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Bitcoin Price Prediction: Evergreen factors you need to understand

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bitcoin Price predictions

What to expect?

  • Factors that hint the price movement of bitcoin so you can make educated predictions 

bitcoin price forecastWhen it comes to Bitcoin price prediction it feels like everyone is an expert and they all have the same answer:  it can go up or it can go down.

Geez. Thanks a lot.  

If this prediction was made by a weatherman saying – it may rain or it may not, it would make for a shitty prediction, yet, Bitcoin price predictions all throw big charts into our face and when those charts don’t turn out the way they predicted, they just find a causation to blame.

To be clear, there are few good analysts and people with a grasp of the space who tend to call the bitcoin price movements accurately. The problem is, they charge $1000s of dollars to share their wisdom.  If people had $1000s of dollars to pay in fees – wouldn’t they go to a Wall Street broker?

For those of you who want to understand how to get a grip on Bitcoin price prediction, we will share what we look for in predicting the bitcoin price. These factors tend to correlate, correspond and coast with the bitcoin price movements. Learning to read these factors will help you predict bitcoin price movements with a little more basis.

Of course, these are our opinions and we have been wrong before – so please do your own research and use the below information to further your research, and to make your own decisions.

We predict Bitcoin will cross $20,000 in 2020

We have earlier called for a Bitcoin Price of $50,000 just based on the averages of all the different predictions made by crypto folks. However, here we will discuss the factors that hint of the price movement of bitcoin, whether that movement is up or down.

The basis of our $20,000 price prediction for 2020 is based on factors like google trends, demand, number of wallets, traditional market movements, and more. Let’s look at each factor and how it impacts bitcoin price predictions.

Factor #1: Google search trends

If you want to find something on the internet, what do you do?

You google.

We no longer say we search. The word search has been replaced by search. So when we say google search trends, we are simply talking about public search trends.  

That means, whenever people think about investing in Bitcoin or other cryptocurrencies, they search and then either decide to invest or to not invest.  That is the reason there is a strong correlation between the two trends, that is, Bitcoin price movement and Google search trends. However, if you look closely, in a bull run the price outruns the search trends and in a bear market it precedes it.  

Look at these two charts from July 2013 through April 2020, one shows bitcoin price movement and other shows google bitcoin search trends.

Google Trends - Bitcoin price prediction

Google Trends - Bitcoin price prediction

Obviously, it makes it even more easier to see these trend lines laid out on top of each other. Someone did this for us, see below.

Charts Bitcoin Price

Overlay chart source: Exploratory.io

2020 data is very interesting because of the COVID-19 black swan event.  It is quite impressive that even during the crisis google search trends and bitcoin price movement are traveling in tandem.

Halving searches grow

There also seems to be a correlation between Bitcoin halving searches and the price movement. As Bitcoin gains the image of Gold 2.0, digital gold, rarest gold, safe haven etc, and then the halving scarcity adds to the mix – the interest in this rare asset class grows.   

If we keep an eye on the google trends – you can make an educated guess on the bitcoin price movement. Increased searches indicate a positive turn for price and a slump in searches indicate an downward price movement.

Factor #2: Media mentions

The number of times Bitcoin appears on the TV, gets mentioned on Twitter, Reddit or other social media seems to have a direct correlation on bitcoin’s price movement.

ChartStar has done a detailed analysis of the trend of bitcoin mentions on Reddit and its impact on price movement. Below we borrow a chart from their multiple chart analysis to showcase an example.

Reddit Bitcoin price charts

Tradingview took this correlation even further. They have used the CNBC Fast Money tweets to predict the bitcoin price movement with a 95% accuracy. They have used CNBC Fast Money tweets as contraindication of the bitcoin price movement.

A research paper titled, The Impacts of Social Media mentions on Bitcoin Performance, concludes that “First, a positive shock of bullish posting indicates positive bitcoin returns on the next day, and a positive shock of bearish posting affects returns negatively on the next day. Second, disagreement induces the trading of bitcoin: greater disagreement across messages precedes higher bitcoin exchange trading volume on the next day. Third, message posting has a significant impact on bitcoin transaction volume. From an investment perspective, Internet forum posts thus can be viewed as bitcoin popularity indicators, offering investors means to understand the price movements of bitcoin.

If you want to predict the price movement of bitcoin, gather intelligence around the media mentions, particularly from CNBC, Reddit and Twitter and chances are you might be able to predict the short-term movements with pretty awesome probability.

Factor #3:  User participation

Those who come to the project because of the price movement will leave the project for the same reason. Make a mental note of that statement. This is why Ripple’s fan club shrinked by 63% over 2 years while people flocking to Bitcoin (which had more volatile price action, although it did not lose 95% of its value from peak) have increased in strides.  

