – Where is the “gas” coming from to power this racing car up the hill? Critics have countered that volume data at present is not sufficient enough to keep the momentum going, much less climb back up a steep hill, but volume is also a product of fundamental forces at work. A brief synopsis of only seven of these forces follows:
- Size Does Matter: It certainly does in Crypto-Land. Bitcoin is the oldest and the largest coin system in existence. In fact, BTC’s share of the entire crypto system rose from 50.5% to 54.6% in the past four weeks, as allegiances were shifted from other altcoins. Bitcoin remains the gateway to all other cryptocurrencies and benefits from public recognition above all others;
- Stability: Size and maturity have also brought a level of stability rarely seen in the crypto space. Volatility was only 7.8% in March, “its 2nd lowest volatility month on record.” Until the run up in April, volatility for all of 2019 was the second lowest in history, as well. From this springboard, BTC volatility has already catapulted an astounding 200% in April from supposed pent-up buying pressure;
- Mining Support: Recent reports suggest that mining is very profitable again. Per those in the know, the breakeven average is $3,550, well below the current prices. The “Hash Rate”, a measure of computing power in the network, fell precipitously during Crypto Winter, but signs are that it, too, is back: “The hash rate has since stabilized near the 2018 all-time highs and is evidence of continued support among the network.” The same cannot be said for other tokens;
- Blockchain Developments: Bitcoin’s Lightening Network enhancements corrected several previous issues with speed and processing inefficiencies, but other blockchain developments will also enhance Bitcoin’s future prosperity, as well. One example is Moon, a payment processing startup. It will act much as did PayPal for payment cards on the Internet, assuming an intermediary role for merchants to accept BTC, but without the risk. Amazon would settle in USD with Moon, while it handled the BTC back office settlement process, and “the company expects to be connected to virtually all online merchants within two years.” So goes blockchain, so goes Bitcoin;
- Institutional Inroads: News headlines have been rife with stories about Fidelity Investments, Bakkt, ErisX, the Nasdaq, IBM, Facebook, JPGMorgan, Samsung, and others, as they pave the way for greater institutional involvement and public awareness of Bitcoin and cryptos. It turns out that these stories only scratched the surface as to the level of capital investment by major corporations in all things crypto. Forbes broke the news that crypto activites are much greater than ever anticipated. Its new “Top 50” list of large global corporations and their internal efforts with cryptos and blockchain technology revealed broad-based support;
- Stablecoin Stashes: Stablecoins are the latest thing in Crypto-Land. According to Forbes, there are at least 120 projects involving these “pegged” tokens. The market cap for the Top 20 programs is just under $4 billion, which represents cash reserves that could easily shift into more buying demand for Bitcoin when the price was right;
- Scarcity in Future: There are currently 17.67 million Bitcoin in circulation, but, for technical reasons too difficult to explain, roughly one third of these will never be traded. Bitcoin also has an upper limit: “There are only going to be 21 million Bitcoins ever. There is no central bank to issue new BTCs, there is no way to print more, that will be it”. The remainder will be added ratably in a “halving” process over the next few years. The main takeaway is that when public awareness and investor interest heats up, a fixed supply will drive prices higher.
In technical terms, a convergence pattern of fundamental forces is forming, and a major breakout always follows a convergence pattern formation. Thomas Hughes, a long time trader and author of weekly newsletters for OptionInvestor.com, believes the future prospects for Bitcoin are literally through the roof, based upon the above narrative:
Now that BTC/USD is moving up from the $5,100 level, the next target for resistance is $5,800. A move above $5,800 will probably go to $8,000 and, if that happens, I expect to start seeing increased media coverage and a little FOMO buying. Longer-term, the target is $20,000. The market has already proven that is how it can go, once that level is surpassed, calls for BTC $50,000 and $100,000 won’t be far-fetched.
While the above conjectures may seem compelling, the crypto community from time to time also has its share of “black swans” that come and go, impacting prices negatively before they fly away. These risks, by definition, cannot be anticipated. At this writing, news of business impropriety on the part of the team that manages Tether, a stablecoin program, and Bitfinex, a crypto exchange, has sent the industry into a tailspin. Bitcoin prices have plummeted from $5,600 back to $5,050, but, have since, recovered to $5,200. Prices appear to be stabilizing, but such is life in a developing, nascent industry.