Bitcoin prices have carved out a fresh near-term nadir, extending a downtrend that has taken hold of the world’s No. 1 virtual currency since a recent peak in May peak and raising doubts about bullish forecast for the virtual currency.
A single bitcoin BTCUSD, +5.59% on the Kraken exchange was trading at $5,883.36 on Friday. That represents a roughly 60% tumble in bitcoin in the first half of 2018 and a 70% plunge from its peak near $20,000 late in 2017. By comparison, the Dow Jones Industrial Average DJIA, +0.23% is down 1.2% so far in 2018, while the S&P 500 index SPX, +0.08% is set for a gain of 2.3%.
Just a few weeks ago, one of the staunchest and more vocal bitcoin proponents, Tom Lee of Fundstrat Global Advisors, reiterated a prediction that the asset would end the year around $25,000 during a Bloomberg interview (paywall). Bitcoin Foundation‘s Llew Claasen back in February said bitcoin would touch $40,000 by the end of this year, in a Business Insider interview (paywall).
However, the digital asset’s current dismal trading action makes those lofty prognostications for a finish at new records above $20,000 and beyond questionable.
“I can’t base my analysis on anything other than technicals and right now the charts are looking very bearish. Therefore, as things stand, I have no reason to expect bitcoin to go to those crazy levels again,” said Fawad Razaqzada, technical analyst at Forex.com.
Robert Sluymer, technical strategist at Fundstrat Global Advisors, and a colleague of Lee’s concurs with Razaqzada.
“You have what is happening and what could happen and I think if you are using technical [analysis]—and you have to be very truthful about what is happening—then we have a downturn in place,” he said.
“From my perspective price is news and [bitcoin] needs to show evidence of turning to reinstate bullish calls,” said Sluymer, referring to the asset’s breach below levels of around $7,000 a few weeks ago.
In order for bitcoin to hit $40,000, it would need to surge by about 590% in the following six months; for a finish at $25,000, the asset would need to rise more than 330% by year-end.
Is that possible? Sure.
Bitcoin bounced by about 240% from its November 2017 low to a peak at $19,783 within a few short weeks to mid December, according to news and research site CoinDesk. On top of that, the rolling six-month change for bitcoin from August to December of last year represented gains of at least 300%, according to WSJ Market Data Group.
However, critics argue that last year was marked by euphoria centered on blockchain, the distributed-ledger technology that underpins virtual currencies, and cryptos like bitcoin, luring fresh interest in virtual currencies from Main Street and Wall Street alike, and helping to juice sentiment around the asset.
Fast forward to this period and bitcoin’s current decline in value comes even as the stage for further gains seems set. Institutions, some of which had cast a dubious eye on cryptos, have declared intentions to form trading platforms or invest in blockchain.
Indeed, one of the world’s most prominent investment banks, Goldman Sachs Group GS, -1.28% in May announced in a New York Times article that it would launch a cryptocurrency trading desk. Meanwhile, regulatory attention in the nascent sector has helped to bolster its legitimacy, as the Securities and Exchange Commission has cracked down on special types of crowdfunding tied to digital coins, but fostered an environment that may facilitate the maturation of bitcoin and alternative coins to bitcoin, known as altcoins. Those include Ether ETHUSD, +7.32% running on Ethereum’s blockchain, XRP coin XRPUSD, +7.16% pegged to Ripple, and bitcoin Cash BCHUSD, +9.46%
Read: SEC may make it easier to create exchange-traded funds
It is a backdrop that ought to create a runway higher for bitcoin. But it hasn’t. And that is part of the dynamic that has shaken the confidence of those who track virtual instruments that are intended to compete with fiat currencies like the U.S. dollar DXY, -0.89% and euro EURUSD, +0.9854%
“Bitcoin’s recent and dramatic depreciation against the dollar has called into question the cryptocurrency’s commonly touted purpose as a ‘store of value’ or ‘digital gold,’” said Eiland Glover, CEO of Kowala, a crypto business focused on virtual currencies designed to be less volatile than bitcoin.
“Rather than a mere dip, this could very well signal the beginning of an existential crisis for the currency. With investors seriously questioning bitcoin’s first mover advantage, it seems unlikely that the currency will be achieving previous lofty price predictions anytime soon, and certainly not this year,” he wrote.
To be sure, some of the more ardent fans believe that a jump to a fresh record for bitcoin before the end of the year remains a genuine possibility.
The bull case is that there are still a wave of investors set to emerge, which should send prices higher later in the year.
Matthew Newton, market analyst at eToro, a crypto brokerage platform, argues that there are still many more entrants to come, even after 2017’s introduction to the uninitiated.
“Particularly institutions who would have far great financial power. We’ve seen what can happen with retail investors, what could we see with institutional inflows,” he said. “There’s trillions in cash [on] deposit in US bank accounts. We’re only scratching the surface,” Newton said.
Iqbal Gandham, managing director at eToro, added that unscientific surveys conducted by eToro in the U.K. suggest that few investors that heard about bitcoin during its mainstream upsurge in 2017 actually invested in cryptos. “We had a lot of people talk the talk but very few people walked the walk,” Gandham said.
Many crypto bulls shares this rosy outlook, including Ethereum co-founder Charles Hoskinson via Twitter:
What's often missed by the cryptocurrency is going to die broken record media is that after the next wave of regulation, wall street is showing up to the party with all their locked up capital. That's tens of trillions of dollars entering the space eventually. Future is bright
— Charles Hoskinson (@IOHK_Charles) June 21, 2018
