It has been a tough start to the year for cryptocurrency investors. The price of bitcoin is down by over 50% year-to-date, lawmakers are mulling over potentially restrictive global cryptocurrency regulations, and digital asset exchanges are finding themselves under increased scrutiny.
Some experts believe that the crypto bubble has popped while others believe that this is just a short correction before the rally continues to new highs.
In this article, we will explore and compare recent bitcoin price forecasts that were made by leading analysts and investors to get a better idea of what Wall Street is thinking about where the crypto asset market will go next.
Everyone Has an Opinion
It seems like not everyone wants to hold bitcoin as an investment but everyone has an opinion about it. Recent price predictions have ranged from bitcoin becoming worthless to exceeding the USD 90,000 mark within the next two years.
Harvard Unversity professor and economist Kenneth Rogoff told CNBC Squawk Box:
“Bitcoin will be worth a tiny fraction of what it is now if we’re headed out 10 years from now … I would see USD 100 as being a lot more likely than USD 100,000 ten years from now.”
Rogoff argues that “if you take away the possibility of money laundering and tax evasion, its actual uses as a transaction vehicle are very small.”
He believes that in the aftermath of the potentially upcoming wave of crypto regulations plus tax authorities’ newly found interest in going after wealthy bitcoin holders, the value of the currency will likely diminish to be worth a small fraction of where it is trading today.
Rogoff’s negative view on the future of bitcoin is shared by Stefan Hofrichter, Allianz Global Advisor’s head of global economics and strategy. In a recent blog post, he stated that “[bitcoin’s] intrinsic value must be zero”.
His argument for this conclusion is:
“A bitcoin is a claim on nobody – in contrast to, for instance, sovereign bonds, equities or paper money – and it does not generate any income stream.”
Hofrichter considers bitcoin as “a textbook case of a financial market bubble” that will likely still continue for a while but will eventually pop. He cites factors such as overtrading, easy monetary conditions, lack of regulation, increasing leverage, swindles, and overvaluation as key reasons why bitcoin is a bubble.
He also does not consider bitcoin a currency as its transaction fees and volatility are too high. Additionally, the high energy consumption of running the Bitcoin network makes it unsustainable in the long-run. Hence, he views bitcoin as a nothing but a bubble.
University of Pittsburgh researchers Carey Caginalp and Gunduz Caginalp share Hofrichter’s view that bitcoin has “no value by traditional measures”. They believe that:
“The cryptocurrencies may simply be a mechanism for a transfer of wealth from the late-comers to the early entrants and nimble traders”.
Outspoken New York University Professor and author Nouriel Roubini stated in a recent Bloomberg interview that bitcoin is the “biggest bubble in human history” and believes that this “mother of all bubbles” is now finally crashing.
Jon Matonis, economist and co-founder of the Bitcoin Foundation, disagrees and said, in an interview with Business Insider, that he remains confident that cryptocurrencies are not in bubble territory:
“Bitcoin is the pin that’s going to pop the bubble. The bubble is the insane bond markets and the fake equity markets that are propped up by the central banks. Those are the bubbles.”
LDJ Capital founder and chairman David Drake is also bullish on the “digital gold”. He told Bloomberg that he believes that the value of one bitcoin could reach USD 30,000 by the end of 2018. He thinks that as regulatory bodies get more involved in the cryptocurrency space the asset class become more legitimized. This, in turn, will attract more investors, especially from Wall Street, who will push the price of bitcoin and other cryptocurrencies to new highs.
Matonis’ and Drake’s optimism about the future of bitcoin is shared by Fundstrat Global Advisors’ lead analyst Tom Lee, who predicts that the price of bitcoin will hit USD 91,000 by March 2020.
Lee, who has emerged as one of Wall Street’s leading analysts covering bitcoin, has amassed substantial data about the digital currency, which he uses for his – usually accurate – price predictions. His collected data include the cost of mining, detailed trading trends data and technical analysis.
Lee and his team’s most recent analysis has concluded that after bitcoin’s last three 70% drops, the digital currency has always managed to hit new highs shortly thereafter. Based on this data, Lee believes that bitcoin could hit USD 91,000 within the next two years.
Big Disagreements and Common Themes
It is no surprise that the bitcoin “bulls” strongly disagree with the “bears” out there. The main focus of disagreement lies in whether bitcoin actually has intrinsic value or whether its value is purely driven by hype.
While the majority of financial experts agree that bitcoin – and cryptocurrencies in general – will likely be around for a little longer, some believe they will eventually become worthless while others believe that big things are still to come for crypto assets in the future.
A common theme among bitcoin “bears” is that they compare the decentralized digital currencies to existing asset classes and use traditional valuation models to evaluate the cryptocurrency market. However, to truly evaluate bitcoin, you need to look beyond established financial markets and understand that cryptocurrencies are an entirely new breed.
To evaluate cryptocurrencies new factors must be considered that economist and equity analysts not look at in the traditional financial markets. These include the number of active nodes, the daily number of transactions, the level of decentralization, adoption rates as well as the network effect, to name a few. Hence, any analysis of bitcoin and other crypto assets must incorporate valuations techniques that are tailored specifically towards this new digital asset class for it to carry any weight in this brave new world of investing in cryptographic assets.
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