Bitcoin (BTC-USD) is back, up by 157% since its most recent stampede higher began. But despite the seemingly extraordinary gains, we are still very likely in the initial stages of this new Bitcoin Bull Market.
Bitcoin’s technical long-term image continues to look exceedingly bullish. Furthermore, the Fed's continuously easy monetary policy makes Bitcoin appear extremely attractive due to its set, limited supply.
Ultimately, prices should continue to appreciate as Bitcoin's popularity simultaneously increases with the widespread adoption of blockchain technology.
I expect that the recently-stared Bitcoin bull market can last for several years, possibly longer than any previous expansion. Likewise, the price also should rise beyond previous Bitcoin peaks. Therefore, we are likely still in the initial stages of a Bitcoin bull run that could take prices to $50-100K.
If You were Looking for a Pullback: It Just Happened
If you were expecting a pullback in Bitcoin, you probably just got it. After testing the $7,500 level Bitcoin gave up a textbook 10% correction. However, the coin quickly regained its composure, blowing past $7,500 all the way to $8,100 (at the time of writing this).
I wrote about this extremely bullish setup in this article eight days ago, and in my prior piece "Bitcoin's Bullish Setup" back on May 26, when Bitcoin was at only $4,000, about to break out to $6K.
Bitcoin 10-Day Chart
Bitcoin 2-Month Chart
Additionally, we see volume increasing, suggesting more interest in Bitcoin right now. As Bitcoin’s popularity continues to progress and more blockchain wallets are activated, BTC’s price should continue to trend higher from here.
Naturally, there will be a few bumps in the road, but overall I think Bitcoin could be in the beginning stages of a multi-year uptrend that's very likely to bring Bitcoin prices above prior peaks.
Where We're Headed Now
In my Dec. 22 "Why Bitcoin's Bear Market May be Over and What You Can Expect Next" I discussed in detail why the bear market is likely over.
New bull markets are born from situations like this. Bitcoin's popularity rises, demand goes up, more wallets are created and the overall Bitcoin network expands considerably. In fact, blockchain wallet accounts are up by about 55% YoY.
Blockchain Accounts 1-Year
Bitcoin's Past Price Action Suggests Higher Prices
If we look back on a long-term chart of Bitcoin’s price action, we see that Bitcoin has gone through three major up waves. The first one took Bitcoin’s price from about $2 - $200, or about 10,000%, the second wave took the price up from about $50 to roughly $1,200, or approximately 2,300%, and the third wave brought Bitcoin’s price from $200 all the way to over $19,500, or nearly 10,000%.
Bitcoin: Long-Term Chart
Now, each one of these waves has been followed by a substantial washout,or a bear market. After wave one, Bitcoin declined from about $200 to $50, or 75%, after wave two Bitcoin came down from about $1,200 to $200, or approximately 83%, and this most recent wave had been followed by a washout of approximately 84%.
Judging by historical data we are likely on the cusp of a new bull market in Bitcoin and other digital assets, many of which got punished to the tune of 95%-99%, so there is quite a bit of upside to make up.
Bitcoin Still Has a Very Small Share of the Market
Despite its recent rise, Bitcoin commands a market cap of only $143 billion right now. However, given its enormous long-term potential, this figure can go much higher.
In fact, if Bitcoin only had 1% of the value of the global medium of exchange and store of value markets, it would have a market cap of roughly $1 trillion. This would equate to about $56K per Bitcoin, an additional 600% from current levels.
At 5% of the market that figure could grow to nearly $300K per Bitcoin. However, if the digital asset does eventually carve out such a market share for itself, it would likely happen over 5-10, maybe even a 15-year period.
Remember, the Bitcoin trip is likely going to be a long ride and there are going to be quite of few bumps along the road. First, let's not forget that Bitcoin is among the favorite trading instruments in the world. So, expect a lot of volatility on that basis alone.
How To Keep What You Make in Bitcoin
Some people may ask, how would you keep your gains safe in Bitcoin and other digital assets after 100%, 200%, or 400% returns in as little as 4-5 months, and the answer is stable coins.
Various stable coins are often used to transfer Bitcoin gains to a stable $1-$1 ratio. This is where a stable coin like the True USD (TUSD-USD) comes in. You can transfer whole or partial positions into stable coins, a strategy especially beneficial after parabolic gains.
If more people took advantage of stable coins around the top in 2017 they would have a lot more capital and many more Bitcoins right now. These are extremely effective tools if used right as they do not require you to actually go through a traditional banking system to have your cryptocurrency at a stable price.
Moreover, this technology can be integrated with cold wallets like the Trezorand Nano S. This makes it even more convenient as it's essentially the same as holding dollars in the bank, but it's your own bank and you essentially have complete control over it (certain cryptocurrency specific risks do exist).
Please do your own diligent research before picking a "stable coin" that suits you.
The Entire Crypto Currency Complex is Coming Back
It’s not just the exchanges that process more than $100 billion in transactions each day, it’s the enormous blockchain infrastructure that's here, and that's going to change the world.
