What’s Behind the New Bull Run and What’s to Come?
Bitcoin’s decisive break above the psychologically important $10,000 mark – with $11,000 breached over the weekend and in sight again today – is being driven by institutional investors and the afterglow from Facebook’s Libra news, despite the regulatory and political pushback against Mark Zuckerberg’s global money plans.
Below Finance Monthly hears commentary from interactive investor cryptocurrency analyst Gary McFarlane on bitcoin passing $11,000 over the weekend.
The recommendations, as expected, from the global G7-instituted Financial Action Task Force, which will see crypto exchanges and others required to provide full know-your-customer (KYC) details on clients and all parties to crypto transactions, has done little to dampen bitcoin buying.
Other top altcoins – all other coins barring bitcoin – are struggling today.
Two notable exceptions are decentralised application platforms Ethereum (its Ether token is the second-most valuable crypto), and one of its many rivals, Tron, whose founder and chief executive Justin Sun recently won the auction for lunch with legendary investor and crypto sceptic Warren Buffett at a cost of $4.57 million.
Other factors in play behind the bitcoin rally
Geopolitical tensions, notably in the Middle East; the realisation that historically unprecedented loose monetary policy by central banks is not being reversed any time soon, the China-US trade war encouraging bitcoin’s use as a conduit to effect capital flight by some Chinese investors; record high trading in distressed economies such as Turkey and to a greater extent Venezuela and some other countries in Latin American; and talk of an outright ban on crypto by the authorities in India. These are all helping to propel the bitcoin price higher, providing, as they do, a range of examples of its use case as a store of value, no matter how peculiar that may sound for such a crash-prone asset.
Is the fourth parabolic bitcoin price upturn upon us?
Talk is now turning to the possibility of “the fourth parabolic”, which postulates a rise in the bitcoin price beyond the previous all-time high at $20,000 in December 2017.
With end of year targets of $40,000 from Wall Street analyst Thomas Lee of Fundstrat Global Advisors and commodity trader Peter Brandt saying $100,000 for next year is a possibility, which would align to the run up to block rewards halving from 12.5 to 6.25 in May 2020 for bitcoin miners, it is starting to feel like 2017 all over again.
That might sound fanciful in the extreme but on past form it is a possibility – and so is a crash from wherever any potential new all-time high might form.
When bitcoin first surpassed $10,000 on 29 November 2017 it only took 17 days to reach its all-time high near $20,000, but past performance is of course not a reliable guide to future performance, especially where crypto is concerned.
Judging by Google Trends, searches for ‘bitcoin’ haven’t surged yet in the way they did last time round: December 2017 scores is 100 and we are currently registering 16.
It suggests current buyers are those who have previously been in the market and were waiting on the sidelines for a new entry point. That could mean there is plenty of near-term oxygen to drive this market higher, but as always with crypto, it will be a high-risk rollercoaster ride. The fear-of-missing-out (FOMO) impulse for now is more in evidence among institutional buyers.