19 Jul Small steps, but next six months critical for cryptocurrency
Fundstrat Global Advisors co-founder and analyst Tom Lee says despite appearances, incremental steps in the market have been positive but the next six months are critical for cryptocurrency.
Lee says the past weeks 17% gain the overall cryptocurrency market is a positive sign. As well, he notes that privacy tokens rose 18% and small-caps also rose 16% after the continuous selling pressure underway throughout most of 2018 so far.
Recent positive developments
He points to social media reluctance, especially on Telegram and Twitter, to pick up on several recent positive developments including:
- MasterCard received a patent enabling customers to use credit cards to purchase cryptocurrency and speed up transactions; this indicates potential acceptance of cryptocurrency in the near future
- the Chartered Financial Analyst (CFA) Institute added cryptocurrency to its CFA exam due to strong interest in surveys and focus groups saying “this is not a passing fad”; this signals the need for deeper understanding of this new asset
- technical analysis strategists are pointing to an expected upturn
- despite short-covering, Lee says all rallies start with that and then build momentum.
Lee says the only potential short-term risk on the horizon is from government:
“What could go wrong?” he asks. “The greatest risk, in our view, is unfriendly government and regulatory action against crypto. There are Congressional hearings this week and so far, they seem fairly constructive.”
That said, the short-term is less certain for cryptocurrency and bitcoin. Bitcoin has recently traded 30% below its 200-day average and the Bitcoin Misery Index dropped to 27 and recently recovered to 39, indicating a strong buy signal.
The uncertain timing or likelihood of approval for bitcoin ETF’s remains a question and tends to dampen larger investor interest in the short-term.
He also says the current altcoins cycle is still in “purgatory” and not likely to move positive until mid-August to mid-September.
Looking ahead for growth
Recent developments support higher prices in the medium to longer term according to Lee.
CME Group posted record volume for bitcoin futures trading, indicating stronger and rising interest by institutional investors.
SEC uncertainty about rulings on which coins other than bitcoin, will be deemed securities should strengthen bitcoin’s position compared to most other coins in his view.
Lee adds, “Institutional custody solutions are coming along but favor larger tokens like BTC.”
He also notes more than $10 billion has been raised by ICOs to date in 2018, much of it in projects outside of the US “and is where family offices and incremental capital is focused.”
Fundstrat is more favorable towards commodities tokens like bitcoin, Zcash, Litecoin, Bitcoin Cash which are thus easier to implement to payment systems and less subject to regulatory risks.
“In general, we see 2018 being a strong year, but we see the larger and more established blockchains growing in dominance in 2018—hence, better upside for ETH and BTC over the FS CryptoFX indices,” he writes.
Lee’s team is still predicting year-end values for bitcoin at $25,000, Ethereum at $1,900, Ethereum Classic at $60 and Neo at $30.
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