Bitcoin could soon reach $45,000 if this pattern repeats, analyst says. Has the crypto started a new bull market?
By Frances Yue
Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.
Bitcoin has rallied over 70% so far this year, but it's still down almost 60% from its record high in November 2021. The cryptocurrency is trading at slightly below $28,500 on Thursday, according to CoinDesk data.
This week, I caught up with Vetle Lunde, senior analyst at K33 research, who said bitcoin could reach as high as $45,000 in a month, if it follows the patterns it saw after the 2018-2019 bear market.
There are a lot of similarities between bitcoin's year-to-date rally and its recovery path after the 2018-2019 bear market, according to Lunde.
Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.
A familiar rally?
For both the recent bear market and the one from 2018 to 2019, it took bitcoin about 370 days to reach bottom from the cyclical peaks, Lunde wrote in a recent note.
Meanwhile, 510 days into both cycles, bitcoin are down about 60% from the previous peaks, according to Lunde.
In June 2019, bitcoin's bear market rally topped $13,852, 556 days after it reached the 2017 peak at $19,752. If the crypto follows a similar pattern this year, it could reach as high as $45,000 on around May 20, noted Lunde.
Meanwhile, there was intense fear in the market during both bear markets, Lunde said in a phone interview.
In late 2018, crypto investors were concerned about U.S. regulators' crackdown of initial coin offerings, and worried that a split of Bitcoin Cash, a fork of the Bitcoin blockchain, would weigh on the largest cryptocurrency's price.
Similarly, FTX's collapse in November last year led many investors to sell their bitcoin or short the cryptocurrency, as they expected further losses in digital asset prices, Lunde noted.
Later, as markets slowly and gradually started to climb, people "who were underexposed or maybe even have a short exposure in crypto started to rotate back in again," Lunde said.
To be sure, there are several key differences between the current market and the one in 2018 and 2019. The crypto market has matured a lot, with less concentration of coin holdings and more institution participation, Lunde noted. The crypto derivatives markets also became more developed, Lunde said.
In addition, cryptocurrencies other than bitcoin have gained prominence and investors now have more options, according to Lunde.
What's more, the macro environment has changed significantly. The broader economic environment, which currently looks vulnerable to a recession, didn't matter as much to bitcoin's price back in 2018 as it does now, as there was less institutional adoption of crypto in the past, Lunde noted.
The Federal Reserve also has indicated it plans to keep rates high, currently at 5% on the top end of its policy range, for a while, as it looks to tamp down inflation after an era of loose monetary policy that aided crypto and other risky assets.
Hope for consolidation
With recent stress in the U.S. banking system calming down and investors looking to the next Federal Reserve rate-setting committee meeting in May, Bitcoin's price is now primarily driven by technical factors, according to William Cai, co-founder and managing partner at Wilshire Phoenix.
He thinks a consolidation in the range of $25,000 and $30,000 would help bitcoin to break and hold above $30,000, a psychology level, for an extended period.
Gensler declined to say whether ether is a security
House Republicans on Tuesday criticized the U.S. Securities and Exchange Commission for its oversight of the crypto industry, arguing that the agency's chairman Gary Gensler has been overly aggressive in bringing enforcement actions against the industry, while refusing to clearly state which tokens he sees as under its jurisdiction.
"You've refused to provide clarity on whether digital assets...are subject to securities laws and more important, how these firms should comply with these laws," said Rep. Patrick McHenry of North Carolina, the Republican chairman of the House Financial Services Committee, during an oversight hearing.
McHenry pressed Gensler to state whether ether, the second largest cryptocurrency by market capitalization, was a security, but he declined to go into specifics on any particular digital token. Gensler has repeatedly said most cryptocurrencies are securities.
Read more in this article by MarketWatch's Chris Matthews.
Crypto in a snap
Bitcoin declined 4.9% in the past week and was trading above $28,000 on Thursday, according to CoinDesk data. Ether dipped 0.6%% in the same period to above $1,900.
Biggest Gainers Price %7-day return
Radix $0.09 42.3%
Baby Doge Coin $0.000000003 36.4%
OKB $52.97 25.3%
Render $1.95 22.1%
Arbitrum $1.42 18.8%
Source: CoinGecko
Biggest Decliners Price %7-day return
Kaspa $0.03 -21.6%
Stacks $0.73 -18%
Conflux $0.33 -14.4%
ImmutableX $0.98 -12.9%
Bitget Token $0.39 -12.2%
Source: CoinGecko
Crypto companies, funds
Shares of Coinbase Global Inc. (COIN) tumbled 11.6% for the week to around $60.95. MicroStrategy Inc. (MSTR) lost14.2% thus far on the week, to $292.84.
Crypto mining company Riot Blockchain Inc. (RIOT)'s shares declined 19.5% to $10.87 as of Thursday. Shares of rival Marathon Digital Holdings Inc. (MARA) lost 17.4% to $9.51 over the past week. Ebang International Holdings Inc. (EBON) edged up 2% over the past week to around $6.02.
Overstock.com Inc. shares (OSTK) added 2.7% to $18.90 over the week.
Shares of Block Inc. (SQ), formerly known as Square, declined 3.6% to $62.24 for the week thus far. Tesla Inc. (TSLA) shares plunged 13% to $161.63.
PayPal Holdings Inc.'s (PYPL) stock was down 2.3% over the week to trade at around $73.76. Nvidia Corp.'s (NVDA) gained 2.5% to $271.18 for the past week.
Advanced Micro Devices Inc. (AMD) shares dropped 2.6% for the week at $89.73.
Among crypto funds, ProShares Bitcoin Strategy (BITO) lost 8.8% over the week to $16.67 Thursday, while counterpart Short Bitcoin Strategy ETF (BITI) rallied 9.3% to $21.09. Valkyrie Bitcoin Strategy ETF (BTF) plummeted 9% over the past week to $10.94, while VanEck Bitcoin Strategy ETF (XBTF) fell 7.7% to $28.39.
Grayscale Bitcoin Trust (GBTC) retreated 11.6% over the past five days to $15.88 on Thursday.
-Frances Yue
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May 04, 2023 11:46 ET (15:46 GMT)
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