In fact, since the 2018 crash of the crypto market, the number of bitcoin wallets have gone up from 13 million to 48 million as of April 2020. That is over 3.7 times growth in wallets since the crash.  

This indicates that the use case and the acceptance of bitcoin has been increasing.

bitcoin price charts

Source: Bitcoin.com

If this trend continues, we could predict the bitcoin price to go up as more and more people start using bitcoin.

Looking at the data from December 2013 to December 2019 shows that the price has moved from $400 to $7500 at a rate of 3:1, that is, for every two wallets created the price moved 1x. Between 2013 wallet count of 838,000 to 2019 wallet count of 45,000,000 represents a 53 times growth in number of wallets. The price of $400 in 2013 to $7500 in 2019 indicates a 18 times increase in the price. A correlation of 3:1.

Factor #4: Losing trust in the Fiat currency

The US Dollar has lost about 11% of its purchasing power since 2013. During the same period Bitcoin has increased 1794%. 

According to a report released by Raulo Pal, Bitcoin is just getting started and has the potential to 70x from here which should put the bitcoin average price around $500,000.  But Raoul thinks Bitcoin could hit $1 Million in the coming years.

If you ask true bitcoin maximalists they consider valuing Bitcoin price in fiat as a moot point. ‘How does it matter what its value is in a fake currency that inherently has no value,’ they would tell you.

For the purposes of how the world measures anything, that is the US Dollar, I think it is safe to say that as the dollar keeps losing its value, now in an accelerated way due to the COVID-19 related stimulus package in the trillions, bitcoin will proportionately pick up its value.

It may not be long before we will start measuring bitcoin in satoshis rather than whole bitcoin prices. 

If you want to find out which direction bitcoin price will move, look at the release of new fiat into the economy.  

Factor #5: Macro economic aspects

ResearchGate published a paper on factors influencing Bitcoin’s price.  In that paper, researchers used the VEC model using Gold price as the reference point.  Since the correlation between gold and macro economic aspects such as Consumer Price Index (CPI), Dow Jones Industrial Average (DJIA), US Dollar Index (USDI), Federal Funds Rate (FFR) and Gold Fixing Price, the researchers have used these same factors to study their impact on Bitcoin.

The study concluded that “the economic factors such as CPI, DJIA, FFR and USDI do have a long-term negative influence on Bitcoin price. This result indicates that in the market Bitcoin behaves similar to gold as a financial asset to a certain extent. But gold price has no influence on Bitcoin’s price in the long run.”

A study titled, The economics of Bitcoin price formation, looks at the macroeconomic aspects of the demand and supply on bitcoin price movement.  This includes the increasing demand for bitcoin while the supply is slashed.  In addition, the study found that the more people that learn about Bitcoin the greater the price movement. Paper concludes “the arrival of new information impacts BitCoin price positively, which may be a result of increasing trust among users.”

Conclusion

If one wants to predict the short-term bitcoin price movement – they only have to look at the chatter on social media, especially google search trends.  An increase in the positive mentions on Reddit, Twitter and CNBC tend to correlate with positive price movements within 24 hours. Negative mentions on the same source result in the negative price movement and usually faster than the positive movement.

If you want to understand the long-term price movement you should consider the increasing user base and shifts in macroeconomic aspects to assess the trajectory of bitcoin price.

Also read: This global macro investment paper predicts bitcoin price will hit $100,000 in next 2 years.

Thank you for reading and sharing this article. Stay safe and healthy!

IMPORTANT DISCLAIMER

We have used referral codes where available.

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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Is Cryptocurrency driven by fundamentals or hype?

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Fundamentals or Hype

During the early 2000s India experienced a massive real estate bubble. With a lot of western companies opening their outsourcing centers in India, the land prices shot up 2x, 5x, 10x, and even 100x.

You read that right. 

Have you heard about 100x in Real Estate?

To be sure, the demand was exponentially growing in the major cities like Bangalore, Hyderabad, etc., which were quickly turning into back offices for the many western companies.

The hype in these cities was somewhat justified.

However, here is the kicker.  Many remote places which did not directly benefit from this influx of foreign direct investment started seeing their prices go up in similar fashion.

In a crazy case of trickle effect and super-hype created by the real estate agents, properties were just trading from one party to another for unbelievable markups and the prices constantly went up.

Today, that massive bubble is still intact minus the crazy multipliers.

The reason we like the comparison of what happened in Indian Real Estate market to the crypto is that a genuine need in a specific space has been exploited to translate that hype onto anything tagged with the name. 

