After Bitcoin stands at 10,000 USD, there will be strong support.
Original text from Bloomberg Intelligence
Original Author | Bloomberg Intelligence Commodity Strategist Mike McGlone
Bloomberg Intelligence recently released Bloomberg Crypto Outlook in June. The full text of the Odaily Planet Daily translated as follows:
- The idea that Bitcoin does not appreciate may not be right now
- Bitcoin advantage vs. crypto market, just like gold vs. commodity market
- Referring to the NASDAQ and crude oil markets, mature Bitcoin is gaining an advantage
- ETF absorbs a quarter of Bitcoin’s annual supply
- Bitcoin futures will drive the price of Bitcoin to more than $10,000
- Bitcoin address indicator expects Bitcoin to maintain resistance above $10,000
- Digital analysis of Tether, Bitcoin rise and currency during the New Crown Virus epidemic
The idea of not thinking about Bitcoin appreciation in the past may not be right now
Market performance comparison
1. Bloomberg Galaxy Cypto Index: +0.2% in May, +39% in 2020 (as of June 2), -23% in one year;
2. Bitcoin: +6.7% in May, +33% in 2020 (as of June 2), +11% in one year.
Bloomberg Intelligence believes that 2020 is a year in which bitcoin technology and market foundations have become increasingly advantageous, but for the broader cryptocurrency market, it does not seem to be so good. Bitcoin closed at about US$7,000 at the end of 2019, close to the bottom of its price range, so the market is conducive to a peak shift. Last year, Bitcoin hit a high of about 14,000 US dollars. Even if Bitcoin ranks in the most recent price range, this means that Bitcoin price is almost likely to double in 2020. In addition, the power to boost gold will now support Bitcoin, but the supply of Bitcoin is more restricted. By default, popularity is still an important bitcoin evaluation indicator. From the analysis of Bloomberg Intelligence, this indicator is positive.
In March of this year, the bitcoin market was hit hard, but it was also a key test, and there is no doubt that bitcoin easily passed this test. Although the correlation between bitcoin price and Nasdaq has reached its highest record since 2017, bitcoin has received sufficient support to maintain it at the $10,000 price point, and the relative volatility of bitcoin price has also reached the lowest level ever Level.
A solid Bitcoin bull market
Bitcoin advantages vs. the crypto market, just like gold vs. the commodity market. Even if there are major changes, in the worst case, we still expect the price of Bitcoin to continue to rise. In 2020, the U.S. Central Bank implemented an unprecedented quantitative monetary easing policy, resulting in an oversupply of money in most markets, so it will accelerate the promotion of Bitcoin into Crypto gold.
Bitcoin that broke through $10,000 may become Crypto gold
Bitcoin is free from cryptocurrency. Compared to the broader cryptocurrency market, the basis for Bitcoin’s price increase seems to be stronger. The Bloomberg Galaxy Cypto Index (BGCI) index is already higher than the 2017 peak. Bloomberg Intelligence believes that the indicator chart shows that the current ratio of Bitcoin to BGCI is close to 25, while the highest ratio three years ago was only 23. Bitcoin seems to be struggling to break the $10,000 resistance level. Compared with other cryptocurrencies, Bitcoin’s appreciation potential is obviously higher. The last time Bitcoin broke the $10,000 threshold occurred in June 2019, but the ratio of Bitcoin to BGCI was Dropped by a third. The Bitcoin market will be further developed, especially central banks such as the Federal Reserve are implementing unprecedented monetary quantitative easing policies.
Historical records indicate that Bitcoin will reach USD 20,000 in 2020. Bitcoin’s current trend is very similar to 2016, and it is getting closer and closer to the price peak. In 2016, the second block reward halving in Bitcoin history occurred, and then a third price spike occurred. Bloomberg Intelligence analyzed the rebound trend in 2017 and marked some key time nodes. The price of Bitcoin fell by 60% in 2014, but by the end of 2016, the price of Bitcoin was close to the 2013 peak. Therefore, Bloomberg Intelligence believes that if the trend in 2016 is followed, then the price of Bitcoin will reach a record high of about $20,000 in 2020.
Bitcoin price uptrend correlates with gold
The maturity of bitcoin futures, as well as greater depth and more risk exposure, have effectively suppressed bitcoin’s volatility, which is also conducive to pushing bitcoin prices higher.
