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Bitcoin: The Calm Before The Storm
Bitcoin (BTC-USD) has been remarkably stable in recent months. In fact, for over two months Bitcoin has been trading in an incredibly tight range of about $ 6,000 – $ 6,800. There does not seem to be much news worthy of moving prices at this time. So, Bitcoin remains extremely calm for now.
Bitcoin Annual Chart
Source: BitcoinCharts.com
However, despite the tame atmosphere surrounding Bitcoin for the time being, this is predominantly likely only to calm before the storm, a storm that will likely increase Bitcoin prices considerably in the coming years.
This is not the first bitcoin has seen the calm waters. We have witnessed similar periods of modest volatility and modest price fluctuations. First, a similar phenomenon of low volatility occurred in the very advanced stages of the bitcoin bear markets (the opposite of vertical moves and wild price fluctuations we see at the peak of Bitcoin bull markets) . Everyone seems to lose interest, the volume dries, the flow of news is calm and, when you least expect it, the next bitcoin bull market starts.
I expect that the current "quiet period" will soon lead to a new Bitcoin bull market. So, what will be the catalyst to light a game below Bitcoin prices? There are several developments that should start to improve confidence and start moving prices substantially in the future.
Bitcoin at $ 250,000 in 4 years?
Billionaire investor Tim Draper recently reiterated his 250 million bitcoin price target by 2022. Draper believes many of us will use cryptocurrencies to buy coffee and other everyday things in 5 years instead of implementing currencies everywhere. Of course, Draper is not the only one in his bullish analysis on Bitcoin. Tom Lee of Fundstrat and many other prominent figures on Wall Street and not Wall St believe that Bitcoin will be worth much more in the future.
Source: CreditCards.com
Tom Lee even predicted that Bitcoin would be at $ 25K by the end of this year. Well, this does not seem very likely now, however, Bitcoin could be worth many more years from now. The problem with Bitcoin's price targets is that they are extremely difficult to define, but due to the fundamental factors surrounding Bitcoin, the overall trajectory should remain higher in the long run.
Jamie Dimon does not care much about Bitcoin
On the flip side of the discussion, many Wall St members like JPMorgan's CEO (JPM) Jamie Dimon, and even the revered investor Warren Buffet have become avid Bitcoin skeptics. In fact, in a recent interview, Mr. Dimon shared how much he does not care about Bitcoin.
I've never changed what I said, I'm sorry I just said it. I did not want to be the Bitcoin spokesperson. I do not give a fuck, this is the point. Blockchainit's real, it's technology, but Bitcoin is not the same thing as a legal currency.
Jamie's great insight right there, which can accurately represent the point of view of many internal experts on Wall Street and Wall St. So, why Mr. Dimon should worry about Bitcoin, or like or dislike him at all?
Source: imgflip.com
Well, Mr. Dimon is the head of one of the richest and most powerful banking institutions in the world. Incidentally, JPMorgan, like every other major bank in the United States, owns part of the Federal Reserve through shares. In addition, associated banks such as JPMorgan come to assign 6 of the 9 members of the board of directors to each regional bank of the Federal Reserve.
Some readers may think that the Federal Reserve is part of the US government, but it is not. It is sanctioned by the United States Congress through the Federal Reserve Act, but ultimately it is a private enterprise owned by associated banks such as JPMorgan, Citi (C), Bank of America (BAC) and others. Therefore, it is logical to assume that the same entities that hold majority stakes in major US banks by default and through the appointment of most of the directors control the Federal Reserve.
It seems convenient that a private organization like the Fed has a monopoly of creating dollars. The organization creates all the dollars "which it deems appropriate", then lends these dollars to the affiliated banks as JPMorgan at a very low rate, the participating banks then create all the credit they want through the fractional reserve banking system (generally at a rate of 10-1, credit – reserve), and then lend it to the population, small businesses, etc. At a substantially higher interest rate.
This is the system in which we live, the fiat reality. Who do you think a system like this favors and benefits, the people who make the rules or the general public?
So obviously, Jamie Dimon does not care much about Bitcoin. In fact, he should probably fear it and despise it, because Bitcoin and cryptocurrencies in general represent a real alternative and therefore a real threat to the current static order.
