After losing 16% of its value in November, the price of Bitcoin traded above $7,000 in the first week of December, going as high as $7,800. Currently, we are trading at $7,550, up by 2.80%, as per Coincodex.
Mike McGlone senior commodity strategist at Bloomberg Intelligence says 2019 was the year of Bitcoin’s transition towards the gold. This maturation process, he says would continue as volatility declines.
Just like with gold, Bitcoin is retracing a bear market, said McGlone in Bloomberg’s Crypto Outlook for December 2019 report. He sees $6,500 — the most widely traded price — as good support for the world's leading cryptocurrency and sustaining below this “unlikely”.
Actually, he says, there are higher chances of it going to a 2019 high than to revising the $3,360 low. This is because Bitcoin has already declined 50% from 2019’s peak, “which will limit further declines.”
In 2020, the initial resistance would be at $10,000 but breaching this should be just a “matter of time” especially if gold continues to advance as expected.
According to McGlone, there are several tailwinds that makes flagship cryptocurrency capable of doubling in 2020.
Volatility Set to Decline
Bitcoin price volatility will continue to decline next year, marking the completion of the transition from a bear to a bull market. Last time, it signaled the inception of the parabolic rally to the 2017 peak.
“The all-time low in 180-day volatility (41% in October 2015) should be revisited next year,” it reads.
Increasing institutional interest and vehicle for exposure such as futures and options are meanwhile contributing to the market’s maturity process.
The new quasi-currency store-of-value, the report says will continue appreciating because of the key Bitcoin price tailwind, limited supply. Bitcoin has a limited supply of 21 million and the upcoming third reward halving will further cut down the inflation rate from 3.70% to 1.80%.
The only primary bearish factor McGlone says is the BTC price has appreciated so far so fast. And the normal market maturation suggests, it will take longer to hit the 2017 peak.
Among the cryptocurrencies, Bitcoin is winning the adoption race that combined with the asset becoming increasingly scarce favors price appreciation. The fact that most altcoins are too volatile further enhances the allure of Bitcoin.
Moreover, while there are only 17% more BTC to be created, the number of tradable crypto assets has more than doubled in 2019 alone.
Bitcoin will Closely Mimic Gold
Bloomberg analyst believes Bitcoin trading will closely mimic gold’s. The yellow metal has an upward bias and the 52-week beta of the crypto asset-to-gold is also highest since 2010, about 2x.
“Bitcoin's relative richness was last comparable to its 2017 surge.”
There is greater potential for continued climbs for Bitcoin in the long term and it shares similar factors with advancing gold.
Apart from Bitcoin, Tether is another leader of the crypto market. And Tether boosts Bitcoin as crypto standard, with little to dislodge either of them as the crypto asset leaders.
The report says while the popular stablecoin has positive implications for BTC, it has negative ramifications for most crypto assets. It increases the value of Bitcoin as an equivalent of gold while exposing the “fallacy of so-called cryptos.
“The rapidly increasing market cap of Tether is widening the disparity between Bitcoin and the most speculative digital assets (alt-coins).”
While Tether is appreciating Bitcoin, it is also depreciating Yuan. From 16th position by the end of 2017, Tether has grown to the fourth-largest crypto asset this year and that has been on the back of “an almost 8% decline in the Chinese yuan and 80% retreat in the Bloomberg Galaxy Crypto Index.”
The analyst also sees Bitcoin to keep on gaining recognition as the “standout independent store-of-value digital asset” just like gold.
Escalating trade tension, showing Chinese economic growth, depreciating yuan and unrest in Hong Kong are actually the “incentives” for currency diversification which would work in favor of Bitcoin.
Now as we march towards the end of 2019, 2020 has a pretty bullish picture to look forward to.
Live Bitcoin (BTC) Price:
1 BTC/USD =$8,361.4623 change ~ -3.52%