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The Road to 50,000$

By Marius-Cristian Frunza
Weekly Briefs

Three years ago, Bitcoin created mass hysteria amongst retail investors. The sky seemed the limit for the cryptographical protocol, perceived at that time as the Holy Grail of financial freedom. Bitcoin’s campaigners propagated the idea that when the banking system crashes, the leading cryptocurrency will remain the viable money.  Since then, Bitcoin went nearly bust, when its price plummeted in 2018 below the psychological level of 6,000 USD. Despite going through a significant effervesce, Bitcoin faces a Shakespearean dilemma: To be or not to be?, whilst most investors have currently a major impasse: To buy or not to buy?

There are many reasons why Bitcoin should move North and only North. First, the current capitalization of the leading cryptocurrency is around 250 billion USD, thereby representing only 16% of Amazon’s market capitalization. Such a figure is far from sufficient to empower a monetary system capable of breaking the monopoly of central banks. If all Bitcoins available would have a valuation closed to 1 trillion USD, then they could represent a serious alternative to fiat currencies. To reach such a goal, Bitcoin should find support at 50,000 USD. Second, Bitcoin’s exchange rate should behave more like a currency and less like an exotic commodity. Therefore, Bitcoin’s volatility needs to decrease to a level closer to EUR/USD volatility. In order to achieve this objective, the Bitcoin derivative market should grow significantly. Leading investment banks and hedge funds should build more robust crypto-trading desks which could bring Bitcoin market closer to completeness.

Last but not least, Bitcoin Cash, Bitcoin’s leading fork would reach a critical mass when Bitcoin’s price goes above 50 000 USD. Thus, Bitcoin Cash could cover a higher number of transactions and become more relevant to the real economy.
While most analysts believe Bitcoin is thriving amid the coronavirus pandemic, the leading cryptocurrency is playing a crucial and quintessential part of its history.

Bitcoins are like gold bars with wings. That is why I, and so many others, view bitcoin and its network as gold 2.0. Tyler Winklevoss, early Bitcoin investor

Market overview

The leading stock indices kept the momentum built amid the American elections. The S&P 500 went for several consecutive trading sessions along with a level close to its all-time high. The announces concerning the successful clinical tests for the coronavirus vaccines developed by Moderna and Pfizer boosted the optimism on the financial markets. There are signs that the second pandemic outbreak stopped its expansion in Europe, as new COVID cases in France, Belgium, and the Netherlands are observing a decreasing pattern. This wave of optimism is not sustainable. If the lockdowns are impacting at a big scale, the retail business during Christmas, then the macro-economic indicators of the last quarter will not look well. Moreover, the end of the year effect could play a role as some fund managers may cut their positions and lock in the profits for their investors.

Focus:

Dolly Parton boosts Moderna

Dolly Parton’s name appeared among the sponsors of Moderna’s Covid-19 vaccine. The famous country singer made donations that were channelled towards the research efforts to tackle the coronavirus pandemic. Moderna’s share price recovered some of the losses from the previous week after announcing that its vaccine is 95% effective. Moderna, AstraZeneca and Pfizer are engaged in a race for delivering the vaccine at a large scale. The company which comes first in this competition will secure a significant competitive advantage. The potential profits could be counted in tens of billions of dollars. Nevertheless, if this first generation of vaccines presents secondary effects, the concerned companies will support massive liabilities, and their share prices could suffer.

Focus:

Tesla is back

When Tesla's share plummeted in September, many believed it was the beginning of the end for the electric car manufacturer.  Surprisingly, Tesla's share soared again to an all-time peak amid the global momentum built after Biden's victory.

Rumours about its inclusion in S&P500 fuelled the market rally. Moreover, Elon Musk announced that Tesla's "full self-driving" technology provided positive testing results. Tesla retains its position of world's biggest car manufacturer. But high hopes are in many cases, the origin of big delusions.

Commodities:

Is Gold oversold?

After going through a solid rally during the summer, the Gold ounce is following a negative trend. This move is counterintuitive as many investors perceive the yellow metal as a safe harbour investment. There are two possible explanations for this trend.

First, institutional investors may not see the upside of holding Gold positions and most likely moved the liquidity towards the equity markets.  Second, the retail investors might prefer having physical positions in Gold rather than the paper on the futures markets. Both assumptions could be valid and explain why we do not see a sustainable momentum on Gold prices.

The wind could turn if big fund managers decide to reduce their exposures to the equity market.

Market outlook

The Dow Jones continued its rally but failed to break the resistance level at 23,000USD. The market has built momentum amid the euphoria of the US elections and is pricing the optimism generated by the positive announces about the COVID vaccine. Some corrections could occur over the next week, amid technical sales. More significant market corrections could arrive in January 2021.

Bitcoin's rally continued overpassing our prediction and reached 18,500 USD.  Institutional investors start to take Bitcoin seriously. Thus, Bitcoin is becoming slowly but surely a leading asset in the investment, and we expect to see Bitcoin rising towards 20,000 in the early days of 2021.

General Disclaimer

The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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