Bitcoin, after a prolonged period of stability, has suddenly leaped higher – jumping over the closely-watched $10,000 per bitcoin level for the first time since June and surging toward $12,000, writes Forbes journalist Billy Bambrough.
The bitcoin price has added some 20% over the last seven days, hitting highs of $11,420 on the Luxembourg-based Bitstamp exchange, amid equity market jitters and a rally in the price of gold, considered a safe haven asset.
However, some market watchers have warned the recent bitcoin price gains might not last – with the options market signalling just a 7% probability of bitcoin returning to its all-time high of around $20,000 before the end of 2020.
“Our view for the balance of 2020 is still high volatility with a year end of around $7,000 [per bitcoin] with a drive higher to new highs in 2021,” Gavin Smith, the chief executive of bitcoin and crypto consortium Panxora, said via email following the publication of Finder’s latest cryptocurrency prediction report, adding he expects “a short-term washout this year before the true rally takes hold.”
“Our view is that we still believe the markets are pulled on the one hand by the inflation hedge story driving bitcoin higher while at the same time the global economy is suffering a massive demand shock with the potential to drive bitcoin lower.”
In March, the bitcoin price fell sharply, in line with global stocks and other commodities, as the coronavirus pandemic spread around the world and countries went into lockdown to contain it.
The bitcoin price quickly bounced back, boosted by a highly-anticipated supply squeeze and bullish signals including investment giant Paul Tudor Jones revealing he was buying bitcoin as a potential hedge against the inflation unprecedented central bank stimulus measures designed to prop up coronavirus-hit economies could bring.
Smith’s warning chimes with comments made by Binance chief executive Changpeng Zhao (CZ) last week, who said bitcoin is still tied to the stock market and a future crash could send the bitcoin price lower.
“People should not take the description of bitcoin as a safe haven asset too literally,” CZ told Bloomberg.
Others have also warned the bitcoin price could be heading lower in the short term.
“There won’t be as much money going into bitcoin while people try to survive,” Jimmy Song, author of Programming Bitcoin, said in Finder’s Cryptocurrency Predictions 2020 report.
“Until the prices rise in the grocery store, bitcoin won’t really start taking off. I suspect that’ll take another nine months or so.”
Time to sell?
Finder’s report, released last week ahead of bitcoin’s surge toward $12,000, revealed half of the 28 bitcoin and crypto experts surveyed thought it was the right time to buy bitcoin, with 32% recommending investors hold and 18% saying it was time to sell.
Another panelist, University of New South Wales associate professor of finance, Elvira Sojli, said she expects the bitcoin price to be under $10,000 by December 31 2020. The panel’s consensus was for the bitcoin price to climb to just under $13,000 by the end of the year.
“If anything, the second or third wave of Covid-19 may drive [the bitcoin price] down,” Sojli said, pointing to the coronavirus’ devastating economic impact.
Meanwhile, as bitcoin began its rally past $11,000, the bitcoin options market was signalling just 7% probability of the price returning to its all-time high of $20,000 per bitcoin, data from crypto derivatives analytics firm Skew revealed, with the market putting the odds of $10,000 per bitcoin by Christmas at around 50%.
“Options market is repricing quickly the probability of [new highs] by the end of the year, from 4% to 7% over the last week,” Skew chief executive Emmanuel Goh told bitcoin and crypto news site Coindesk.
Elsewhere, others are confident the bitcoin price is going to continue to soar.
“There are significant changes since March in the way that institutional investors view bitcoin,” Joe DiPasquale, the chief executive of BitBull Capital, said via email.
“Now that institutions have moved into bitcoin in 2020, the price has shown more support over the last couple of months. We will not see a repeat of the March crash, but bitcoin will still remain somewhat more volatile than equities.”
“I think the price needs to take a bit of breather – it has moved quite a lot in a short period of time,” Bill Herrmann, the managing partner of hedge fund Wilshire Phoenix, said via email, adding he could see the bitcoin price hit its all-time highs by the end of the year “if we continue to receive regulatory clarity and continued institutional adoption,” pointing to last week’s decision by the US Office of the Comptroller of the Currency to allow banks in the country to custody digital assets as triggering the latest rally.
“It is huge for the space and that should serve as a tailwind for quite some time.”
Trying to forecast bitcoin price moves has proven difficult, however, and some have warned against trying to predict market moves.
“Predicting the price of bitcoin on an exact timeline is a fool’s errand,” Peter Wall, the CEO of UK-listed crypto miner Argo Blockchain, said via email, though adding he is “very optimistic in the medium to long term, as we believe bitcoin will again be one of the best-performing asset classes in the coming months and years.”