Why Bitcoin Investors Should Be Optimistic in 2020: Fundstrat’s Lee Explains
If you’ve been following the cryptocurrency space at all over the past few months, you likely know of the plight of Bitcoin investors. Since hitting $14,000 in June, the price of BTC has fallen by nearly 50%, trading at $7,400 as of the time of writing this article.
While already bad enough, analysts, like prominent gold proponent Peter Schiff and hedge fund manager Mark Dow (who shorted Bitcoin at $20,000 in December 2018), have suggested that it may get worse for the crypto market.
Though one top industry researcher is sticking to his guns, claiming that Bitcoin is likely going to trend strongly heading into 2020. The researcher in question is Thomas Lee, the co-founder of Fundstrat Global Advisors as a noted Bitcoin “permabull.”
Lee recently sat down with CNBC’s “Market Alert” segment to discuss his latest thoughts on the cryptocurrency market. When asked about the “bloodbath” in this nascent market by the CNBC host, he opined that the weakness in Bitcoin can be mainly attributed to the increase in regulatory scrutiny and uncertainty, especially in places like the U.S. due to Libra, and to the flailing levels of cryptocurrency adoption that has been seen in 2019 thus far.
Headwinds aside, the Fundstrat executive asserted that Bitcoin’s 50% decline from $14,000 does not change the positive long-term outlook for Bitcoin. He went on to give three reasons why this is the case.
Strong Stock Market Should Aid Bitcoin
Firstly, Lee noted that the strength in the traditional equities market is likely to provide Bitcoin with some jet fuel heading into 2020.
For those unaware, last week the S&P 500 set an all-time high at 3,150, and the index has gained some 25% in the past year alone — likely one of the strongest years on record for the stock market. These gains have been reflected across the American stock market, meaning for the Dow Jones and the NYSE Composite indices as well.
Fundstrat believes that this strength in equities should set the stage for risk-tolerant investors to start siphoning capital back into Bitcoin and other markets deemed “risky” by classical investors. Just look at the chart below published by the firm earlier this year, which shows that there is a trend forming between strong performances in the price of Bitcoin and the S&P 500 index.
Block Reward Halving to Help BTC
Secondly, Lee looked to the fact that the block reward reduction, also known as the “halving” or “halvening” in reference to the fact that Bitcoin’s inflation gets cut in half during these events, is coming up in six months’ time.
While prominent miners like Marco Streng and Jihan Wu are skeptical that this event will have any positive impact on the market, a price model co-opted by a German bank suggests that the halving will boost Bitcoin higher. Munich-based financial institution Bayerische Landesbank noted that once Bitcoin’s block reward reduction is cut in half next year, the cryptocurrency will have a fair valuation of $90,000 per coin, implying that “the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000.”
China Pro Digital Assets?
Lastly, Lee drew attention to the China narrative around blockchain and cryptocurrencies. While he did admit that the country has taken a harsh stance towards Bitcoin thus far, he noted that the authorities in China remain pro-digital assets because they are pro-blockchain.
He didn’t elaborate much on that point, but it was made seemingly in reference to the idea that the adoption of blockchain technologies should naturally lead people to Bitcoin and other decentralized digital assets.
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