As cryptocurrencies take a big step forward in their maturity this week with the launch of broker Coinbase on Nasdaq, it may be time to look at their long-term outlook. A pair of financial market experts pondered that question at Events of MarketWatch-Barron Invest in cryptocurrency, held on Wednesday.
Katie Stockton, a market technician and founder of Fairlead Strategies, notes that the technical analysis shows a “clearly higher” trend towards Bitcoin price.
Looking back, we can see that the lows in 2018 and 2020 act as a big double bottom, she noted.
After hitting a 2017 high, Bitcoin has risen above $ 34,000 and “hasn’t looked back since,” Stockton said. The new all-time high is a good thing in the long term, she said, and the small breakout is a good thing, in the short term, indicating a measurable gain to over $ 69,000. However, the loss of momentum means that the uptrend will become more gradual.
Bryan Routledge, professor of finance at Carnegie Mellon University’s Tepper School of Business, notes that cryptocurrencies have a number of use cases. Most importantly, they represent an investment in a new technology and a technology that is critical to the future economy.
That has happened before – think the dot-com bubble of two decades ago, Routledge says. But now, investing in new technology generally doesn’t involve investing in a new company but buying a new asset.
Similar to the dot-com era, there were many companies that failed, he noted. So far, one of the commonly discussed use cases for cryptocurrencies – like literal currency – has not really come to fruition yet.
Bitcoin is often compared to gold for fundamental reasons, but there are also a number of technical reasons, the moderator commented.
Since August of last year, when gold peaked and Bitcoin boomed, gold has fallen for six out of seven months, while Bitcoin has risen higher for six in seven, Stockton said. She hypothesized that Bitcoin could be seen as a store of value today, while gold was not helped by a stronger risk-taking attitude in the market.
The strong uptrend shows Bitcoin is currently a more risky asset, but it appears to be stealing buyers’ gold, notes Stockton. From the hedge fund community’s perspective, it’s a “welcome” alternative asset class, she said.
With that in mind, it’s still early days for Bitcoin and cryptocurrencies in general, Stockton said. “I think we’re probably still in the ‘innovation’ phase, representing opportunity, but it often comes with volatility.”
It’s hard to predict when volatility will drop, she said, but “it will probably take a long time for this new asset class to work, for people to understand what it is and figure out ways. to invest in it and for it to become a medium of exchange. Traders will say it’s something they can take advantage of, ”even if long-term investors are pregnant.
Bitcoin is considered decentralized but the financial industry that develops around it has made it more centralized, one executive commented. Routledge agrees it has a “great” focus. People don’t usually buy bitcoins, they buy debt often run through Coinbase or other exchanges, he noted.
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