Is it possible that bitcoin is about to play catch-up to other risky assets?
According to Tom Lee of Fundstrat, that is likely going to be exactly the case.
Since December 24th, equities have rallied significantly, bitcoin not so much.
The premise is that since bitcoin has been mostly correlated with risky assets over the past couple years, it likely trades with them going forward, at least in the near term.
Specifically that of Emerging Markets and Small Cap equities.
Why does Mr. Lee think bitcoin is about to rally?
He bases these thoughts off of data science.
Since December 24th, US equities have moved up roughly 2 standard deviations. Small Caps have moved up roughly 2 standard deviations. Emerging Markets have moved up roughly 1 standard deviation.
As we mentioned, bitcoin is most correlated with Small Caps and Emerging Markets.
In fact, we can see that bitcoin followed Emerging Markets very closely starting just before 2016:
(Source: ~~~ embed:1107287109340200960) twitter metadata:ZnVuZHN0cmF0fHxodHRwczovL3R3aXR0ZXIuY29tL2Z1bmRzdHJhdC9zdGF0dXMvMTEwNzI4NzEwOTM0MDIwMDk2MCl8 ~~~
And since that time, bitcoin has been flat...
How much does this imply prices might rally?
If we apply that same standard deviation move up that EM and Small Caps have seen we get a bitcoin price of $10k-$20k, respectively.
That would be anywhere from 3X-5X current prices.
Lee was quick to say that this is not their base case going forward, but he does think that bitcoin is about to play catch-up at least to some degree.
Whether it "fully catches up" is anyone's guess, but if there is any catch-up at all there is plenty of upside from current prices.
(Source: ~~~ embed:1107287109340200960) twitter metadata:ZnVuZHN0cmF0fHxodHRwczovL3R3aXR0ZXIuY29tL2Z1bmRzdHJhdC9zdGF0dXMvMTEwNzI4NzEwOTM0MDIwMDk2MCl8 ~~~
What do you think, is he going to be right?
Personally, I think he is going to be proven right.
With the FED no longer raising rates, the dollar not strengthening any more, and other risky assets performing well, not to mention strong fundamental developments for the currency, I think we have some nice tailwinds for bitcoin right now.
I would not be surprised to see bitcoin test $6k within the next couple months.
Stay informed my friends.
-Doc
We are on the right track
Things should start to get fun again here soon.
Please be right. This crypto winter has been exhausting.
I agree. I think he will be, at least to some degree.
Go BTC Go!
I'm ready for it to go up!
I watch a guy on magic tcg investing and it seems there market has bottomed and is starting to turn around as well. It will be interesting if the cards start to top out just before the crypto market as this might ne a leading indicator for crypto as unlikely as it maybe.
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Crypto tends to be pretty far right on the risky asset spectrum, so possibly.
Just in time for an after-tax-season bump and a mini bull run in the summer.
Yep, things could be setting pretty well for a nice little run here.
Last year we started a nice rally in March that ended in May. Might we see something similar this year? It's possible.
In 2017 we had a very nice rally in the Spring.
I like the thought but I challenge the fact that they would correlate as those markets are more entangled with institutions whereas bitcoin still is most lead by a smaller and unrepresentative community. Therefore, bitcoin could remain flat as the financial markets continue to inflate due to manipulation by the Central Banks as they work to maintain their own bubbles.
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True. Though they are the most correlated to bitcoin of any other asset class over the past 3 years. If you look at EM specifically it was a pretty strong correlation for over 2 years. Perhaps it was just coincidence though... as you mentioned they are very different markets with very different participants for the most part.
Your words in Gods ears 🙏🙏🙏
Have a wonderful week
Tom
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Hopefully! Eventually Tom Lee is going to be right... I hope.
What you wrote: Is it possible that bitcoin is about to play catch-up to other risky assets?
What we read: Are things getting fun again?
It can only go one of two ways!!!
Very true. Which way do you think we are about to go?
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Thanks.
HODL and take a Tea ;-) We will se us as WInner in the next 3-5 years ;-) Good vibes too you ALL !!
I agree. I think if people can hold on for 3-6 years, basically through the next 2 bitcoin halvings. Prices should by much higher by then.
Thanks.