You can find the first part at: Can The Bitcoin Virus Reach USD 20,000? (Part I)
We have to add to that analysis the “momentum” of which I spoke some time ago in this same section, and the investor interest.
With the first we want to identify the moment of the trend and the relative strength that this asset has with respect to price variation.
It is an anomaly that occurs in the traditional market and that, in this still very immature cryptoactive, has even greater impact.
According to this strategy, it is a question of only entering the rise in those assets whose evolution is very positive. And if we also compare them, against the rest of cryptoactives, it must have the highest relative rise.
This point is not minor because, as many followers of cryptoactives have seen, since April 2019 BTC is one of those with the greatest momentum and, the so-called Altcoins, is suffering different fate.
Similarly, when an asset experiences negative momentum, it may be the occasion to open short positions. In any case, the entry point and risk management must be studied and applied at all times.
With respect to investor interest, and using very simple tools analyzed in this study by Yale University professors, Google can have a very clear view of the state of the same. Since April, the increase in the search for the term “bitcoin” has experienced a clear upward shift.
However, if we compare it with what we experienced in 2017 and part of 2018, we are still very far from what we experienced in those months.
Some investors comment that the final investor has not yet joined and that it is the “smart” money that is behind this year’s price increase.
It is important not to forget what the Libra Facebook project brings with it and with respect to cryptoactives.
While it does not pose a danger to decentralized currencies such as bitcoin (yes for the USD or the Euro), what is clear is the interest of large corporations in crypto currencies and in their future use.
Libra will mean greater benefits for Facebook thanks to being able to make transactions more efficient, easier to execute and at lower cost. And this will attract other companies such as Amazon or Apple.
We are talking about the greater adoption to which we referred earlier that, by simple contagion, will expand to a greater or lesser extent to bitcoin and some (few) other decentralized currencies.
Being the potential of more key users for a possible valuation, it is enough to place this supposed growth in the formulation of Metcalfe’s Law, in order to arrive at a future valuation.
This interest can also be seen on the side of trading volume and its origin. Graphs that help to understand the origin of this interest, with all the reserves, are those obtained with respect to the origin of the incoming cash flow.
The real volume is experiencing significant increases, achieving business records above 3000 million USD on-chain.
In the CME futures market, the same trading peaks have been experienced, surpassing in a single May session, the 33,000 contracts that are equivalent to a nominal of around 1.3 billion USD.
Currently, as this buyer interest graph shows, the current market moment (with a BTC above 12,000 USD) is accompanied by volume and, what is interesting to see in the previous one, is that we have not yet entered a moment of euphoria.
Some Risks
However, despite all this positive, it should never be forgotten that it is a question of allocating a very small part of a portfolio (maximum 5%) and that there are certain risks to be monitored.
The first is to understand that this whole approach to a new ecosystem that revolves around cryptoactives may not be completed.
Secondly, and despite the regulatory advances observed, this is a risk that is not minor and has a high impact.
Finally, all factors relating to fraud, breach of network security, etc. must be taken into account for their rapid and lethal effect.
In this sense, and making it clear that this forum does not invite any position to be taken, cryptoactives are not for all types of investors.
As things stand and with a bitcoin in annual highs, the current environment in which we move tends to promote the idea of a greater adoption of cryptoactives.
Since supply is limited in the case of the BTC and in view of the expectation of greater demand on both the institutional and retail sides, and assuming that the aforementioned risks do not occur, several technical indicators point to the 20000 USD as the next bullish objective.
Before that, however, the current overbought levels will have to be saved and abrupt profit-taking will have to be witnessed.
But seeing how the momentum is very positive and the growth of investor interest has returned to the market, one wonders if this virus that bitcoin represents will not be, in the end, rather a bacterium of those beneficial that, as a living organism, has a high trajectory.
