During a recent CNBC “Futures Now” segment, Tom Lee, the head of research at Fundstrat Global Advisors, claimed that Bitcoin’s fundamentals and technicals all point to the conclusion that the so-called “crypto winter” is over. And maybe, just maybe, spring is on the horizon.
Crypto Spring Might Be On The Horizon
Like him or not, Tom Lee has stuck with Bitcoin through thick and thin. Sure, the asset didn’t rally past $25,000 by the end of 2018 as the Fundstrat co-founder postulated in early-2018, but he has somehow kept his head up high.
Speaking to CNBC, Lee explained that while last year was “terrible” for cryptocurrencies, marked by what he dubbed a “massive bear market,” there are signs that winter is ending. He looks to a piece of analysis that Fundstrat compiled, which stated that Bitcoin and cryptocurrencies are currently showing 11 “signs” that only “take place in a bull market.” Here’s a brief breakdown of some of those signs.
— CNBC Futures Now (@CNBCFuturesNow) April 25, 2019
Firstly, Lee looked to blockchain statistics, specifically that of Bitcoin. He explained that the transactional value of on-chain transfers has turned positive on a year-over-year basis, signifying that BTC is still seeing constant use for its intended purpose, in spite of the brutal conditions in the market. What’s even more positive is the fact that average daily transactions processed on the Bitcoin chain are reaching near-all-time highs, but that the fee market has yet to froth.
Secondly, the long-standing cryptocurrency optimist (who is also hopeful that traditional markets and emerging markets will do well too) looked to the fact that BTC has moved above and held on top of its 200-day simple moving average.
Throughout Bitcoin’s history, and the history of other liquid, tradable assets, the aforementioned technical level has been seen as a kind of ‘make or break’ point, in that holding above it signals that bulls have the upper hand.
Combine this with the fact that Bitcoin’s daily chart recently printed a golden cross, which saw the 50-day simple moving average cross over the 200-day, is another reason, in Lee’s eyes, that “spring” might finally be inbound for digital assets across the board.
Lastly, and arguably most importantly, is the growth in trading activity in cryptocurrency markets, especially over-the-counter (OTC) desks. Citing closed-door conversations, Lee explained:
“We surveyed OTC brokers, who are really important in facilitating institutional investors, and they’ve all talked about a 60% to 70% increase in activity/number of clients and trading volume per client. Fundamentals are improving; technicals are improving, and activity by HODLers too.”
With all this in mind, he claimed that Bitcoin could potentially see new all-time highs by 2020, but was unclear about the specifics of this pseudo-prediction. (Lee notably asserted that he wouldn’t make explicit forecasts in late-2018 after an influx of backlash.)
Where Could BTC Head Next?
Although many analysts are convinced that Bitcoin will see new highs by late-2020, where could the asset head next? Or more importantly, what’s currently fair for the market to value BTC at?
Per a number of statements from Lee, anywhere from $10,000 to $20,000 might be fair for the asset, meaning that BTC is dramatically undervalued. In a comment given to CNBC “Squawk Box” after Bitcoin’s sudden move past $5,000 in early-April, the commentator opined that BTC has historically traded at 2.5 times the cost to mine one coin.
With Fundstrat estimating that breakeven mining costs current sit around $5,500, a $14,000 “fair” valuation was extrapolated. In another statement, Lee explained that if BTC follows the trail that “risky assets,” like the stocks in the S&P 500 and emerging markets, have blazed, within one standard deviation, Bitcoin could reach as high as $10,000 or even $20,000.
But will this occur? At this point, especially with the Tether and Bitfinex ‘FUD’ looming over the market, no one is all too sure.