The Bitcoin / Blockchain system essentially takes control of the currency by large banks such as JPMorgan and restores power over the currency in the hands of the population, essentially leveling the financial field for all market participants. This takes the potential for predatory manipulation, devaluation, inflation and other unpleasant factors essentially outside the financial equation.
Pay no attention to the 2,000 Plus Cryptocurrencies
Critics often point to the fact that there are now over 2,000 cryptocurrencies in circulation. Some skeptics say that the continuous creation of new digital resources will de-legitimize the entire space and eventually make most or all cryptocurrencies almost worthless.
However, the cryptocurrency complex has maintained a relatively stable market capitalization of around $ 200 billion for months, despite the creation of new currencies. This implies that the new coins that arrive online could have a very limited success going forward and today's prominent coins are likely to be widely used tomorrow's coins.
Source: ViceNews.com
As the segment matures, entry barriers will become higher as there are a number of dominant cryptocurrencies that are likely to maintain their reference market positions indefinitely. In addition to coins specifically designed to handle certain functions such as ethereal Ripple (XRP-USD) (ETH-USD) and others, prominent coins such as Bitcoin Cash (BCH-USD), Litecoin (LTC-USD) and others they will probably retain extremely high portions of the transactional market.
This suggests that while these currencies will increase considerably over time, the more recent currencies that arrive online with similar functions will likely remain largely irrelevant due to the recognition and widespread use of current digital resources and major barriers to the Internet. entry in the future.
I'm still waiting for a real Bitcoin ETF
The SEC continues to get stuck on a Bitcoin ETF. In September, the ruling on 9 Bitcoin ETFs was postponed, but a decision is expected in the near future. The introduction of Bitcoin ETFs will likely open the doors to the Bitcoin market and push Bitcoin into the main stream for conventional investable resources. This will most likely help to ignite the next bull phase in the bitcoins era.
At the moment, investors have very limited access to Bitcoin. They can buy Bitcoin directly through a cryptocurrency exchange, exchange futures contracts with Bitcoin or they can buy the gray-scale Bitcoin Investment Trust (OTCQX: GBTC), none of which is the ideal option for the overwhelming majority of retail investors and institutional. Much easier access will be guaranteed through more traditional Bitcoin ETFs.
Furthermore, even if the SEC will postpone its decision or approve an ETF at this time, the path is already set for Bitcoin to be accepted into the world of mass-scale investment. Future bitcoins already exist and trade freely on the largest stock exchanges in the United States. Moreover, bitcoin has been officially classified as commodity, it is receiving more regulation and the next logical step is to introduce ETFs. In addition, there are many leading companies that are now pushing for the approval of Bitcoin-supported ETFs.
Institutions that could move soon
A very atypical factor of the Bitcoin phenomenon is the extremely limited role that traditional investment houses and Wall Street in general have played in it. In addition to shorting Bitcoin from the highs, it seems that institutional investors have made very little money in Bitcoin, so far. This is exactly why the next wave of capital that can bring the substantially higher Bitcoin will likely come from large institutional investors. This could include the creation of ETFs supported by Bitcoin and other asset classes, infrastructure projects, development and financing of support companies, direct investments and so on.
Opportunities in the digital resource space for investment companies are essentially limitless, which is why Goldman Sachs (GS) and others are starting to venture into cryptographic space. I expect that when the next Bitcoin bull market arrives, Wall St will not do it this time. There is simply too much money to be gained and the space has reached such a size as to attract many billions in institutional dollars. So, next time prices should be particularly high because of the excessive speculation of the Wall Street guys
Improve functionality
Another factor that could push prices upwards is the continuous improvement of digital resources. Whether it's the Lightning network, transactional currencies like Dash (DASH-USD), ZCash (ZEC-USD) and others, big multinationals that start accepting Bitcoin, or other developments, it seems that the trend is leading to a result, much more extensive use of digital resources in the future.
The Lightning Network is optimizing the functionality of Bitcoin, alt coins offer safer or more anonymous ways of trading, and more and more companies are beginning to accept Bitcoin apparently every day. Moreover, Bitcoin returns control over money to the people to which it eventually belongs. I am in agreement with Mr. Draper, in 5 years we will probably use Bitcoin and alt coins much more easily than most people expect, and for this the price of Bitcoin will probably be much higher in 2022.