In India that hype tag was ‘land’ and in crypto that hype tag could mean anything from ICOs to DeFi.

Ask any crypto enthusiast they will make you believe that crypto is all about fundamentals.  However, anyone who has spent even a few months in the space quickly realizes that crypto prices don’t follow fundamentals.  

This is one place where Crypto space shares its similarities with the stock market as well.

Stock market is completely distanced from the economy and it too acts irrationally, that is, when people are losing jobs and businesses are shutting down permanently, the stock market rallies higher and higher.

Similarly, crypto space, to its own detriment, is ignoring the projects that have amazing fundamentals while pumping other projects solely based on the hype.

Long term vs. Short term

Hype is short lived. Fundamentals are a long game.

That is why we emphasize that anyone interested in the crypto space does their own research in finding the projects that meet their fundamental criteria.

Once you know that a project has fundamentals (team that can execute, problem worth solving, solution that can solve, market demand, etc.,) then you just ignore the FOMO and FUD.

This will help you sleep better and use your spare time and energy in quality endeavors like taking care of yourself or spending time with family, etc.,

If you get on the hype train – it will be difficult to catch the right wave and this constant lookout for the next big thing is going to rob you of all the peace.

And, if you find yourself on the right side of the wave – you will be decimated and drowned.

DeFi defies all common sense

That is what happened with a lot of people who tried to ‘time’ the DeFi market.  

Don’t get us wrong. Many people made a ton of money (and good for them).  However, remember, crypto at this point of its evolution is a zero sum game.  That means, for everyone who made a million someone lost that million.

Unless you got on a project quite early keeping your risk level low or you have some insider information (not to mention this being illegal), you can generally not ‘time’ the market.

Many veteran traders have lost their shirts in chasing the market.

Conclusion: does this mean I should stay away from DeFi?

We cannot tell you that.  That is something you got to decide for yourself.

By market cap, Yearn Finance is considered one of the top DeFi projects. It lost over 67% in less than a month.   

Personally, if the top most project is still trying to find the ground while other projects are losing 99% of their value in a matter of a day, that means one thing:  the space needs time to mature.

We will continue to learn about DeFi. We will continue to invest what we can afford to lose when we find the right project that meets our fundamentals criteria.

That is our strategy at the moment. You have to find a strategy that suits you.

While crypto space is riding on the hype at the moment, we continue to believe in fundamentals.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Will India Ban Cryptocurrency Trading?

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Cryptocurrrency Ban India

India keeps playing with the emotions of the crypto community in India with constant back and forth of change in rules.

First it was a complete ban of crypto transactions. RBI forbids banks from serving any clients that deal in cryptocurrencies. Thanks to the Supreme court decision, RBI had to back off.

Now, there is a renewed effort to place a ban on crypto again.  

Is Crypto Ban a good thing for India’s financial future?

No, Cryptocurrency is here to stay according to many financial investors and billionaires. As nations prepare for a hyper-inflation cycle to sweep the world, Cryptocurrency can act as a hedge in addition to gold and silver.

If the government is concerned about illegal activities with cryptos then they can relax because most crimes happen in fiat cash transactions, not crypto which is traceable.

Crypto traders generally are not the ones that take part in illicit trades.  It is those who introduce illegal ICOs and OTC trades.

How about regulations?

Instead of banning crypto trades, how about bringing clear regulations to provide a framework for the crypto trading.

Such a framework should include stricter guidelines for ICOs and OTC trades.  

Crypto exchanges can relay the trading information directly to the tax authorities (instead of needing to be subpoenaed) so that there is transparency.

Will India Ban Cryptocurrency Trading?

That depends on whether India wants to be in the ranks of the United States, Switzerland, South Korea, etc., or if it wants to be counted among China, Russia and North Korea.

The United States, South Korea and Switzerland (along with other countries) are doing everything to stay ahead in the blockchain and crypto race.

Other countries we stated above are working to stomp on the innovation. 

A better question is: Can India ban cryptocurrency trading?  

The answer is NO.  

To ban cryptocurrency trading – India will have to shut down the internet.  

In the event of an actual law that bans Indians from participating in the cryptocurrency trading, the only people that will be impacted by those are the ‘honest’ citizens because the crooked ones will still find ways to trade using VPN or alias names.

For a country that wants to be at the forefront of technological revolution a ban would be a very backward decision.

We urge the Indian government to NOT punish the honest citizens by introducing a ban.  Rather, introduce a sensible legal framework for everyone to operate in.

This will bring more businesses to India and take India’s platforms to the world.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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