Editor's Note: This article comes fromMengyan Finance (ID: Meng-eyes), reprinted by Odaily with authorization.
Editor's Note: This article comes from
Mengyan Finance (ID: Meng-eyes)Mengyan Finance (ID: Meng-eyes), reprinted by Odaily with authorization.Which direction the price of Bitcoin will go next is a difficult question for many. Who knows? But the following eight factors are worth considering.
A report on Bitcoin from Fortune began to circulate on Friday. In the report, Fortune and Data Sheet senior writer Aaron Pressman wrote that he tripled his own bitcoin investment, only to lose half of it later.
It’s a cautionary tale for prudent long-term investors in cryptocurrencies and short-term traders who tend to spend their money very stupidly. "Where is the price of Bitcoin going next?" is not an empty curiosity, but a difficult question.The tweet below is from a very early adopter, aging with pain and humor, because the pain can only be seen in hindsight. That was a tweet from 2011. So he's an absolute lunatic throwing a dime into an obvious internet scam. If you ask GOAT investment giants Mr. Buffett and Mr. Munger, well, for them, Bitcoin is still like this. But in hindsight, he wasn't crazy enough:Missing out on an opportunity like this is scary, and despite being in the right place at the right time (being one of the lucky few in 2011 who knew what Bitcoin was), if you really want to back off, remember The last time Bitcoin was so hot, someone even mortgaged their house in December 2017 to buy BTC with a loan.Mortgaging Your Home to Buy Bitcoin at Record Prices Is a Bold MoveTo quote Joseph Borg, chairman of the North American Association of Securities Administrators, in an interview with CNBC at the time:
“We’ve seen people take out a mortgage to buy Bitcoin, or use a credit card, stocks, etc. He’s not a guy making $100,000 a year, he has a mortgage and two kids in college.”
So how to plan a path between these two extremes so as to make a profit without losing money?There is no easy answer. So, if you're too sure about anything in a deeply new, incredibly complex, and rapidly evolving phenomenon like Bitcoin, run away.Nevertheless, the following will provide a big-picture overview of some of the biggest strengths, weaknesses, opportunities, and threats for market assessment to price in today's trading points.Bearish: Four major headwinds for Bitcoin1. Fears of overbought make holders and traders take profits.Sellers can be forgiven for taking profits or being risk-averse in the market. Compared with the previous all-time high in December 2017, the price of Bitcoin has tripled in less than a month. And this is also based on the continuous skyrocketing for 3 months. Bitcoin’s price chart went parabolic from the $10,000 mark in September last year to its return to $20,000 for the second time in December.This is the first time a bitcoin has reached such a high face value in the market since "Rockstar" reached No. 1 on the Billboards. As the most crowded trade in the last month, Bitcoin bulls are easily seriously overbought at the moment. Bitcoin was more popular with hedge fund managers than FAANGMT stocks in January.Note: FAANGMT refers to Facebook, Apple, Amazon, Netflix, Google, Microsoft, Tesla2. Double-spending panic drives risk-averse tradingAmid overheated price concerns this week, there was a rumor that a mining pool double-spent $21. The rumors started on Wednesday when BitMEX Research spotted an RBF transaction on-chain. Still, RBF transactions are a normal part of the blockchain. In fact, they are an intentional feature of Bitcoin's architecture. It allows the private key holder to resend a transaction that has not yet been confirmed but has a higher mining fee. In this way, the sender can induce miners to verify and confirm the order and add it to the blockchain, if the original fee is too low, it may not be verified in time.Gaurav Agarwal, an open-source cloud architect in San Francisco, said developers proposed RBF in BIP125. They implemented it in Bitcoin Core 0.12.0 in 2016.Unfortunately, a hint of a double spend has gone viral, sending bitcoin's price plummeting on Thursday. The total market capitalization fell by about $81 billion due to the ensuing FUD. This is because Bitcoin was specifically designed to use rules and incentives to prevent double spending without a trusted third party. The speed and scale of the lost capital reveals just how many new entrants there are in the market today. There was a lot of froth in bitcoin prices Thursday morning, and it only took a rumor to blow it up.3. Threat-rich regulatory environmentRegulatory uncertainty for cryptocurrencies is coming as the U.S. transitions to a Biden administration. The Trump administration was largely silent on the fintech industry until 2019, openly hostile to bitcoin and cryptocurrencies. Then in July of that year, the president broke his silence on encryption, saying he was "not a fan." Trump also mentioned Bitcoin and Facebook's Libra, linking them to illicit activities such as the illegal drug trade.
U.S. President Joe Biden nominated Janet Yellen to head the U.S. Treasury Department in November. The former Federal Reserve chairman has been a critic of open source finance. Regulatory concerns are growing in the industry when Yellen repeated the Trump administration's line on cryptocurrencies during her Senate confirmation hearings this week. But hours later, she softened her stance in a written addendum to her answer.
