Today we recap several fundamental and technical factors surrounding the crypto market, and bitcoin in particular. From the upcoming halving, increasing demand and adoption from China and other correlated bullish signals, Bitcoin could be shaping up for a big 2020.
Bitcoin didn't have the best second half of 2019, sliding from a year-to-date high of $19,700 in June to $10,800 this morning. At its lows, the cryptocurrency fell as low as $9,600 at the end of last month..
Despite the harrowing backdrop, Bloomberg’s Mike McGlone of the business media giant’s Intelligence unit believes that Bitcoin has a positive outlook heading into “2020 and the next decade” due to a confluence of factors.
The analyst noted that:
- The strong growth in U.S. equities, namely the S&P 500, implies that investors will soon start allocating more capital to risk-on investments like Bitcoin and cryptocurrency; noting that there is a correlation between strong performances in the price of Bitcoin and the S&P 500 index.
- Bitcoin’s block reward reduction, also known as the “halving” or “halvening" about the fact that Bitcoin's inflation gets cut in half during these events, is coming up in May. This will be of benefit to BTC investors, as the event acts as a large negative supply shock in a market that is seeing increasing demand over time.
- China remains pro-digital assets because they are pro-blockchain.
The recent plunge in the crypto markets has pushed Bitcoin (BTC) to a “make or break” point — the 21-month simple moving average.
As analyst Byzantine General pointed out in a tweet, this level has been the point at which BTC has bounced in two previous bull market retracements. Of course, the sample size of bull markets is small, though the chart below shows that the 21-month moving average has been a significant level for BTC to hold above.
A number of analysis and research suggests that Bitcoin will hold the level, and continue its secular bull market.
David Martin, the CIO of Blockforce Capital, recently shared some of a report from Delphi Digital, in which the research says that "[although] short-term sentiment gauges have rolled over, the longer-term uptrend still remains intact."
The monumental surge of volumes seen last June, which marked an all-time high, is indicative of a long-term bull trend forming. Fresh all-time highs in volumes are followed by consolidation, just like we're seeing now - the growth in volume leading to long-term exponential bull markets.
That’s not to mention that fundamentals is supporting the cryptocurrency market, or rather, the need for a new form of money in general; legendary hedge fund manager Ray Dalio has confirmed that he thinks that there will be a “paradigm shift” in the economy, as the capitalistic machine just isn’t working for everyone anymore. Dalio said that he thinks the "world is broken." The Wall Street legend did not mention Bitcoin, though many took his comments as a positive sign for a new form of money.
2020 is also looking hopeful to bring an increase in the number of bitcoin retail investors and people using bitcoin and cryptocurrencies for payments. Bakkt, a New York Stock Exchange-owner backed bitcoin and cryptocurrency venture, announced last month it plans to launch a consumer app for cryptocurrency purchases in 2020. U.S. coffee chain Starbucks will be its first launch partner, with the company one of the original backers of the crypto project, along with software giant Microsoft and Boston Consulting Group.
When looking at the chart for bitcoin over the last year, we can see a healthier and more sustainable market than that of late 2017. The market is moving more gradually, unlike the exponential rise in 2017, and is taking longer consolidation periods to re-establish key price support levels. The 'big' price target is the yearly high. If the assets surpass that level, it has nothing holding it back from taking a charge towards an all-time high. However, for the shorter term, we need to cross the price before the drop off in September ($15,100) and in the medium-term, take out the highs of May ($19,700).