The price of bitcoin has had a sizeable bump over the past week, but is it a sign that the cryptocurrency could be climbing back to the highs reached in December, or even further?
You bet, says known crypto-bull Thomas Lee of Fundstrat Global Advisors, who claims that US$25,000 is in the cards for bitcoin in 2018.
Early in April, the world’s most valuable cryptocurrency hit lows not seen since last November, bottoming out in the $6,620 range (all figures in US dollars unless noted) by April 6. But a mini-rally has surfaced, with Bitcoin currently trading in the high $7,000s. Many are attributing the bounce to US investors who would have filed their taxes by April 17 (Americans are said to now owe an estimated $25 billion in taxes for their digital currency gains over the past year).
But beyond the tax bump, bitcoin is now ready to push higher once again, says Lee, said to be the only major Wall Street strategist issuing bitcoin targets.
“It’s overdue. Bitcoin was incredibly oversold,” Lee told CNBC this week. “When you look at metrics like price-to-book, which is ‘money cost,’ or our bitcoin misery index, it’s pretty much what you saw at the end of the 2014 bear market, not the start.”
“We do think that tax and capital gains-related selling really accelerated in the past couple of weeks because tax day is coming up,” says Lee. “We still feel pretty confident that bitcoin is a great risk-reward and we think it could reach $25,000 by the end of the year.”
The $8,000 threshold is considered by many to be significant to the cryptocurrency mining sector, which becomes more and more unprofitable the further down bitcoin’s price goes. If the currency stays below $8,000 for an extended period of time, smaller mining operations will begin to drop out, leaving only those with the necessary scale to compete.
“It’s totally different this year than last year,” Silicon Valley venture capitalist Bill Tai told Bloomberg News. “The bitcoin mining industry was this mysterious dark cottage industry, and it’s about to grow up and about to have elements of institutional scalability at all levels.”
What does the future hold for bitcoin? While many see value in the blockchain distributed ledger platform underpinning many cryptocurrencies, the role that bitcoin and the rest of them is less clear. Lee argues that bitcoin stands to represent a store of value much like gold, only with less potential for theft.
“I think the main trend to keep in mind is that increasingly global growth is being driven by native digital products: digital growth is what’s driving GDP now,” Lee says. “So many services are now becoming digital, including the movement of money where, say, about 80 per cent of money is being moved electronically. You need to prevent double-spend, which is what the blockchain actually does protect [through] creating digitally unique records.”
“And by far, the largest blockchain is bitcoin, so to me, bitcoin is the blockchain — it is the epicentre of trust and it is the most trusted blockchain because it’s never been hacked,” he says.