A lot of crypto investors like to think of bitcoin as a bet on higher inflation, or as a futuristic hedge on some imagined economic-armageddon scenario – Gold 2.0, as they say.
Lately, it’s looking more like Gold 2x: As bitcoin heads into the final months of 2020, the largest cryptocurrency’s 2020 investment returns are twice those of the yellow metal.
Bitcoin gained 50% in the nine months through September versus gold’s 25%, during a year when a global pandemic ravaged economies and prompted central banks to print trillions of dollars. Many investors, while acknowledging that recessions are usually deflationary, say the extra flood of money could eventually send consumer prices spiraling higher.
And bitcoin’s performance looks especially stark when compared with the Standard & Poor’s 500 Index, which has returned 3.5% this year. A gauge of the bond market’s performance is up 19%.
CoinDesk’s Bradley Keoun and Daniel Cawrey rounded up commentary from nine crypto analysts and investors going into the rest of the year. Global conditions could get better, or worse still, but the analysts are pretty bullish.
They may be wrong, and the billionaire investor Warren Buffett has said that bitcoin has “no value,” but the tone is strikingly different from the skepticism that many Wall Street analysts now express toward the lofty valuations in stock and bond markets.
Denis Vinokourov, Bequant: The market is testing the upper bounds of its recent range and, with the absence of fresh macro news flow that could dampen the risk on sentiment, bitcoin may just find enough momentum to break through the $11,000 price level and, more importantly, stay there. Open options interest continues to show signs of recovery.
Charlie Morris, ByteTree: The vast majority of bitcoin’s past gains coincided with periods of a flat or weak dollar. The implication is that bitcoin is likely to be a powerful hedge against U.S. dollar weakness. How likely is that? Quite likely given it is Fed policy.
IntoTheBlock: There are two areas of strong resistance for bitcoin based on on-chain data. The first one is the current resistance it is facing around the $11,000 mark, where 626K BTC has been bought by 1.17 million addresses. This creates resistance from many of these addresses looking to close their positions to break-even. After that, there is another similar resistance level between $11,400 and $11,700 as shown in the graph above. The good news is that past these resistance levels, there is likely to be less selling pressure past $12,000.
Matt Blom, Diginex: Despite the propensity to buy, hold and not move bitcoin, the network remains buoyed by growth. The only thing going sideways in bitcoin is the price.
Jason Lau, OKCoin: Bitcoin’s price momentum is still positive, with its pullbacks leaving higher highs. This is signaling a possible further continuation of this upwards move. Bitcoin perpetual swaps funding rates have started turning positive. This indicates that investors are more willing to go long at current price levels.
George McDonaugh, Keld van Schreven, Kr1 Plc: We are currently seeing some correlation [involving] bitcoin, other digital assets and movements in the equity and gold markets. We expect the trend of strengthening balance sheets and diversification into bitcoin to continue as the world’s monetary policies shift evermore towards unbridled money printing and higher inflation.
QCP Capital: The key support from the early month lows of $10,000 on BTC and $310 on ETH both saw substantial buying demand. This prevented any cascading short gamma selling into quarter-end, which had been our fear if those levels broke.
Constantin Kogan, BitBull Capital: We’re seeing a spike in activity by new participants coming into BTC not yet reflected in price. It doesn’t happen often. This is what traders call a divergence. In this case the trend looks more bullish.
Patrick Tan, Novum Alpha: While it may be tempting to subscribe to the notion that bitcoin will represent a safe haven in times of instability, there’s little evidence to support that view – especially since gold, tech stocks and bitcoin have all tracked each other closely this year. A further round of stimulus, or a smoother than expected political transition, could pave the way for bitcoin to move higher as politicians get past electing and get back to spending.
Bitcoin Watch
Bitcoin is trading in the narrow range of $10,600 to $11,000 for the seventh straight day.
The long-term sentiment remains bullish, as evidenced by a continued decline in the number of coins held on cryptocurrency exchanges – a sign of investors shifting to holding strategies.
In the short run, the cryptocurrency could continue to take cues from the U.S. dollar and stock markets.
“We can’t ignore the greenback’s breakout from its recent consolidation and expect a continued rally in the dollar to weigh over BTC,” said Matthew Dibb, CEO of Stack Funds.
The cryptocurrency fell by over 7% in September, confirming its biggest monthly decline since March as the oversold dollar index rose nearly 1.8%. Bitcoin, gold and S&P 500 have moved largely in the opposite direction to the dollar index since March.
Token Watch
Ether (ETH): Record $166M Ethereum fees last month were six times bigger than bitcoin’s.
SushiSwap (SUSHI): Collateral locked into “vampire mining” protocol plunges to $354M from $1.4B a few weeks ago.
Trump tokens (TRUMP): Prices for FTX crypto exchange’s “futures contract” tracking U.S. president’s chances of staying in office slide after this week’s presidential debate.
Chainlink (LINK), Loopring (LRC), Compound (COMP): DeFi system MakerDAO (MKR, DAI) community votes to add support for Chainlink’s LINK, Loopring’s LRC and Compound’s COMP.
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