NEVER a fan of cryptocurrency because of its high volatility nature, investor extraordinaire Warren Buffet has maintained that bitcoin is too emotional to invest in.
His view struck the chord given that data presented by stock apps indicates that the Crypto Fear and Greed Index has grown by 119.51% on a year-over-year basis.
On Nov 9, the index stood at 90, an all-time high in the past 12 months (the current 90 points represents extreme greed). The weekly index hit its lowest mark on March 22 at 11 points.
There are two simple assumptions whereby (i) extreme fear can be a sign that investors are too worried (sign of buying opportunity) and (ii) when Investors are getting too greedy, the market may due for a correction.
Delving into the future of bitcoin investing, Malaysian Investors` Association vice-president Aaron Ting sees a strong correlation between bitcoin and the S&P 500 in 2020 where the cryptocurrency seems impervious and surpassed the US$16,000 level.
“Certainly, the buzz generated by the recent accumulation of bitcoin by US listed companies such as MicroStrategy and Square to the tune of US$500 mil in October has helped,” he told FocusM.
“There is a possibility of further decoupling should the Dow, gold and oil remains bearish going into the final quarter (in tandem with an escalation of COVID-19 infection in developed economies) while bitcoin is perceived as a safe haven.”
In this regard, Ting projects that the level of US$20,000 is possible but will be difficult to sustain. For the record, bitcoin hit an all-time high of US$19,665.39 in late 2017, an incredible year for the digital currency which had started 2017 at about US$1,000.
Since hitting its peak, bitcoin has fluctuated wildly southward.
“A strong caution is advised as the higher the price goes, the correction tends to be more severe as well,” projects Ting who is also the Access Blockchain Association Malaysia secretary.
“Also, a worse than expected drops in the markets will bring bitcoin down to below the US$10,000 levels.”
According to Ting, the short-term bitcoin price action in the next quarter will largely determine the performance of its medium term outlook.
“Generally, the higher the short-term price reaches, the stronger the correction,” he reckons. “Any strong declines from the financial markets will impact bitcoin as well. And leading into the medium-term outlook over the next two to three quarters, I expect a steady and gradual increase.”
As for the long term outlook of on year and beyond, many bitcoin traders believe in the four-year boom and bust cycle theory due to the supply halving every four years.
However, the theory of the lengthening cycle has gained popularity and acceptance in recent times as bitcoin’s bull run seems to be delayed with each halving.
“The next projected bull run is expected to be around end-2021 and early-2022 when the expected price levels could exceed more than US$50,000 to US$70,000,” suggests Ting.
“Of course, I would like to remind everyone that crypto prices can completely collapse and that’s my personal opinion and certainly not a financial advice.”
That bitcoin investing is only trendy among the millennial generation may no longer be true as demand is growing with more traditional family offices making their first investments into bitcoin as a long-term hedge or as insurance for their existing portfolio of investments.
“I expect this trend to continue as bitcoin keeps maintaining its value and being uncorrelated to most other asset classes,” Global Digital Assets CEO Michael Gord recently pointed out. – Nov 14, 2020
