There are many on this site that are claiming to know where BTC and other cryptos are heading in the short to intermediate term. The only issue? Their analysis is absolute hogwash.
This chart shows the Vanguard Emerging Market index (which shows a diversified performance of equities in many of the emerging markets). Notice the stark similarity.
As you can see, BTC has traded very closely to the emerging markets index fund, and this should be no surprise to anyone because a plethora of reasons, but, I believe, most notably the fact that adoption rates in emerging markets are much higher than that of the United States.
One of the highest BTC adoption rates is in China. Notice when BTC begins to peak - right around the end of December. To refresh your memory, this is the time when everyone around the world started to notice that President Trump was not, as many as stated, bluffing about tough trade talks with China and the rest of the emerging markets. Thus, China and the rest of the emerging market economies being to have fear and uncertainty thrust into their everyday life.
What is the first thing that people want to do when they have uncertainty? Stockpile the one thing that they know will allow them to eat, live, and pay for expenses - cash.
That leads us to the next logical decision of what assets to liquidate to get this security. I feel that many believed that the untested, unproven and uncertain BTC was the first asset on their list.
So I have a theory, what does it all mean?
For one it means that while Technical Analysis can be very helpful in making decisions, the psychological analysis of investor's willingness to buy and sell of security may be a better means of predicting what kind of growth BTC can see. Boom and busts are something that have been heavily studied throughout our financial markets, and it may be a good idea to apply some of the things we have learned about nearly every other financial market to BTC.
My underlying point is that we have to start thinking of BTC as a truly speculative investment. It is something that many who got involved did not do so for the long-term gain, but instead the short-term gain. Will it become a world currency one day? I think so. Should we treat BTC with the same kind of legitimacy that "world currency" demands? Absolutely not.
So, what needs to happen to see another bull run?
1. Emerging Markets need to may a rebound, and fast! For every day that emerging markets and, to an extend, China is down continues to put downward pressure on BTC. No matter what happens, if the primary adopters of BTC don't want to take risks anymore then BTC will continue to consolidate downwards.
2. We need trade certainty. China and the United States and other emerging markets need to take an ambiguous trade situation and at least make clear what the relationships are going to be in the future. Uncertainty will nearly always slaughter everyday investors' appetite for high-risk and speculative investments. As of right now, BTC falls in these categories.
3. There needs to be more adopting and a fight against ignorance in countries that have low adoption rates. The United States is one of the worst adopters of BTC and other alt coins, and it's very hard to see why. Nearly all of the biggest technology companies and technological advances have occurred in the United States. If BTC owners are seriously concerned with bringing awareness and adoption, then maybe some of them should start to open their pocketbooks and liquidate some of their reserves to pay for strong marketing campaigns to convince those who are either on the fence, ignorant, or who have maybe never even heard of BTC to add the investment into their nest egg. Unless this campaign becomes a reality, many citizens will always know BTC as a busted bubble and not a serious investment.
If the above can happen and investor sentiment can turn around, so can BTC. But until these things begin to happen, don't take anyone's TA as gold and expect BTC to magically rise as it did before. Many markets work the same way, and now we are starting to find that BTC is no different.
This chart shows the Vanguard Emerging Market index (which shows a diversified performance of equities in many of the emerging markets). Notice the stark similarity.
As you can see, BTC has traded very closely to the emerging markets index fund, and this should be no surprise to anyone because a plethora of reasons, but, I believe, most notably the fact that adoption rates in emerging markets are much higher than that of the United States.
One of the highest BTC adoption rates is in China. Notice when BTC begins to peak - right around the end of December. To refresh your memory, this is the time when everyone around the world started to notice that President Trump was not, as many as stated, bluffing about tough trade talks with China and the rest of the emerging markets. Thus, China and the rest of the emerging market economies being to have fear and uncertainty thrust into their everyday life.
What is the first thing that people want to do when they have uncertainty? Stockpile the one thing that they know will allow them to eat, live, and pay for expenses - cash.
That leads us to the next logical decision of what assets to liquidate to get this security. I feel that many believed that the untested, unproven and uncertain BTC was the first asset on their list.
So I have a theory, what does it all mean?
For one it means that while Technical Analysis can be very helpful in making decisions, the psychological analysis of investor's willingness to buy and sell of security may be a better means of predicting what kind of growth BTC can see. Boom and busts are something that have been heavily studied throughout our financial markets, and it may be a good idea to apply some of the things we have learned about nearly every other financial market to BTC.
My underlying point is that we have to start thinking of BTC as a truly speculative investment. It is something that many who got involved did not do so for the long-term gain, but instead the short-term gain. Will it become a world currency one day? I think so. Should we treat BTC with the same kind of legitimacy that "world currency" demands? Absolutely not.
So, what needs to happen to see another bull run?
1. Emerging Markets need to may a rebound, and fast! For every day that emerging markets and, to an extend, China is down continues to put downward pressure on BTC. No matter what happens, if the primary adopters of BTC don't want to take risks anymore then BTC will continue to consolidate downwards.
2. We need trade certainty. China and the United States and other emerging markets need to take an ambiguous trade situation and at least make clear what the relationships are going to be in the future. Uncertainty will nearly always slaughter everyday investors' appetite for high-risk and speculative investments. As of right now, BTC falls in these categories.
3. There needs to be more adopting and a fight against ignorance in countries that have low adoption rates. The United States is one of the worst adopters of BTC and other alt coins, and it's very hard to see why. Nearly all of the biggest technology companies and technological advances have occurred in the United States. If BTC owners are seriously concerned with bringing awareness and adoption, then maybe some of them should start to open their pocketbooks and liquidate some of their reserves to pay for strong marketing campaigns to convince those who are either on the fence, ignorant, or who have maybe never even heard of BTC to add the investment into their nest egg. Unless this campaign becomes a reality, many citizens will always know BTC as a busted bubble and not a serious investment.
If the above can happen and investor sentiment can turn around, so can BTC. But until these things begin to happen, don't take anyone's TA as gold and expect BTC to magically rise as it did before. Many markets work the same way, and now we are starting to find that BTC is no different.