You've probably seen the headlines. And you may have wondered: could this be true? Or is this just more Bitcoin rah-rah news? Well, we were wondering the same thing, so we dug into the latest edition (June 2020) of Bloomberg's latest crypto report to find out the reasoning behind the rah-rah.
We're glad we did so, and we've summarised our key takeaways from the crypto report for you here in this article. The five core reasons cover the following areas:
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In our previous article in this series, we looked at how Bitcoin (BTC) has weathered the COVID-19 pandemic so far and found that the coin has largely outperformed most if not all traditional markets.
"This year is about increasingly favourable technical and fundamental underpinnings for Bitcoin, and less so for the broader crypto market, in our view." --- Bloomberg Intelligence
Bloomberg's latest crypto report appears to agree with this assessment, as it went so far as to say that something would have to go really wrong for Bitcoin's value to not appreciate.
Here are the reasons laid out in the crypto report:
Source: Bloomberg Intelligence
According to the Bloomberg Galaxy Crypto Index (BGCI), Bitcoin has risen above the highs it reached in 2017 and appears to be breaking through the $10,000 resistance. The last time Bitcoin broached this resistance was in June 2019 and indicators show that the coin's current performance is already stronger than it was back then.
This can be seen in the graphic above, which depicts the ratio of Bitcoin when compared to the broader crypto market as represented by the BGCI at around 25, up from 23 when Bitcoin prices were at a high back in 2017.
As such, analysts believe that Bitcoin is well-positioned to not only outperform the broader crypto market but also pull the rest of the market along.
Source: visualcapitalist.com
Remember when crude oil and coal were touted as "black gold" and were constantly compared to gold? Well, times have changed --- for what use is oil when people are sitting at home and not driving on the road due to a pandemic? And for how much longer will coal hold its value when countries, businesses and individuals alike are looking to shift to clean energy sources?
Bloomberg analysts appear to feel the same way, saying that another reason they believe Bitcoin will continue its uptrend is the ongoing COVID-19 pandemic which has not only accelerated the coin's maturity but also brought about "historic declines" in the world's most significant commodity (crude oil).
Furthermore, Bitcoin is also experiencing its lowest-ever volatility based on historical volatility readings. For instance, Bitcoin's volatility was nearly seven times higher than the Nasdaq composite's back in 2017 but is now only two times higher than the composite's --- thus leading analysts to believe that the coin is very much moving towards the mainstream.
Source: Bloomberg Intelligence
Bitcoin is often referred to as "digital gold" due to its deflationary nature and use as a store of value. As such, analysts tend to compare Bitcoin price movements to that of gold.
Indeed, analysts have been able to draw a correlation between the price movements of both assets for 52 weeks now and as such are confident that Bitcoin will continue to advance for reasons similar to gold, fuelled by unprecedented levels of money printing by central banks around the world.
Analysts believe that with gold moving towards what will likely be an eight-year high, Bitcoin is likely to also advance towards a new peak.
Source: ig.com
According to Bloomberg analysts, Bitcoin's current uptrend is similar to the ascend it took back in 2016 before it reached its previous peak. Not to mention that like this year, Bitcoin also went through a halving in 2016.
"After 2014's 60% decline, by the end of 2016, the crypto matched the 2013 peak. Fast forward four years and the second year after the almost 75% decline in 2018, Bitcoin will approach the record high of about $20,000 this year, in our view, if it follows 2016's trend." --- Bloomberg Intelligence
Source: Bloomberg Intelligence
Bloomberg also found Bitcoin futures trading trends to be supportive of their analysis. According to them, the near doubling in futures open interest indicates the rapid pace of Bitcoin's maturation, which will, in turn, tilt it toward higher prices.
Other indicators include a stabilising premium in Bitcoin's futures price which indicates more institutional buy-and-hold of the asset, as well as on-chain metrics which point toward a firming price foundation evidenced by the coin's stabilising transactions and hash rates.
So there you have it. The five main reasons Bloomberg analysts believe that Bitcoin will reach US$20,000 this year. Do you agree?
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Disclaimer: The content in this article is for informational purposes only and should not be construed as legal, tax, investment, financial, or other advice.
