We spoke with Simon Peters, eToro market analyst, about the state of Bitcoin, how bullish he feels right now and the impact of the US election on the markets
eToro has established itself as one of the leading exchanges to offer cryptocurrency trading, with arguably one of the best brand presence among its competitors — with strong advertising campaigns on Youtube featuring actor Alec Baldwin, Premier League football sponsorship and numerous ads seen on London’s red buses.
Here’s what market analyst Simon Peters had to say about Bitcoin and the crypto markets when we spoke at the beginning of November ahead of the US election:
How do you think the US election will impact the cryptocurrency market? Is a Biden victory going to be good or bad for the crypto markets?
I don’t think you can say it’s black and white on whether Biden will be good or bad for crypto. We’ve seen some comments and tweets from Trump saying he’s not a fan of Bitcoin and other cryptos. However, some of Trump’s key staff have made positive comments on crypto, whereas some Democrats in the House have had some negative things about crypto.
Nevertheless, what’s been going on with Covid could have a greater impact as we’re seeing record cases in the US. A lot of focus in the crypto community will be on a proposed stimulus package, i.e the fiscal stimulus package. There’s been a lot of speculation on how much it will be and how it will be funded. If greater liquidity is injected into the economy from the Fed, ithen this could have a beneficial impact on Bitcoin. An increase in the monetary supply could
Recently, there’s also been companies such as Micro Strategy and Square who have bought Bitcoin as a hedge against inflation and we could see more companies follow this trend.
The coronavirus has also highlighted the need for a digital dollar or a CBDC, as we’ve seen with the stimulus that has already gone out, it was sent in cheque form by mail which then meant people had to go and queue to cash them in, which is really costly and time consuming. A digital currency could avoid these problems as distribution would be so much easier and avoid these huge inefficiencies, which could have a knock-on effect that is good for the wider crypto market.
Bitcoin shows no signs of slowing down any time soon, how do you see the price developing over the coming weeks?
Since Bitcoin’s inception, we have continuously made higher highs and higher lows, which is by definition in an upwards trend. Even with the price crash we saw earlier in March this year, the $ 3,850 low was still higher than the previous one set in December 2018 at the end of the most recent bear market.
The $ 14,000 mark, which was the highest high we saw in 2019, was a key resistance level for me. Now that the price has comfortably broken this resistance level and the current trajectory of the price looks strong, there is now a real possibility that we could see a new all-time high before the year is out.
Whilst I do think we’ll see a price correction within the $ 17,200 – $ 17,500 range, I do think this bull feels different.
Since the last major price rally in 2017, there are a whole host of factors contributing to the current Bitcoin price increase, including a massive influx of investors from large scale institutions such as listed investment trusts, pension schemes and university endowment funds, which shows how far Bitcoin has come. Datasets that analyse the health of Bitcoin by looking at data from the blockchain, the technology underpinning crypto, are also reporting strong signals that justify the recent price rises.
The $ 20,000 level is clearly the next target for Bitcoin. Should we surpass that this year, which I believe is possible, then we are into uncharted territory as sentiment remains positive. Bitcoin’s maturity, evidenced by the diversity of its investors and extensive and wide-ranging data sets, mean that we can say with some trepidation, ‘this time is different’.
Currently, there is a boom in the number of whales holding Bitcoin — the highest number since 2016 — what techniques do analysts such as yourself use to anticipate how these big players will impact the market’s direction?
How whales are defined is important to think about when we look at stats like these, as the parameters for what makes a whale a whale can be subjective. Larger whales holding more than 10,000 bitcoin have decreased, but those holding more than a 1,000 have increased.
Generally speaking though, we tend to look at inflows and outflows to look at whales. In the case of inflows you can use that as a metric to signify a market dump. More or less liquidity in the order books can be a good indicator for looking at this.
If we look at where the market was four years ago, it was mostly driven by retail investors, with a few whales in the mix. Now though, as more institutional investors have got involved, the number of whales has subsequently increased.
Do you expect the highly anticipated Ethereum 2.0 upgrade to have an impact on the whole crypto market and would you say Ethereum is undervalued right now?
If we look at projects like Chainlink, which is built on Ethereum, then we arguably had an alt season earlier this year. Chainlink managed to go from within the top 20 cryptos to within the top 5 just this year — which is just one project out of many Ethereum-based ones. At a point in the future, it’s possible that DeFi could one day outstrip Bitcoin.
Do you think they’ll be a new all-time-high by the end of the year?
Whilst I think Bitcoin is on a strong upward trajectory at the moment, I’m not sure if we will reach a new record this side of Christmas. However, some sort of catalyst such as further stimulus packages or more news of successful COVID vaccines could provide impetus for bitcoin’s price. Vaccine news is causing investors to be risk on in traditional markets, and it could be they are using some of their extra cash to buy bitcoin at the moment.
Has the correlation between Bitcoin and the stock market been falling away, in your view, as the sector matures?
The correlation between Bitcoin and the stock market was highlighted in the crash earlier this year that was caused by the coronavirus outbreak.
Recently we are starting to see more of a decoupling. I think traditional markets are very sensitive at the moment, so talk of more deaths and further lockdowns due to coronavirus is weighing heavily, but at the same time vaccine developments are causing positive reactions. Bitcoin, while it is still sensitive to these forces, has shown to have more resilience and has had good news for adoption, such as the PayPal integration. Also, I think if we do see bitcoin over time be favoured as an inflation hedge rather than say gold and to some degree stocks, then we could see that correlation further fall away in the years to come.
CFD regulations are set to arrive on the 6th January from the FCA for the UK. Does eToro have a strategy in place in anticipation of the new restrictions?
I’ve had a lot of questions from my own clients about this. Around 85% of the positions on our platform are ‘real’ crypto, so the new regulations shouldn’t have too much of an impact on our business.
Simon Peters is a market analyst for eToro.