Bitcoin - Back to all-time highs?
Dear investors,
In today’s newsletter we will focus on Bitcoin, with Bitcoin’s price back at $50k, bullish sentiment is returning to cryptocurrency and we are providing our insight to see if Bitcoin is worth considering an investment on current prices.
Topics we will discuss:
Bitcoin’s fundamentals
Latest news
Technical Analysis
Conclusion
Bitcoin
Bitcoin is a decentralised digital currency, where no state, central bank or person is in charge. Bitcoin’s can be send from user to user on its peer-to-peer network without the need of intermediaries. Transactions are verified by full nodes and are added to Bitcoin’s blockchain, the network is protected by the miners who mine bitcoin through its Proof of Work protocol. Bitcoin is invented in 2008 by an unknown person or group called Satoshi Nakamoto and started its trading experience in 2009.
Bitcoin had a rough start in the beginning of its creation, with China banning and unbanning the decentralised currency multiple times and uncertainty around the acceptation of other counties, Bitcoin had multiple crashes but managed to survive every time.
Now more than a decade later, Bitcoin has grown exponential with a market cap at almost $1 trillion and is adopted by 150 million people globally. It is used as a method of payment, a store of value and people believe it to be a hedge against inflation.
Bitcoin vs intrinsic value
One of the biggest criticisms about Bitcoin is that the coin has no intrinsic value. Jamie Dimon, the CEO of JPMorgan recently stated that Bitcoin is fool’s gold, basically saying that it has no underlying value.
"It's got no intrinsic value. And regulators are going to regulate the hell out of it," Dimon said.
We like to counter his (and others) opinion and why we do believe that Bitcoin does have an underlying value.
To start, value is determined by humans and their personal needs and wants, if something is considered to be a method of payment for a long period of time it creates historical value. A nice example is gold, gold has been considered a method of payment and a store wealth for decennia’s, some tend to believe that other values in storing and exchanging wealth can be intrinsic to gold, but that is not the case.
Instead, value is determined externally by humans and their personal needs and wants, and its continuity brings about historical value. A long enough usage of the dollar, for instance, could bring about historical significance, but that would still not give an intrinsic value to the USD, it is only paper.
While Bitcoin is only a decade old and in contrast to gold does not have the same historical value, it does not mean Bitcoin has no intrinsic value.
Bitcoin is the only monetary network in the world that allows any user to transact value with anyone else, regardless of their location, race, creed, or status. Bitcoin also allows people to store money that governments cannot control or influence, ensuring fundamental rights and empowering individuals. Therefore we believe that Bitcoin is not fool's gold, but instead another (better) version of gold.
Technical Analysis
Bitcoin / 1D-chart
At the time of writing, Bitcoin is trading around $51k and is back at prices it was a little over a month ago. In the last week Bitcoin had an aggressive jump in price and it is likely it will continue this trend.
Both the RSI and MACD indicator indicated around August bearish divergences in the running up towards $50k (indicating that a short-term top is likely around the corner). Eventually Bitcoin dropped substantially and lost a quarter of its value.
With the occurred pullback in September, technical indicators cooled off to acceptable values with the MACD indicator back in the bullish momentum zone.
We suggested in our fourth Market Overview newsletter that around $53k would be a good point to take potential profit. In addition, we also indicated that $42k would be a good buy opportunity for a mid to long-term position. Now a few weeks later we are back at $50k with a gain of around 20%.
If we wanted to invest in Bitcoin now, we see two potential scenario’s to safely enter positions.
If Bitcoin breaks through its local resistance around $55k and retest the resistance line (making it a support line), we would enter positions. But this is only if it stays above it, if not we expect it to be a failed attempt (bull trap).
If Bitcoin bulls are not strong enough to break through the next resistance line, we expect it to return at around $48k where it enters a short-term consolidation pattern, to make itself ready for another run towards the local resistance line.
Bitcoin / 1W-chart
If we zoom further out into the weekly chart, we can see that around $55k a strong resistance line is displayed where past price performance had multiple reactions on.
The technical indicators on the long-term scale are at acceptable levels to us and we believe Bitcoin’s price will continue to increase in the mid to long-term timeframe.
Conclusion
With Bitcoin becoming more popular by every year, we believe Bitcoin’s global adoption will continue to growth, making it an interesting investment opportunity. Their will likely be more countries to ban Bitcoin because of its unregulated impression against their regulated fiat-currency. But like in the begin of its creation, Bitcoin managed to survive and prospered.
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