The price of gold breaks through the “Carter Times” high vs. commodities. Bloomberg Intelligence believes that compared to commodities, there has been nothing in the past 40 years to prevent gold from continuing its upward trend in prices. The upward trend of gold and the downward trend of commodity prices seem to be entrenched, especially during the recent epidemic of new coronavirus. Bloomberg Intelligence found through chart analysis that the ratio of gold vs. BCOM spot index soared (the index reached its peak in 1980 as the consumer price index (CPI) approached 15%).
More powerful than 1980 – Gold vs. BCOM
Although the United States has been experiencing inflation, due to its small magnitude, it took about 27 years for gold to exceed the 1980 peak. Deflation is a sign of stronger commodities, but now there is growing evidence that the Fed’s loose monetary policy will support gold’s continued highs.
The infrastructure will support $1,700 in gold and $9,000 in bitcoin. We believe that in this turbulent 2020, only a handful of assets will be able to rise. Among them, gold and Bitcoin are laying the foundation for further price increases. If you want to judge the best performing assets, they are definitely Bloomberg. Intelligence’s best candidate in 2020, especially the outbreak of the new coronavirus, created conditions for the rise in the value of these two assets. Bloomberg Intelligence chart analysis shows that until the traditional financial market plunged in late March, the key resistance level for gold consolidation has remained above $1,700 per ounce. Every day above this price level will establish a stronger foundation for and step up for gold Rebound provides effective support.
A good bull market partner: Gold & Bitcoin
Bitcoin is also in a state of market consolidation similar to gold, and its price is maintained between 9,000-10,000 US dollars, so Bloomberg Intelligence believes that Bitcoin is now more like a sleeping bull, about to erupt after more than 10 years of sleep in the past, and create A major historical change, not just doing one thing everyone knows: appreciation. If the stock market plummets, gold and Bitcoin should rise.
Digital gold may be more powerful than physical gold. Bloomberg Intelligence believes that the connection between gold and bitcoin is getting stronger, which is actually a good thing for bitcoin price increases. The 52-week correlation between bitcoin and gold has set a record high, and one of the most important reasons for this situation is the implementation of unprecedented monetary easing policies by global central banks. Bitcoin is gradually becoming the Crypto version of gold, and it is likely to consolidate its 2017 peak price for a longer period of time. However, unless gold falls, the price of Bitcoin may rise to its peak.
Gold prices hit a new high of nearly eight years, may cause bit of “trouble” for Bitcoin
The golden bull market appeared in the early days. Bloomberg Intelligence believes that the price of gold is moving in the direction of a potentially extreme opposite of the monetary policy restrictions that inhibited inflation nearly 40 years ago. This trend can only be reversed unless the Fed fund rate is reduced to a discount that matches its 1980-81 premium. The extreme tightening cycle proves that inflation is easily controlled by the Fed, which should boldly lower interest rates or use negative interest rates to change trends.
U.S. futures began to price negative interest rates, and most other parts of the world may have to follow suit, so there is a high probability that gold prices will continue to rise. One major difference from 40 years ago was that the ratio of US debt to GDP was about 30% at that time, while the ratio of debt to GDP now has rapidly increased to over 110%.
How to end the decline? May require federal funds rate “discount”
Referring to the NASDAQ and crude oil markets,
Mature Bitcoin is gaining an advantage
With reference to the NASDAQ and crude oil markets, mature Bitcoin is gaining an advantage. Bloomberg Intelligence believes that the covid-19 virus together is making Bitcoin more and more mature, especially comparing the Nasdaq and crude oil markets, which will further support the appreciation of Bitcoin prices. The traditional stock market and oil, the most important commodities in the world, have all experienced historic declines, and bitcoin prices have rebounded rapidly after bottoming out, indicating that the bitcoin price base is very strong.
Bitcoin volatility hits record low vs. Nasdaq
Bitcoin has the upper hand vs. Nasdaq. Bitcoin is clearly better than the traditional stock market. Bloomberg Intelligence believes that Bitcoin’s downturn in March has provided a good basis for subsequent price increases. When it returned to above 1:1 in early June, the bitcoin price to Nasdaq ratio fell to just below 0.70 in March, setting a new low. The price of Bitcoin on June 2 was about 10,000 USD, which was almost the same as the index level. According to historical volatility data, Bitcoin is gaining the upper hand, and the 260-day volatility measurement of Bitcoin is also the lowest level ever.
