The bitcoin rally is “very long in the tooth” and could be about to sharply reverse course, according to one currency strategist.
Boris Schlossberg, managing director of FX strategy at BK Asset Management, told CNBC this week CME Group’s announcement that it will introduce micro bitcoin futures could be a sign that the market is at the top.
“Last time they announced that there was going to be futures” – which was in 2017 – “bitcoin actually hit [the] top,” Schlossberg said.
“I don’t think any asset that has a volatility of 20% per week can really act as a currency at this point,” Schlossberg said. “And I think whatever transactions you’re going to see in bitcoin are going to be infinitesimally small relative to regular currency.”
The foreign exchange strategist said he thought “the whole rally in crypto… is getting very long in the tooth.”
He said: “I think we’re very, very close to perhaps an intermediate-term top here. A little bit of a correction is certainly due at this point.”
Schlossberg is far from the only analyst predicting that the remarkable rally in the world’s biggest cryptocurrency could be nearing its peak. Bitcoin has risen around 775% over the last year to $58,400 on Thursday, according to Coinbase data.
Yet bitcoin tycoon Mike Novogratz predicted on Wednesday that increased institutional interest would drive the asset to be bigger than gold. He told CNBC he is shocked at the pace of crypto adoption by big Wall Street players.
Bitcoin may be entering the second half or later stages of a bull market, according to crypto analyst Glassnode, as nervousness grows in some quarters about a possible plunge in the price.
Glassnode’s weekly analysis report found there had been a pick-up in “wealth transfers” from long-term bitcoin holders to newer speculators, which the company said was reminiscent of previous market peaks.
The report said bitcoin bull markets eventually reach a “euphoric top”, which materializes as big holders increasingly spend their coins to realize profits.
Glassnode estimated long-term bitcoin holders had reactivated about 9% of supply so far in 2021 by spending coins, although this was below the 17% reactivation seen before the market’s crash in 2017.
“These studies suggest conditions are similar to the second half or later stages of a bull market,” Glassnode said.
The bitcoin price (BTC) was down 6% on Tuesday to $54,294, well off a high of $62,000 earlier in March, but still up around 700% from a year ago.
Glassnode also said on Tuesday that the biggest players – wallets with 1,000 to 10,000 BTC – had cut their holdings by 307,000 bitcoin since December.
Investment manager Timothy Peterson tweeted recent falls in big holdings “are often, but not always, associated with bear markets.”
On Monday, crypto exchange founder Bobby Lee told CNBC 2021 is a bull market for bitcoin, of the sort that comes around every three, or four years. He said the bitcoin price could “potentially” go as high as $300,000 this year.
Yet Lee said the “bubble” was likely to pop. “People should be aware that it could fall as much as 80% to 90% of its value from the all-time peak,” he said.
The bitcoin price could surge as high as $300,000 in the latest bull-market rally, but could then plunge 90% into a “winter” lasting years, the founder of cryptocurrency exchange BTCC has warned.
Bobby Lee told CNBC’s “Squawk Box Asia” on Monday that 2021 is a bull market for bitcoin, of the sort that comes around every three or four years. Lee, who currently runs crypto wallet app Ballet, said 2013 and 2017 were also bull-market years in which the bitcoin price increased by 10 or 20 times.
He predicted the bitcoin price (BTC) would hit $100,000 by the summer and “potentially” $300,000 by the end of the year, “if history plays itself out again.”
However, Lee said “bull market cycles come and go.” He added: “After a bull market peak, inevitably it could go down by quite a bit, and that’s when the bubble bursts.”
Lee warned bitcoin could then enter a “winter” where the price stays low for two to three years. “So after it peaks out, whether it’s $200,000, $100,000 or $300,000, people should be aware that it could fall as much as 80% to 90% of its value from the all-time peak.”
Lee co-founded BTCC in 2011, making it one of the oldest cryptocurrency exchanges.
The bitcoin price has roughly doubled this year already to around $58,100 on Monday, down from a high of close to $62,000 a week ago. And it is up by almost 800% from March last year, when it tumbled as coronavirus started to batter the global economy.
Advocates say the world’s biggest cryptocurrency by market value will continue its remarkable run, as growing numbers of institutional investors become involved. They also argue bitcoin can act as a hedge against inflation, which many investors expect to rise.
But critics say bitcoin’s massive volatility means its institutional adoption will be limited. Many argue it is in a bubble driven by huge amounts of stimulus and is set for a price crash of the sort seen after 2017, when bitcoin plunged from around $20,000 to below $4,000 in just over a year.
“I don’t know if history will repeat itself, but what we do know is that bitcoin bull-market cycles come every 4 years and this is a big one,” Lee said.
Bitcoin had a momentous run in February, from catapulting to a market capitalization of $1 trillion to smashing the $58,000-mark.
