Since peaking at $13,900 in June, Bitcoin has fallen by 25%, managing to lose the support of bulls after a rally from $3,150.
Cynics of the cryptocurrency markets, like gold proponent Peter Schiff, have said that this is a clear sign that there is no remaining interest in BTC, and that cryptocurrencies are on their way out.
But, Thomas Lee of Fundstrat Global Advisors recently reassured investors in this market that there are a number of catalysts on the table that are setting Bitcoin up for fresh all-time highs.
The following are some of the key potential market factors he mentioned in a Thursday interview with CNBC “Fast Money”.
— CNBC's Fast Money (@CNBCFastMoney) September 12, 2019
Institutional Money Flooding Into Crypto
Firstly, Lee touched on the fact that institutions continue to have a growing effect on the cryptocurrency markets, which he says will cause Bitcoin’s price to appreciate.
He cites Bakkt as a sign that, as Brian Kelly of the Fast Money panel would say, “the institutional herd is coming”. Indeed, the Intercontinental Exchange-backed cryptocurrency platform is reported by Fundstrat to have a “critical mass” of institutions ready to adopt Bakkt’s Bitcoin futures at launch on September 23rd.
Fundstrat analyst Sam Doctor said earlier this year that the exchange is going to give institutions on the edge about cryptocurrency the push to actually begin investing in Bitcoin.
The firm’s launch isn’t the only sign that institutions are slowly injecting human and financial capital into cryptocurrency. As reported by Blockonomi previously, The TIE recently wrote that one of their social media indicators has been exhibiting an odd trend, showing no signs of growth as Bitcoin’s value has exploded in 2019.
The analytics firm suggests that this is a clear sign that retail investors aren’t as influential in this rally as in 2017. Instead of retail investors, they implicated institutions.
Stock Market Rally to Boost Bitcoin
Secondly, the Fundstrat co-founder looked to the recovery that the S&P 500 and other equities indices have had after this summer’s trade spat between the U.S. and China.
After hitting 2,750 in June, the S&P has since bounced back to 3,000. Lee says that a continued rally in equities to new all-time highs will cause Bitcoin to surge higher too, potentially past $20,000.
He explains that the best years for the S&P 500 over the past decade have also been Bitcoin’s best years, implying that a further surge in American stocks will be a catalyst for BTC to head higher.
The idea here is that as investors make copious gains in the stock market, they will look to park their funds in alternative assets that have the potential to rally.
Central Banks Liquidity Injections to Boost Cryptocurrency
And lastly, the market analyst said that central banks’ decision to continue injecting liquidity into the economy is likely to boost Bitcoin.
Indeed, the European Central Bank on Thursday cut its policy interest rate again and started the next round of quantitative easing. Also, the Federal Reserve is expected by the market to cut rates this month, marking the injection of more liquidity into the economy.
As the Financial Times’ Henny Sender wrote about central banks in relation to Bitcoin: these monetary policies, “which amount to competitive currency devaluations in the name of reflating economies”, are driving up the price of Bitcoin.
While Lee was hesitant to mention an exact price target in this interview, he has said in previous statements that the aforementioned factors, coupled with other demand drivers for Bitcoin, could bring the cryptocurrency to $20,000, or even $40,000, by year’s end. But it isn’t clear if he still holds this prediction today.