Bloomberg Intelligence’s analysis chart depicts that Bitcoin’s volatility is about twice that of Nasdaq. However, when the price of Bitcoin hit a record high in 2017, this ratio was nearly 7 times. Bitcoin’s volatility usually increases as its price rises, and for stocks, this relationship is usually inversely proportional.
The dramatic fluctuations in the crude oil market make Bitcoin look more like gold. Bloomberg Intelligence believes that bitcoin’s volatility relative to crude oil is the lowest it has ever been, which indicates that bitcoin has become mainstream and is moving towards a Crypto version of gold. As an emerging technology, bitcoin can play a deflation relative to fiat currency, and bitcoin price will maintain an upward trend relative to crude oil. In the analysis chart of Bloomberg, the trend of the ratio of Bitcoin to West Texas Crude Oil Index is roughly the same as the peak of Bitcoin in 2017.
Bitcoin will continue to appreciate vs. crude oil
One key difference: Bitcoin’s 260-day volatility measure is about 0.6 times the West Texas Crude Oil Index. And about three years ago, this ratio was close to 3.5 times, setting a historical line draft. Record crude oil volatility lowers its mean return potential, but the fact that novices are less risky than veterans is clearly more beneficial to Bitcoin.
Strong gold and weak oil may continue for some time. Bloomberg Intelligence believes that the recent record prices of gold and crude oil in futures trading have a solid foundation and are deflationary. Gold is recovering from the bull market, and it is almost impossible to stop the bull market under the unprecedented monetary stimulus environment, and the price of gold as a quasi-currency is still far below the peak of about $1,900. On the other hand, crude oil has been stuck in a bear market for ten years and is now just back to its most comfortable price area (about US$20 per barrel).
If the West Texas Crude Oil Index keeps the company’s natural gas and government bond yields unchanged, then oil prices will be unlikely to remain above the 2008 and 2016 lows (about $30), so Bloomberg Intelligence believes that gold bulls are Stride forward.
Fed stimulus measures and low inflation risk-gold/crude
Trading funds are “absorbing” Bitcoin supply
The bitcoin exchange has absorbed about 25% of its annual supply. Although there are not many exchange-traded funds in the US market, bitcoin exchange trading tools have shown greater buying and holding interest, thus providing support for bitcoin prices. The largest gray-scale Bitcoin trust fund (GBTC) is absorbing more and more supply from the market, but its premium is still declining.
Grayscale Trust Fund is “absorbing” Bitcoin. The exchange trading tools led by the Grayscale Bitcoin Trust Fund are absorbing large amounts of Bitcoin supply, which indicates that buyers are buying on dips and leading to price increases. Measured by the scale of asset management (AUM), the trust fund is by far the largest crypto asset exchange trading tool. So far this year, the increasing asset management scale of the Grayscale Bitcoin Trust Fund has consumed approximately 25% of newly mined Bitcoin, compared with less than 10% in 2019. The Bloomberg Intelligence analysis chart shows that the 30-day average of the gray scale Bitcoin trust fund asset management scale is rapidly rising, approaching 340,000 Bitcoin equivalent, accounting for about 2% of the total supply of Bitcoin. And about two years ago, this ratio was 1%.
Grayscale Bitcoin Trust Fund “absorbed” 25% of new supply in 2020
The trading premium of Grayscale Bitcoin Trust Fund overestimates the equivalent currency of Bitcoin, but also emphasizes the demand. Another online trading tool is Bitcoin Tracker One in Sweden, and their asset management scale is about 38,000 bitcoins.
As bitcoin matures, grayscale bitcoin trust funds have gradually narrowed. Despite the large amount of capital inflows, the premium of the Grayscale Bitcoin Trust Fund has begun to decline steadily, indicating that Bitcoin is gradually maturing. Based on the 30-day average price indicator, the underlying asset value of the Grayscale Bitcoin Trust Fund is at a premium of 20%, while the historical average is 39%. In March of this year, the price of Bitcoin suffered a plunge. The premium of the Grayscale Bitcoin Trust Fund is also close to zero, which is similar to the situation when Bitcoin bottomed out in 2018.