Bitcoin Volume 1-Month
We see that Bitcoin's buy interest increased noticeably in recent months.
Blockchain technology is unique, and it can be used with various applications, but what links everything together in the world of Blockchain is Bitcoin and cryptocurrencies.
The more you hear about blockchain technology in the future, the more it will become synonymous with Bitcoin, in the minds of millions, or perhaps even billions of people.
Let’s look at some stats since this bull market began:
I will list my five favorite coins, heaviest allocation toward Bitcoin, Bitcoin Cash, and Litecoin.
- Bitcoin: up by 157%
- Bitcoin Cash: up by 500%
- Litecoin: up by 350%
- Dash: up by 139%
- Zcash: up by 50%
Just to put things in context, many of these coins crashed by 90% or more in the recent bear cycle, Bitcoin itself gave up about 85% of its value from peak to trough. Therefore, while the moves to the upside may seem sizable, they are essentially minuscule in proportion to the declines these coins have had.
In other words, digital assets have a lot of room to make up for to the upside from here just to get anywhere near their prior highs. Paradoxically, it seems highly likely to me that many of the coins that succeed should go on to make new all-time highs within the next 2-5 years.
Why Bitcoin is Going a Lot Higher
The more money the Fed prints, the higher the money supply will expand. The Fed is likely to ease, and inflation is already headed higher, ideal for Bitcoin.
Fed Easing: Increasing Inflation
The CPI, the consumer price inflation index, is at 2%, a multi-month high right now. At the same time, the Fed is likely to lower rates before the end of this year. In fact, there's now an overwhelming chance 73% (per CME Group) that rates will be a quarter, or a half a percent lower than they are today.
This means, easier money, more money printing, higher inflation, and high Bitcoin prices.
Bitcoin: The Inflation Proof Investment Vehicle
There are only 21 million Bitcoins that can ever be mined, and right now there are 17.7 million in circulation. However, unlike the Federal Reserve, or just about any other central bank, Bitcoin’s cannot simply be printed.
Therefore, we are dealing with two asset classes, one with a set limited supply and the other with an unlimited one. This leaves fiats at a great disadvantage and gives Bitcoin every probability to appreciate on a continuous basis.
Bitcoin blockchain accounts are at around 37 million worldwide right now. This leaves huge potential for market share in global store of wealth and medium of exchange markets. Moreover, accounts grew by about 55% YoY over the last 12 months.
This Bull Market is Just Getting Started
With a 157% surge from its bottom, Bitcoin's popularity is back. We're still very early in this bull market and investors should not be alarmed by such abnormally high triple-digit gains in the sector over the last 4-5 months.
Bitcoin is essentially inflation proof, and has an extremely low limited supply, unlike government currencies that can be printed endlessly. Moreover, Bitcoin and the cryptocurrency complex have the potential to gain enormous market share in the global store of value and medium of exchange markets, worth roughly ($100 trillion).
Bitcoin has been on fire, and year-to-date our cryptocurrency basket (20% of total holdings) is up by 110%, and is up by 65% just this quarter alone, (essentially just six weeks).
Please remember that Bitcoin is considered a high-risk asset and it's always prudent to take at least some gains off the table after such parabolic moves as we have had in many of the digital asset names over the past several moths.
Expect a choppy ride, but Bitcoin has a lot of upside potential long-term, and I'm not about to miss this trip.
Bitcoin Risks: Not for Everyone
Possibly the No. 1 long-term threat Bitcoin faces is detrimental government regulation or an all-out Bitcoin ban. If major Bitcoin-friendly governments like the U.S., E.U., Japan, South Korea, and others follow the footsteps of China and essentially make Bitcoin use and trading illegal, it could have catastrophic consequences for Bitcoin's price.
Continued Functionality Issues
Another risk factor is the concern that Bitcoin may never become a widely-used transactional currency due to its issues with speed and scale. Yes, the Lightning Network promises to solve many of the issues associated with speed, cost, and scale, but there's no guarantee that the LN will become widely adopted, even over time.
Therefore, there's the risk that newer and more efficient digital currencies like Litecoin, Bitcoin Cash, and others may make Bitcoin somewhat obsolete as an actual medium of exchange for the masses.
Continued Security Breaches and Fraudulent Activity
Continued security breaches in the Bitcoin world concerning exchanges and individual wallets is a constant concern. If significant breaches continue, investors and users may start to lose confidence in the system and demand could decrease as well.
Likewise, there are fraud cases. In an industry that's still loosely regulated, substantial fraudulent activity is a persistent risk factor. Just like with security breaches when people get ripped off, it reflects poorly on the entire industry and demand along with prices can suffer.
Bitcoin is Not for Everyone
The bottom line is that Bitcoin is not for everyone. I view it as an investment for people with a moderate to relatively high-risk tolerance, and even then, maybe only 5%-20% of a portfolio's holdings should be allocated to digital assets.
Bitcoin is still a relatively new phenomenon, and no one truly knows exactly how it's going to play out over the long term.