The month also saw heavyweight institutions such as Tesla and Mastercard embrace the cryptocurrency, while MicroStrategy reinforced its support for bitcoin by adding to its existing pile.
In Febrauary, the price of bitcoin jumped more than 50%. As of Friday 4 pm ET, bitcoin was trading lower by 5.54% to $46,515, a 15% fall compared to Friday last week.
Yet, Pankaj Balani, CEO at cryptocurrency derivatives exchange Delta Exchange, said the case for a stronger rally in bitcoin remains intact despite the recent correction.
“This is only the second correction in bitcoin prices since November when bitcoin broke above its previous all-time high and started a fresh rally,” he said. “One can expect a short-term consolidation in the price of bitcoin around here.”
Balani noted that the $40,000 level has become a strong psychological support for the digital coin and will be difficult to break in the short term.
Paolo Ardoino, CTO of Bitfinex, a cryptocurrency exchange, said such price movements are to be expected in a nascent space. Ardoino foresees the same volatility in March but remains optimistic about the value of the asset.
“As we move into March and through 2021, bitcoin will continue to find its ground, and we will continue to experience fluctuations and volatility,” he said. “We should see more mainstream adoption, with the continued entrance of major traditional financial players onto the scene.”
Alex Zhao, CEO of Standard Hashrate Group, the project team behind the bitcoin Standard Hashrate Token, echoed the sentiment.
“Our members now share the prospect that bitcoin price will reach $100,000 before the end of 2021,” he said. “We generally foresee an abrupt rise in bitcoin price in March 2021. This is in large part due to the continued quantitative easing, particularly in the US. Hedge funds and corporations will continue to buy more bitcoin.”
Meanwhile, Jeffrey Wang, head of Americas for Amber Group, a cryptocurrency financial services firm, said he believes most bitcoin investors are in it for the long haul.
“I believe a lot of the earlier adopters that have held bitcoin for years aren’t looking to sell at levels near here but much higher, north of $100,000 if at all,” Wang said. “I look at the next major milestone to be $75,000 where there should be some resistance.”
Through its ups and downs, here is a quick look back at bitcoin’s record-breaking rally in February.
A European Central Bank governing council sounded an alarm for bitcoin investors. “If people want to invest in bitcoin, they have to be prepared to lose all their money – that’s certainly my view,” said Gabriel Makhlouf, a governing council member of the ECB.
Tesla announced it invested $1.5 billion in bitcoin, pushing the price up 16% to a record $44,795. Tesla also unveiled plans to accept the cryptocurrency as payment in the near future.
Bitcoin soared above $48,000 for the first time, riding the rally sparked by the Tesla announcement.
The ECB’s Christine Lagarde said she does not consider bitcoin a real currency and will not be holding it as reserve currency anytime soon. “It’s very unlikely – I would say it’s out of the question,” Lagarde said.
US Treasury Secretary Janet Yellen also criticized bitcoin. “I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism,” she said.
Bitcoin surged to an intraday high of $48,364 following continued buy-in from major players. It was the second time the world’s most popular cryptocurrency blew past the $48,000-mark in one week.
Elon Musk posted a vague tweet with an image of a ring with the logo of bitcoin earlier in the day.
Twitter CEO and a longtime bitcoin advocate Jack Dorsey announced a partnership with Jay-Z to start a bitcoin endowment that will focus on developing the cryptocurrency in India and Africa. “It’ll be set up as a blind irrevocable trust, taking zero direction from us,” Dorsey said.
On the same day, Andrew Yang said he would make New York City a hub for bitcoin if elected mayor. “As mayor of NYC – the world’s financial capital – I would invest in making the city a hub for BTC and other cryptocurrencies,” the former presidential candidate said in a tweet.
BitPay floated the possibility of its bitcoin cards being added to their Apple Wallet, giving cryptocurrency holders a new way to spend via Apple Pay. “We have thousands of BitPay Wallet app customers using the BitPay Card who are always looking for new places and ways to spend their crypto,” said Stephen Pair, CEO of BitPay.
Bitcoin jumped above $50,000 for the first time, bringing its year-to-date gain to 74%. The cryptocurrency rose nearly 5%, to $50,547.
Bitcoin hit another record high, climbing above $51,700 for the first time and bringing its market capitalization close to $1 trillion.
MicroStrategy increased its convertible debt offering from $600 million to $1 billion. The software technology company owned nearly 71,000 bitcoin to date since it began purchasing bitcoin last summer.
Bitcoin continued its rally to just above $52,600.
Later in the day, payments company Square announced it bought more bitcoin, adding 3,318 coins at an aggregate purchase price of $170 million. The payments company now owns 8,027 bitcoins, representing about 5% of its total cash.