Similar to the trough in 2018, the premium rate of grayscale Bitcoin trust funds is close to zero
The grayscale bitcoin trust base premium has fallen slightly from its peak in 2017 (close to 85%), when the trust fund owned 1% of the total supply of bitcoin. Bloomberg Intelligence expects the gray-scale bitcoin trust base premium to continue to decline slightly, especially as more and more bitcoin exchange-traded funds (ETFs) begin to be listed, which may be related to increased investor demand for purchases and holdings, and The upward trend of Bitcoin prices coincides.
Futures and $10,000 Bitcoin
Bitcoin futures may be the driving force for maintaining prices at the $10,000 level. Bloomberg Intelligence believes that CME Group’s bitcoin futures trading is conducive to supporting bitcoin’s $10,000 price. Bitcoin is becoming a mainstream asset, and it is becoming more and more mature. The increase in futures open positions and stable price premiums will reduce volatility and will also prevent prices from falling.
Bitcoin’s open positions have increased, and it is also becoming more and more mature. Bloomberg Intelligence believes that the open interest of Bitcoin futures has nearly doubled, and the level has reached the level when Bitcoin exceeded US$10,000 in 2019, which indicates that the pace of Bitcoin’s maturity is accelerating, and the price is also tending to rise. Not only does futures represent the mainstream, but the ability to trade on regulated exchanges in the United States is also a key issue because the US Securities and Exchange Commission (SEC) is unwilling to approve bitcoin exchange-traded funds. Bloomberg Intelligence depicts the latest record of open contracts in the analysis chart, which is significantly better than Bitcoin’s performance when it cannot maintain above 10,000 USD.
Bitcoin futures open positions have recently reached about 50,000 bitcoins. Although the proportion in the total supply is not large, as a benchmark cryptocurrency, bitcoin futures are of great significance because they can make bitcoin a mainstream asset types.
Bitcoin futures push Bitcoin above $10,000
The bitcoin futures premium will support price increases. The stable premium of bitcoin futures prices is supporting the cryptocurrency market, which also shows that more and more institutions are interested in buying and holding bitcoin. The 30-day average price of bitcoin futures traded by CME Group has recovered from the recent decline. This trend can also be seen from the price index data released by Bloomberg Intelligence. The analysis chart of Bloomberg Intelligence shows that the average futures price is lower than the price of Bloomberg Intelligence. (XBTUSD) is more than 1% higher.
Bitcoin futures premium pushes spot prices to rise steadily
The 30-day average of bitcoin prices and futures premiums/discounts shows similar trends. Bloomberg Intelligence’s analysis chart automatically scales the metrics, so the price display at the end of the day may be slightly different, but the 30-day average indicator is sufficient to prove the trend. CME Group’s bitcoin futures are liquidated according to the CF Bitcoin Reference Rate, which summarizes the bitcoin trading activities of major spot exchanges.
On-chain indicator & USD 10,000
The indicator of the number of Bitcoin addresses shows that the price can be maintained above 10,000 USD. The indicators on the chain show that the Bitcoin price base is still relatively solid. As we have seen, the number of bitcoin “use addresses” reached a two-year high, providing strong support for the price of bitcoin to break through $10,000. The “hash rate” and transaction volume also indicate that the Bitcoin price base can be effectively supported at around $8,000.
The increase in the number of bitcoin addresses may mean that prices are increasing. If history can be used as a reference, then we will find that the number of Bitcoin active addresses has reached the highest level, which will help to push Bitcoin prices higher. The number of bitcoin addresses reflects the increase in adoption rate, and the average number of Coinmetrics’ 30-day unique addresses has exceeded last year’s peak. In 2019, when the indicator exceeded the previous high, Bitcoin began to gradually recover from the depths of the bear market. According to the Bloomberg Intelligence analysis chart, the number of active Bitcoin addresses has reached the highest level since February 2018.
The number of active Bitcoin addresses has reached its highest level since February 2018
According to Bloomberg Intelligence pricing analysis, Bitcoin’s end-of-day high in 2019 was $12,734. Unless the number of Bitcoin active addresses suddenly reverses, historical data shows that Bitcoin has a tendency to appreciate.
Bitcoin price basis: $8,000-transaction volume and hash rate. Bitcoin’s adjusted transaction volume and hash rate indicate that its price base can stabilize at around $8,000. Bloomberg Intelligence analysis graphs depict Bitcoin’s 52-week moving average, trading volume, and adoption trends. Among them, the trading volume is about the same as the level a year ago, when the price of Bitcoin once recovered to more than $8,000 for the first time. Now $8,000 has become a support level, and before the Bitcoin block reward is halved, Bitcoin’s computing power also surged.
