Economist Tuur Demeester Explains Bitcoin’s Price Decline Factors and Optimistic Outlook
Anyone Expecting Bitcoin to hit a New High This Year? Don't Count on it
One thing that has certainly been tested so far this year: Bitcoin has some strong bottom level foundations, which it's only tested on a few occasions, but for those thinking that it will shoot up from them? The odds aren't looking in your favor.
I just published “Bitcoin: we don’t expect new highs in 2018” https://t.co/ZNqdw9qxs3
— Tuur Demeester (@TuurDemeester) August 2, 2018
Rather than those being my worlds, that's coming from Tuur Demeester, a senior economist and bitcoin trader, and in his latest report, he announces that the market still needs to recuperate from the spectacular 36-month rally that the cryptocurrency market enjoyed from late 2017.
How big of a rally? For those that remember, it took Bitcoin from a humble, yet still impressive $250, to the staggering $20,000, leaving many skeptics waiting for the balloon to burst, or slack-jawed at the sight.
Via his blog on Medium, Demeester states that case that 2018 will go down as the year that saw Bitcoin come to terms with its long-overdue growing pains, but also as a time when the markets liquidity improves, when investors liquidate their holdings and other investors and regulatory bodies finally settle the long game of catch-up in the wake of the financial whiplash the cryptocurrency market just endured.
He bases this argument on several factors, first is the fact that the climate in the world of bitcoin mining has become remarkably febrile and highly competitive.
This is in spite of the fact the underlying profitability of Bitcoin get thrown continually into question, with the total market undergoing a roughly 90% drop in profitability since January this year for miners. But he also points out that this climate is responsible for the ‘significant pressure' of sell pressure currently placed on the market.
In the past, any pessimism expressed by the mining community would be offset by an otherwise bullish investing population that sought to invest in it as an asset or for transactional purposes. However, while that was the case in the past, this year has since proven that there isn't enough buy support to encourage a rally anytime soon.
A recent Gallup/Wells Fargo poll found that less than 0.5 percent of U.S. investors believe that they will “probably buy Bitcoin in the near future.” Meanwhile, Google searches for ‘Bitcoin' stand far lower than in previous years, especially during the rally periods.
At the same time, merchants are reporting a 50% reduction in the volume of cryptocurrency, or specifically, Bitcoin-based transactions compared to last year. This is both an indication that people are holding (HODL) on to their cryptocurrency for the awaited rally, or that less people are willing to experiment with it.
Alongside these factors, Demeester points out that the retail industry has not been able to pick up the slack from these otherwise bearish areas of Bitcoin use. While interest remains relatively strong within trading firms, their interest stems from those that are “just as happy to take on short positions as they are to go long.” Those that tend to bank on ‘Long' investments tend to steer clear of the percieved volatility coming from the cryptocurrency market.
Along with these negative outlooks for Bitcoin, the Technical values, according to Demeester, are equally bad. He cites that the Network Value to Metcalfe (NVM) Ratio, the system of measurement used to assess a network’s value relative to user activity, and the related Network Value to Transactions (NVT) demonstrate the Bitcoin may be overvalued when compared to its present state of adoption.
While the short term is a bearish forecast for Bitcoin, Demeester himself retains his long-term bullish outlook on the subject of Bitcoin. He goes on to suggest that 2018 will be a year of re-acclimation for Bitcoin, seeing slight up, downward movements, but predominantly sideways. This is all before seeing stronger rallies in 2019 and beyond.