Nov

17

The price price of BTC is unlikely exceed 8,000 by much - a reader

Do you play poker? If so, have you ever made money from listening to the people watching the game?

The top call is interesting, but it would be a lot more interesting if you put money on it instead of making paper trade calls, as you have been since BTC was trading at 400.

I suggest 3-6 months of consolidation now that the 2x fork threat has passed (today) without drama.

The rest of the crypto market (i.e. alts such as ETH or app utility tokens such as REP) has been pounded indiscriminately in both BTC and USD terms since August. The attention has been entirely on BTC and its forks, with BTC dominance (market cap of BTC as a % of all crypto) climbing from 40% in June to briefly over 60% last week. The alt bear market has been relentless, taking 75% - 90% off the value of coins for solid, valuable projects with serious PE/VC backing.

Several of these apps will launch on the mainnet to great fanfare in the next few months, and will lift the price on many alts, including some that are undeserving. Coinbase/GDAX will begin allowing trading of some of these in January. Currently they only allow trading in BTC, Ether (ETH), and Litecoin (LTC). Coinbase is all that many new crypto investors know of the market (USD and crypto deposits are insured).

Also, now that Coinbase/GDAX has launched a custody program for digital assets, competitors will follow suit. Soon, institutions will have no compliance barriers to holding crypto and hedging with futures (launching this month on CME) or options (January on the CBOE).

But Wall Street and the CME are latecomers to this party, and with a few exceptions, haven't yet had the opportunity for many "liquidity events" such as what an equity IPO represents. I don't see a close analogy here. Most of the BTC that can exist has already been mined and is available to trade. Anecdotally, I know quite a few serious investors who are clueless about crypto who are champing at the bit to "short the bitcoin bubble" via futures. They haven't bothered to read any of the educational materials I have sent them, don't understand the market beyond what they read in the WSJ and Barron's, and have little but rock-ribbed certitude to justify their position. I expect them to get their education the hard way. IMO in the near term the debut of futures and options will create a tug-of-war. What someone treating it as just another financial asset does not understand is the degree to which network growth, miner hashpower, and difficulty adjustments have on the price. There are, in other words, fundamentals that are reflected in the long-term price trajectory, and complex stakeholder relationships.

I don't call tops (or bottoms), but I do expect a trendless consolidation period for BTC. Consider that following its 4000% run to 420 in June, ETH has traded in a range of 130-380, with trading action concentrated in the high end of that range. I expect ETH to rally while BTC stalls. Price growth has lagged network growth by a significant margin since June, and several of the closely watched use cases/apps are about to launch, which will increase network utilization significantly.


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5 Comments so far

  1. Andre on November 18, 2017 12:47 pm

    https://unglueit-files.s3.amazonaws.com/ebf/05db7df4f31840f0a873d6ea14dcc28d.pdf

    white paper by Satoshi Nakamoto

    I wish I would have made the connection between my frustrations after reading the creature from jekyll island and this technology which I was too dumb to understand at the time.

  2. Andre on November 18, 2017 12:48 pm
  3. DC on November 19, 2017 5:41 pm

    Will be interesting to see the terms structure on of the futures contracts. Most likely contango since there in no yield on BTC and there is a cost to borrow, but how steep and does it go above or below the short term interest rate imply some sort of prediction by the market. Conventional thinking is many want to sell futures to hedge cash BTC, making me think it will be the opposite, steep contango.

  4. Murali on November 21, 2017 12:12 pm

    Hi Andy,

    Can you share any good resources on cryptocurrencies for newbies?

    Thanks.

  5. jason humbert on November 28, 2017 8:52 pm

    great call. very timely indeed

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