Is Bitcoin at $20k the same as Bitcoin at $3k in 2018?
NEW YORK (July 12) With many debating the length of this Bitcoin bear market, Bloomberg Intelligence compared the current $20,000 level to the $3,000 level back in 2018.
During the past week, Bitcoin has steadied somewhat, holding just above $20,000 on Monday, which is down 70% from its November all-time highs of $69,000.
And despite a real risk of prices falling even lower once again, Bloomberg Intelligence is comparing today's opportunity of $20,000 to other historic price bottoms.
“Bitcoin at $20,000 may be looked back upon like $2 in 2011, $200 in 2015 and $3,000 in 2018. Bitcoin and Ether risk measures are falling vs. equities, and the potential for U.S. regulation (Lummis- Gillibrand crypto plan) shows mainstream maturation," said Bloomberg Intelligence senior commodity strategist Mike McGlone. "The significance of about $2 in 2011, $200 in 2015, and $3,000 in 2018, is they were Bitcoin base- building levels when reaching a similar discount to its 50-week moving average as at the start of 2H."
It is not surprising to see Bitcoin plunge so dramatically in the second quarter of the year as the Federal Reserve embarked on the most aggressive tightening since 1994, noted McGlone in his mid-year crypto outlook, adding that all risk assets went through excess purging.
"Cryptos were a leading indicator of speculative excesses in 2020-21 and are likely poised to resume outperforming most risk assets when the dust settles from the great reversion of 2022. Slightly below $1 trillion at the start of 1H, the crypto market cap is a fraction of the about $25 trillion wiped out from global stock markets," he wrote.
Going forward, it is unlikely that Bitcoin will trade below the $20,00 level on a sustained basis, McGlone's outlook added.
"It could dip lower in the near term and take a while to build a similar base as in 2011, 2015, and 2018, but in the history of Bitcoin vs. its 50-week mean, it doesn't get much colder," he said. "A common theme in crypto assets is to embrace the bear and build a better financial system, notably from the institutional and longer-term focused, akin to 2000-02's bursting internet bubble."
Bloomberg Intelligence pointed out that Bitcoin is either in one of the greatest bull markets in history, with prices currently trading at a discount. Or it is a failed experiment.
"Our bias is Bitcoin adoption is more likely to continue rising along with its enduring outperformance vs. most risk assets," McGlone pointed out. "The Nasdaq 100 stock index (NDX) was down about 30% in 1H and a key reason that the Bloomberg Galaxy Crypto Index (BGCI) dropped almost 70%. Yet since the crypto index's inception in August 2017, it remains well ahead of equities."
Another indicator to watch in Bitcoin is miner stress, which can mark a bottom in prices, the report noted.
"Miners played a big role in Bitcoin's record selloff during 2Q22 … Further liquidation is possible until at least the macro picture improves. Miner stress is usually the final phase in a Bitcoin bear market as a falling hash rate and difficulty adjustment reset supply dynamics," McGlone wrote. "During July 2021-March 2022, miners were mostly net accumulators of Bitcoin despite the price climbing to a record high of $69,000 and then retracing to around $35,000. The result was a supply overhang which became progressively burdensome for miners as the hash rate -- the amount of computing power used for mining -- continued to rise in the face of falling prices."
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