There’s no hiding the fact that Bitcoin, at least in terms of its price, has underperformed amid the ongoing crisis unfolding around the world, caused by the coronavirus shutdowns the world’s governments have implemented.
Since the February highs at $10,500, the cryptocurrency has fallen to $6,500, marking a loss of just under 40%.
Despite this, there are a number of prominent analysts who think that Bitcoin’s fundamentals will only strengthen through this crisis. In fact, in a recent analysis, long-time market veteran Dan Morehead went as far as to say that during this crisis, Bitcoin will “come of age.”
1/ I have spent 35 years trading global macro disruptions. This is like no other. This will certainly end the longest global expansion on record.
Bitcoin was born in a financial crisis. It will come of age in this one.
Here are my thoughts: https://t.co/yjx2FwEEoN
— Dan Morehead (@dan_pantera) March 26, 2020
This Crisis Could Be Bitcoin’s Biggest Opportunity Yet: Veteran Investor Explains
Over the past few weeks, the global economy has spiraled into chaos; amid the coronavirus outbreak, unemployment claims have skyrocketed to record levels, prominent investment firms are projecting potentially Great Depression-level GDP contractions, and the stock market has seen its fastest crash in history, losing over 30% in a matter of a few weeks.
Due to this, governments and central banks have been forced to respond with their most drastic measures available — boosted unemployment benefits, tax holidays, free money for all citizens, trillions of dollars worth of quantitative easing, and negative interest rates are amongst the measures being taken by the world’s authorities to try and save the flagging economy.
According to Morehead, this trend towards unorthodox monetary and fiscal solutions will be astronomically bullish for Bitcoin and some other assets. As he wrote in his company’s latest newsletter:
As governments increase the quantity of paper money, it takes more pieces of paper money to buy things that have fixed quantities, like stocks and real estate, above where they would settle absent an increase in the amount of money. I think they will do that. The corollary is they’ll also inflate the price of other things, like gold, bitcoin, and other cryptocurrencies.
He added that with the government deficit in the trillions, it will have a “positive impact on the price of things not quantitatively-easable — stocks, real estate, cryptocurrency relative to the price of money. Said another way, the BTC/USD cross-currency rate will rise.
Bitcoin Will Hit a New High Within 12 Months
With the backdrop set for Bitcoin, Morehead concluded in his letter by remarking that the leading cryptocurrency will likely set a new price high “in the next 12 months,” adding that rapid growth that some bulls expect “is not going to happen overnight.”
This was echoed by Raoul Pal — ex-head of Goldman Sachs’ equity derivatives business and the current CEO of Real Vision — who told an interviewer that he thinks the price of Bitcoin will rally to its $20,000 all-time high within the coming 12 to 18 months.
This interview was released shortly after he remarked that he is more bullish than ever on Bitcoin, remarking that there’s a possibility that “all trust” in the “entire system” has been lost. This was presumably in reference to the world’s response to the outbreak of COVID-19, which has revealed clear insecurities in the fabric of society, from politics to finance.
As to why it will take around 12 months for Bitcoin to reach new highs, Morehead explained:
My best guess is that it will take institutional investors 2–3 months to triage their current portfolio issues. Another 3–6 months to research new opportunities like distressed debt, special situations, crypto, etc. Then, as they begin making allocations, those markets will really begin to rise.
Indeed, with the three primary asset classes — stocks, bonds (rallied, then crashed hard), and commodities — all underperforming in tandem in the crisis, investors may begin to seek alternatives, cryptocurrencies included.