Meanwhile, Biden has ordered a regulatory freeze on all new proposals until his administration has had a chance to review them. That included a proposal by Yellen's predecessor at the Treasury Department to regulate self-custodial crypto wallets. Bitcoin users are waiting to see what Biden will do, and the market abhors uncertainty.4. Bitcoin safe haven/non-correlation questionedPerhaps the biggest bearish factor facing the Bitcoin price right now is the still-unresolved issue of correlation. Bitcoin is a correlated asset that rises and falls with other securities like stocks, bonds, commodities, etc.? Or is it a non-correlated asset and therefore a valuable hedge that can diversify a portfolio? That's the role gold plays in fund managers' portfolios as a hedge against inflation and stock market losses. For most of 2019, Bitcoin's market movements have not been correlated with other asset classes. There is neither direct nor inverse association. But during the collapse in global asset valuations last March, bitcoin fell as sharply as everything else. This dealt a major blow to the non-correlation argument, which remains a doubt to this day.Bullish: Four major tailwinds for Bitcoin1. The tsunami of institutional investment in the past two quarters"Grayscale's assets under management have skyrocketed as Wall Street has become synonymous with investing in bitcoin. The New York-based investment firm started last year with $2 billion in assets and ended the year with more than $202 million in assets." This 900% increase was driven by demand from institutional investors such as hedge funds, endowments and pension funds, the firm said in a quarterly report on Thursday." - CNBC, January 14, 2021 dayDespite Bitcoin's headwinds, hedge funds are still pouring money into the market. In a never-ending hunt for yield, managers have had to look beyond stocks and bonds as the year rolls by. The Nasdaq Composite melted higher, ending a year-long run of weekly highs, an entry point that has ruled out any hope of a stellar return on investment.Business multiples (the relationship between stock prices and related fundamentals such as earnings) are at historical extremes. The price of the stock is jaw-dropping, and the current price is higher than Buffett's price in the past 10 years. The stock price is too rich, and it also makes his blood rush. Tesla's price-to-earnings ratio has soared to a staggering 1,618.That's because of the constant growth that investors like TSLA bull Chamath Palihapitiya expect. But keep in mind that, according to Investopedia, "the average price-to-earnings ratio for the S&P 500 has historically been between 13 and 15." This new valuation model is so completely decoupled from corporate fundamentals that a Zacks commentator at Yahoo Finance asked this week if P/E ratios still matter?Meanwhile, bond yields have only barely woken up from terrible record lows for a longer stretch in 2020, even as they got a boost from the Biden election victory. And as Crescat Capital's Otavio Costa notes, five-year inflation-adjusted real yields on fixed-income securities are approaching historic lows.2. Star-studded stars have joined Satoshi Nakamoto's worldAt the same time, the retail crowd is more enthusiastic about Bitcoin and the cryptocurrency industry than ever before. Currently, the search volume for "bitcoin" on Google is about 10 times that of September 2020.Additionally, a wave of celebrity endorsements is driving awareness of Bitcoin and cryptocurrencies to fans across the globe. Scaled social media channels are amplifying their signals, accelerating adoption in a way that wasn't possible just a few years ago. For example, last May, JK Rowling had Bitcoin explained to her, and it caused a huge stir. Elon Musk also answered among other Bitcoin and crypto enthusiasts.Just this week, Rick and Morty creator Justin Rowland combined art and finance to stunning effect. He successfully auctioned off his works of art with a total price of 1300ETH and a market value of about $1.6 million.Roland was long overdue. Earlier in August, Paris Hilton auctioned off a painting of a cat for more than $16,000 worth of ETH. That same month, Ashton Kutcher also joined the ranks of Ethereum art auctions. Earlier this month, Lindsay Lohan of "Mean Girls" and "The Parent Trap" fame predicted that bitcoin would hit $100,000.It doesn't sound that strange. As early as 2011, Lohan tweeted, "If the Fed continues to print money, (the dollar) will soon be worthless!" In addition, last November, HBO "Game of Thrones" played Arya Shi Tucker’s Maisie Williams also asked her followers on Twitter if they should be “long Bitcoin”? Last month, Russell Okoon of the Carolina Panthers also said that he is now the first NFL player to be paid by the league in Bitcoin."Pay me bitcoin," he tweeted a year ago.3. The Fed’s monetary expansion in 2020As Buffett said of interest rates in a CNBC interview in February 2016: "Interest rates are like a gravitational force in valuation. If interest rates are zero, then value can be almost infinite. If interest rates are extremely high, it's Great gravity on value. We had that in the early 1980s... Berkshire Hathaway holds billions of dollars in one of our insurance companies in Europe, and they're going to assume Negative interest rates."Buffett added, with his characteristic sense of humor: "If only we had a big mattress in Europe and put all this stuff in it. If only I could find someone I trust to sleep on the mattress!"This is why Bitcoin investors have trouble understanding the Oracle of Omaha's extreme disdain for Bitcoin and cryptocurrencies. And the vast majority agree with his understanding of the role of interest rates and the money supply in valuation. This fundamental macro focus on finding refuge from central bank currency debasement is perhaps Bitcoin’s biggest selling point.Assets denominated in central bank money are inflation-designed. The supply of Bitcoin is limited, and the issuance rate is fixed. It will be halved every four years. It is designed to be strongly deflationary. No wonder last year’s unprecedented monetary expansion to curb deflation saw Bitcoin double its 2017 value.4. Strong Fundamentals: Bitcoin Hash Rate and New AddressesAt the height of the bitcoin bubble in 2017, Peter Boockvar, chief investment officer at Bleakley Advisory Group, called bitcoin a "giant price chase without foundation." Bitcoin is "baseless" is a common refrain from critics of cryptocurrencies. But that's not the case with Bitcoin.
