Since falling as low as $8,180 on Monday, the day of the halving, Bitcoin has mounted a strong comeback that culminated in an ongoing move to the psychological resistance of $9,000 and beyond. As of the time of this article’s writing, the cryptocurrency has pushed $9,100.
Bitcoin’s strength comes as the stock market has seemingly begun a process of a bullish reversal, with the S&P 500 falling 2% during Tuesday’s trading session and dropping another 0.7% on Wednesday’s session thus far. Analysts at firms like Goldman Sachs and JP Morgan are currently charting a further drop in the value of equities, citing a slowing economy and harrowing technicals.
Although there is evidence to suggest that cryptocurrencies will be pushed down when (or if) the stock market starts a bear trend, analysts are convinced that Bitcoin’s long-term outlook remains strong. One investor, in fact, suggested that the fundamentals of the network “have never been better.”
Bitcoin’s Fundamentals Are Stronger Than Ever
“The fundamentals for Bitcoin have never been better,” Matt D’Souza — a crypto hedge fund investor and the CEO of Bitcoin infrastructure company Blockware Solutions — opined in a recent analysis published May 13th.
He made this comment in reference to a number of fundamental factors that he sees driving growth in the Bitcoin market. They are as follows:
- The Federal Reserve continues to inject mass amounts of liquidity into the economy via its quantitative easing programs and by maintaining extremely low interest rates, driving the total supply of money in the economy higher.
- During March’s crash in the Bitcoin market, “leverage was removed from the network as traders and miners capitulated.” The collapse of market leverage, D’Souza indicated, will give Bitcoin a better environment to rally as leverage eventually unwinds, pushing prices lower when that happens.
- Bitcoin’s halving just took place, improving the “supply-side economics” of the market as miners have fewer coins to sell to fund their operations.
- Square’s flagship application, Cash App, saw a record amount of Bitcoin sales in the first quarter of 2020, “signaling retail participation.”
- The entrance of Paul Tudor Jones, the legendary hedge fund manager worth over $5 billion, into Bitcoin is a “sign of what’s to come,” referencing the widespread sentiment that Jones’ support for BTC will spark mass adoption of cryptocurrency by Wall Street.
One Bull of Many
D’Souza is far from the only fund manager with an extremely optimistic outlook on Bitcoin.
Speaking to CNN on May 12th, Michael Novogratz — a former partner at Goldman Sachs and CEO of cryptocurrency fund Galaxy Digital — proposed a price target of $20,000 by the end of the year.
Like D’Souza, Novogratz primarily attributed his outlook to the ongoing macroeconomic environment, which is proving that society needs a decentralized and digital asset that has proven scarcity:
We have quantitive easing over quantitative easing all over the world, not just in the U.S. […] On the flip side, Bitcoin’s halving is basically ‘quantitative tightening’. So you have this exclamation point on the story of a scarce asset.
Other prominent bulls certain the cryptocurrency will cross $20,000 and beyond this year include former Goldman Sachs executive Raoul Pal and the founder of one of the first crypto funds, Dan Morehead.
All of them cite the ongoing macroeconomic issues as the main reason why they’re so optimistic. As put best by Novogratz, now is the “perfect time” for Bitcoin. But whether or not the cryptocurrency rises to the occasion remains to be seen.