The Bottom Line: The Calm Before The Storm
The price of Bitcoin is extremely calm right now, but in the past we have witnessed such quiet periods. In particular, the action on Bitcoin prices flattened in 2012 before an upward trend, in 2013, before a rise, and for the entire period in 2015 and 2016, before the most recent uptrend market. One thing that all these periods of calm have in common is that they have occurred after significant falls have occurred and all have preceded important demonstrations. I do not expect this time to be different.
Bitcoin: long-term logarithmic graph
Furthermore, there are a lot of potential catalysts that can trigger an explosive rally in Bitcoin as well as other digital resources. The approval of ETFs supported by Bitcoin, the increase in institutional participation, the improvement of functionality, as well as other bullish elements, will probably play an instrumental role in leading the next wave of Bitcoin significantly higher. The prices of this wave should be significantly higher than current levels and could eclipse the previous top by around $ 20,000 for several factors. So essentially, I'm looking for Bitcoins around $ 50,000 – $ 100,000 in 3 – 5 years.
The risks exist
Regulation of the harmful government
In my opinion, the number one long-term threat Bitcoin has to face is a harmful government regulation or a Bitcoin ban. If the leading Bitcoin-friendly governments such as the United States, the United Kingdom, Japan, South Korea and others follow in China's footsteps and substantially make use and illegal trade in Bitcoin, they could have catastrophic consequences for the price of Bitcoin. The question would probably collapse and when the demand for a commodity diminished, the price would be reduced sometimes drastically. This seems unlikely due to progressive measures taken in the United States, E.U. and other areas related to Bitcoin, but the threat exists, especially if Bitcoin begins to seriously challenge the current fiat financial status.
Continued function problems
Another risk factor is the concern that Bitcoin can never become a widely used transaction currency due to its problems with speed and scale. Yes, the Lightning network promises to solve many of the problems associated with speed, cost and size, but there is no guarantee that the LN will be widely adopted, even over time.
Therefore, there is the risk that the newer and more efficient digital currencies such as LiteCoin, Bitcoin Cash and others will make Bitcoin a bit outdated as a means of real exchange for the masses.
Continuous violations of security and fraudulent activity
The continued security breaches in the Bitcoin world regarding exchanges and individual portfolios are a constant concern. If significant infringements continue to occur, investors and users may begin to lose confidence in the system and the demand may fall as a result.
Likewise for cases of fraud. In a sector that is relatively vaguely regulated, substantial fraudulent activity is a persistent risk. Just as with security breaches, when people are robbed, they reflect the whole industry badly, and demand and prices can be affected.
One Million and One Cryptocurrencies
Another concern is the seemingly endless supply of new cryptocurrencies. There are now over 2000 different cryptocurrencies listed on CoinMarketcap.com. The risk is that the market may become too saturated with digital resources that could lead to a crash or devaluation of many digital resources, including Bitcoin.
Loss of interest among the masses
There is always the simple risk of loss of interest among the masses. There is a possibility that Bitcoin will always remain a niche phenomenon, a novelty, as Jamie Dimon of JPMorgan says. In this case, Bitcoin may not have a substantial demand and the price will most likely decline to a much lower level over time.
Bitcoin is not for everyone
The bottom line is that Bitcoin is not for everyone. I consider it an investment for people with a relatively high risk tolerance, and even in this case, perhaps only 5-10% of the positions in a portfolio should be allocated to digital resources.
Bitcoin is still a relatively new phenomenon and nobody knows exactly how it will end in the long run. The truth is that in 10 years a Bitcoin could be worth $ 1 million, or it could be useless, and given the number of uncertainties, no results should really shock people.
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Disclaimer: This article expresses only my opinions, is produced for information purposes only and is not a recommendation for the purchase or sale of securities. The investment carries a substantial risk for the loss of capital. Please conduct your research, consult a professional and take your investment decisions seriously before putting any capital at risk.
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Revelation: We are / are long-term BTC-USD, BCH-USD, LTC-USD, XRP-USD, DASH-USD, ZEC-USD.
I wrote this article alone, and expresses my opinions. I'm not getting any compensation for this (other than Seeking Alpha). I have no business relationship with any company whose actions are mentioned in this article.
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