My May price prediction turned out reasonably accurate. On 5.5.2018 Bitcoin tested the 200 day moving average at 10,000 USD, failed, and most recently bounced off ~8300 on 5.12.2018 (with a re-test on 5.14.2018).
Bitcoin is currently trading at 8725 USD on BitFenix having bounced off support at the 50-day moving average (twice). The 10 and 20-day moving averages are currently serving as resistance at ~9200 USD and the upward sloping 200-day moving average lies beyond at ~10,200 USD.
Typically I’d be short-term bearish given the 10 day moving average just “death-crossed” the 20 day moving average, but with Consensus 2018 next week I expect Bitcoin prices (the entire crypto market, really) to be highly event driven for the near-term future as fundamentals trump technicals.
I expect Consensus 2018 to officially kick-off a Wave 5 bull impulse with Bitcoin prices peaking around ~100,000 USD. Sound crazy? Let’s break down developments from around the world, separate the signal from the noise, and consider the impact of such on the crypto space. Suffice it to say, a confluence of factors will drive Ethereum and Bitcoin prices to a new all-time high, and like a rising tide will lift the entire crypto-currency market to a ~5 trillion dollar market cap:
Seasonality and the Next Wave of Adoption
These days when I broach the crypto-currency topic with people, the prevailing sentiment is one of, “I missed the boat on that one” This is in stark contrast to say, 2015 when people would scoff and confidently declare Bitcoin a scam/ponzi scheme/vaporware. Behold progress!
There’s the old marketing “Rule of 7” which says people need seven exposures or contacts with something before they accept or buy it (if at all). Think back to when you first heard about Bitcoin – even if you were initially enraptured, you probably didn’t buy-in on the spot. More likely, you went back and did your own research over days, weeks, or months (all the while racking up exposures) until you established enough comfort level to finally acquire some coins. After that you probably told your family and friends, and the cycle begins anew for them. Now consider this at scale, with awareness spreading across populations. Granted, the vast majority of people won’t be interested enough in Bitcoin to research on their own so their exposure points will come from a news article here, and a friend/family/co-worker mention there. Of course, there are people will never “buy-in” no matter how many times they hear about it.
Let me remind you, for a span of time in December 2017 Coinbase was the #1 iOS app on the US App Store. I’m willing to bet the vast majority of these new users have yet to buy their first coin (anecdotally confirmed). Instead, they are building up exposure points and looking around for the herd to start moving before they jump in and serve as jet fuel to power the next round of explosive growth.
Institutional Money and Aligning the Regulatory Stars
Up until now, the crypto sector has been driven to 0.5 trillion dollar market cap primarily by “geek money”. Wall Street has finally realized that Bitcoin is “for real” and institutions are getting a deluge of interest from their clients. Goldman Sachs will have a Bitcoin trading desk up by end of June, and will likely begin real trading by Q4 2018. One of the main hang-ups institutions have is the lack of regulated crypto custodian services, but this will be remedied shortly (see here here and here) which will open the floodgates to institutional money. Michael Novogratz is already planting the psychological seed for people (and funds) to feel comfortable “diversifying” a small portion of their 401K, pension, investments, etc into crypto-assets.
Put yourself in the shoes of an active hedge or pension fund asset manager. You work in an ultra-competitive world looking for any kind of edge you can get. Perhaps you are experiencing huge money outflows due to under-performance or have gaping shortfalls to fill. Interest in crypto-assets by your clientele is skyrocketing, there’s now a regulatory framework from which you can work from, and the general professional sentiment makes it acceptable (if not avant-garde) to dabble in crypto-currencies. Why wouldn’t you? Talk all you want about Bitcoin’s recent “crash” but one year ago on May 15th, 2017 Bitcoin’s price was a mere $1772. 400% gains year-over-year is nothing to scoff at and downright mind-blowing when compared to the (exceptional) 21% return from the S&P 500 in 2017.
The last thing I’ll say about institutional money is this current bull market in stocks is looking a bit long in the tooth. My best guess is the S&P 500 will peak at ~3000 within a year or year and a half, with a deep bear market to follow. Asset managers are already looking around for non-correlated assets in the never-ending search for alpha. Is crypto-currency really an alternative asset class? Ultimately it doesn’t matter. If people believe they are, and divert their funds accordingly, it’ll become a self-fulfilling prophecy.
The Rise of Ethereum and Solving the Scaling Problem
2017 was the year Bitcoin established a permanent presence in the public mindshare. 2018/2019 will be Ethereum’s turn in the sun. Whereas Bitcoin’s 2015-2017 positive adoption feedback loop was short-circuited by the lack of scaling, Ethereum’s sharding solution should hit Mainnet within 2 years (my own best guess) and grease the wheels for an order of magnitude jump in adoption. Even Bitcoin’s first lightening network implementations are just getting off the ground and almost 40% of all transactions are using Segwit, which roughly translates into a best-case 13.3 transactions per second (via my quick back of the envelope math*) or a 35% increase in potential throughput since the December transaction fee debacle. Suffice it to say, the crypto space is much better positioned to welcome a new influx of interest (and money) than before, especially with scaling solutions so close.
Final Words and Fearless Predictions
The convergence of the Ethereum rumor-driven adoption wave, institutional money, and fundamental technical developments will push the crypto market to new all-time highs by Q1 2019. The next couple of months will include a relatively quick surge to the 11,500 level post-Consensus 2018, and will then bounce between support at the 200-day moving average and resistance at ~15,000 for some time. There will likely be at least one bear trap down to the 50-day moving average before this consolidation phase concludes. The October/November time frame will see the beginning of an euphoria-driven Wave 5 blow-off top (ending around 100,000 USD / Bitcoin) as all those new Coinbase users dust off their accounts and submit market buys in a race to the moon. What happens after that is still fuzzy, but watch this space for future predictions…
* If 0% Segwit transactions equates to 8.68 transactions per second, then 100% Segwit adoption delivers 20.325 tx/s.