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Survey: Bitcoin’s bullishness isn’t fading; demand to underpin recovery and support crypto king around $7,000

Wed, 09 Oct 2019, 08:27 am UTC

Bitcoin’s descend will be very well supported around 7,000 and most likely recover soon to its 2019 high by year-end against the U.S. dollar on higher demand from institutional players, an FxWirePro survey showed.

After a year-long pain, the battered bitcoin, which lost about 80 percent last year, is once again on the path of rising. But since June it is going through a period of technical adjustment, declining about 60 percent in just last three months.

In September alone, the bitcoin suffered over 70 percent. But majority of the crypto analysts believe that the down trend is unlikely to persist.

According to the median forecast of 20 research organizations and institutional investors surveyed between September 30 – October 9, the Bitcoin is forecast to break this year’s high of around $13,770 by end-2019.

While 13 forecast it to surge to $18,000 or more by December, four forecast the prices to rise to $25,000 or more. Only three predicted the BTC/USD to decline and hit as low as $3000.

“Bitcoin is going through a period of technical adjustment after the fierce Q2 run up, though we anticipate continued demand from institutional players starved for yield in a world where global equities are increasingly vulnerable. Plenty of demand is reported on dips down towards $7,000,” noted LMAX Exchange in its October 8 report.

“The market continues to correct and consolidate in the aftermath of a major surge in the second quarter of 2019. However, any setback should be very well supported around $7,000, with an eventual higher low sought out in favour of a bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 5,750 would compromise the constructive outlook.”

It is worth noting that a state-backed German bank, Bayern LB, has predicted that Bitcoin will hit a price of $90,000 by May 2020, in anticipation of the “halvening” of new supply.

“The most intriguing question, of course, is what the future will bring. What is certain is that Bitcoin’s stock-to-flow ratio will increase drastically in May 2020 - i.e. after the next halving - from around 25.8 at the moment to almost 53. By contrast, gold’s stock-to-flow ratio (currently in the vicinity of 58) will only be insignificantly (if at all) higher next May. If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000 (the current model value is roughly USD 7,500),” said Manuel Andersch, senior FX analyst at Bayern LB.

“The stock-to-flow approach will serve, at any rate, as a good heuristic for understanding Bitcoin. It becomes clear that Bitcoin has been conceived as an ultra-hard type of money. In 2024, its degree of hardness will inexorably increase even further, to a level unprecedented in human history. Nobody really knows what repercussions such a monetary standard would have. Only one thing is clear: if Bitcoin is indeed to become the money of the 21st century, it will be because its properties have been preferred to those of alternative types of money - after all Bitcoin is a completely open monetary system operating on a purely voluntary basis.”

Bullish experts say the strong showing could signal that bitcoin has a future as a worthy investment opportunity. But the currency's volatile and controversial history has prompted plenty of scepticism.

Ethereum is also forecast to recover some of its losses made last year and hit the $500 rate by end of this year on hopes of demand recovery. But a global economic downturn and regulatory challenges are the biggest downside risks over the coming year.

“Profit taking in the aftermath of the rapid Q2 appreciation has triggered a healthy period of correction and consolidation, while critique of the space from the likes of President Trump and Fed Chair Powell, along with worry associated with fallout in the global economy, are stories that could continue to keep the more risk correlated crypto asset weighed down in the second half of the year. Risk off in the global economy is expected to result in ETH underperformance relative to Bitcoin,” LMAX added.

“The market is in the process of a major correction after a surge in the second quarter of 2019. Look for setbacks to be well supported above of previous resistance turned support at 150 on a weekly close basis, in favour of the next major higher low and bullish resumption back towards and through the 2019 high up at 363. Ultimately, only a weekly close below 150 would compromise the outlook.”

To participate in FxWirePro’s monthly cryptocurrency poll, please drop an email with your company details at [email protected]

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