A year ago, 8,000 USD was the bitcoin price resistance level, and now it has become a support level.
In May 2020, the number of newly mined bitcoins per day was reduced from 1,800 BTC to approximately 900 BTC, which reflected that the computing power began to decline and the supply of bitcoin also began to decrease. In this case, the importance of the initial adoption rate indicator appears, and the adoption rate has become the main indicator of the Bitcoin price outlook, and the increase in the number of addresses indicates that the adoption rate is constantly increasing.
Digital currency, Tether & rising Bitcoin
Tether in the New Crown Virus epidemic, currency digitization and rising bitcoin. The rapid growth of the market value of stablecoins indicates that the trend of currency digitization is becoming faster and faster, and the covid-19 virus epidemic is accelerating currency conversion. In addition, many central banks have implemented a large number of quantitative easing policies, which also contributed to the rise in gold and bitcoin prices.
Bitcoin appreciation seems to be related to Tether. Bloomberg Intelligence believes that the surge in market interest in stablecoins has provided support for the rise in Bitcoin prices. Gray-scale analysis stated that in May, the cryptocurrency market’s stablecoin transaction volume exceeded 10 billion U.S. dollars, compared with only 4 billion U.S. dollars last year, which highlights the need for people to use stablecoins for transactions and value storage without intermediaries. As today’s world is rapidly becoming Crypto, more and more people will not be able to bear the use of banknotes. Bitcoin is a benchmark crypto asset and is becoming the Crypto version of gold. Similar to gold, Bitcoin is independent as the first generation of cryptocurrency.
As Tether’s assets increase, bitcoin prices also rise
Bloomberg Intelligence’s analysis chart shows that the price of Bitcoin is closely related to Tether’s assets. Tether accounts for about 90% of stablecoin assets, and is closely related to Bitcoin’s price.
Tether is expected to become the second largest cryptocurrency after Bitcoin. Since the trend of cryptocurrencies becoming mainstream is difficult to reverse, it should be a matter of time before Tether surpasses Ethereum and becomes the second largest cryptocurrency in terms of total assets after Bitcoin. Benefiting from a widely adopted practical case and being an alternative to the world’s reserve currency, there seems to be nothing to stop the rise in the popularity of Tether, a stablecoin linked to the US dollar. It can be seen in the analysis chart of Bloomberg Intelligence that Tether assets have been pushed up to nearly 9 billion US dollars, and it is likely to surpass Ethereum (ETH). The market value of Ethereum is basically stable at about 22 billion US dollars.
Tether’s asset management scale has exceeded Ripple, and the next one is Ethereum.
Compared with Bitcoin, Bloomberg Intelligence believes that there is not much room for Ethereum price to rise. Bitcoin has stood out in terms of popularization and application, especially since the Federal Reserve recently implemented a quantitative monetary easing policy. Therefore, under the support of such macroeconomic conditions, Bitcoin can be used as a better store of value, and Tether is similar.
The stronger US dollar provides strong support for stablecoins. Bloomberg Intelligence believes that the rising dollar will drive market demand for Tether stablecoins. As far as gold and bitcoin are concerned, the dollar is depreciating, but compared to most other currencies, the dollar is moving in the opposite direction.
The US dollar is in the best position as global currencies depreciate, and all currencies face an unlimited supply. Tether and other stablecoins are being welcomed by more and more people. At the same time, Tether has also become a tool for intermediary institutions to conduct dollar exposure transactions and to transfer value between many highly speculative and highly volatile crypto assets.
With the strengthening of the US dollar, the popularity of Tether is rising
Just as Tether’s assets continue to rise, Bitcoin has also begun to play a role of value storage like gold. Bloomberg Intelligence believes that there is currently no way to disrupt the development trend of Bitcoin.
“The new coronavirus epidemic may give Libra a new life, and the Fed has begun to value cryptocurrencies.”-Special Analyst Ben Elliott (Government)
The New Crown Virus epidemic has made people see that cash-based transactions and markets are outdated, prompting the Fed to reconsider the issuance of cryptocurrencies, and regenerating Facebook’s Libra. It is more likely to promote Wells Fargo, Truist and Bank of America. Traditional mortgage lenders seek technological upgrading. However, the Fed’s Crypto currency or payment applications may weaken the role of traditional banks.