- After weeks of trading sideways, leading cryptocurrencies bitcoin and ether are seeing a surge in upward momentum.
- In a new report, a senior commodity strategist breaks down how the two are in a “discounted bull market”.
- He lays out how bitcoin could chart a path to $100,000, while ether could return to $4,000.
- See more stories on Insider’s business page.
Leading cryptocurrencies bitcoin and ether have seen a sudden surge in upward momentum after weeks of trading sideways.
Bitcoin (BTC) has reached $40,000 after sitting in the range of $31,000 to $34,000. It gained almost 18.5% in July, thanks to a surge late in the month, making this its strongest monthly performance since March, while ether (ETH) is trading around $2,700, having posted a gain of 11.5% last month, its largest increase in three months.
This shift has led many technical analysts to re-think their price predictions and outlook for the crypto market.
Insider recently spoke to Dave Keller, a chief market strategist and technical analyst at StockCharts.com, who outlined that over the long term, he expects bitcoin to surge past $100,000, while ethereum could return $4,400 in the near-term.
Considering both assets dropped more than 50% in price in mid-April after reaching all-time highs of $64,800 for bitcoin and $4,300 for ether, McGlone laid out why he’s so confident in the two coins.
In the case of bitcoin, the balance betwen supply and demand is central to the bullish outlook.
McGlone highlights that supply is declining, while demand and adoption are rising in most countries.
This view is also that of a number of large crypto exchanges and banks, such as Kraken, Bitstamp and Anchorage, who have all seen institutional demand stay steady, even though prices are almost half what they were a few months ago when they were at the peak.
Crypto traders are wary of an increase in regulation. Just this week, the new SEC Chairman Gary Gensler signaled his interest in regulating the crypto markets describing the current operations as the “Wild West“.
But over the longer term, the focus on regulation is actually a positive, as it signals a maturation of the market, McGlone said in the report.
“The US embrace of digital assets with regulation versus. China’s increasing hostility are likely to play out favorably for bitcoin and the dollar,” he said.
Macro forces are also playing a role in his outlook, as he believes some of the deflationary signals stemming from US Treasury yields and the commodity markets are adding to the argument for owning bitcoin, as well as gold – a traditional hedge against inflation or deflation in many portfolios, McGlone said.
“We see the digital and analog stores-of-value advancing together,” said McGlone, who expects both bitcoin and gold to follow the upward trajectory of US bond prices – resulting in a drop in yields – in the second half of 2021.
“Both have had substantial corrections that typically favor responsive buyers, rather than encouraging new shorts at unfavorable relative-value levels unless fundamental drivers have reversed,” McGlone said.
For the rest of this year, McGlone believes bitcoin, gold and long-dated bonds will be the top-performing assets. Negative yields in Japan and Europe could pull US yields lower too, thereby influencing the value of bitcoin, he said
“Bitcoin appears to have built a base around $30,000, that’s akin to $4,000 at the start of 2019, and we see performance parallels that could get the benchmark crypto back on track toward $100,000,” McGlone said.
Ethereum, on the other hand, has become the go-to platform for the digitization of financial and monetary infrastructure, McGlone said. He cites the example of decentralized exchange Uniswap, which currently has volume that is about half of that of Coinbase’s.
“Ethereum has been outperforming Bitcoin for about two years, and in the aftermath of the B-Word conference, we expect more of the same,” McGlone said.
McGlone highlights stablecoin Tether as a prime use-case for ethereum as it presents a key entry point into the crypto landscape,
Stablecoins are cryptocurrencies pegged to a fiat currency on a 1:1 basis and are backed by reserves, such as short-term government bonds and the currency itself.
Tether is the largest stable coin with a market capitalization of $62 billion, according to Coinmarketcap.com, This is more than triple where the capitalization was this time last year.
However, some see Tether as a major risk to the crypto markets because the firm is yet to produce an independent audit on its financial reserves despite its size.
This has become a key argument for the bears. Portfolio manager Duncan MacInnes from Ruffer Investment, a firm that made $1.1 billion from a bitcoin investment, said stablecoin risk was one of his key concerns in revisiting crypto.
“As 2021 progresses, we see momentum in bitcoin adoption, ethereum building the digital fintech infrastructure and dollar dominance remaining predominant themes,” McGlone said. “About $30,000 for the No. 1 crypto and $2,000 for the No. 2 are solidifying support levels. Bitcoin and [ether] appear to be discounted bull markets.”
“We see probabilities tilted toward more price-appreciation resumption and for [ether] to rise toward $4,000.”