Bitcoin

The short answer: we do not see Bitcoin rising to $160,000 anytime soon. It may be a very long term target, potentially, but not by 2020 or 2022 which was the timeframe we used when we published this Bitcoin price forecast.

One of the most important reasons for this is the introduction of Bitcoin futures. This allows large investors to put pressure on Bitcoin’s price in a way not seen before. In other words, the introduction of Bitcoin futures on December 17th 2017 resulted primarily in subdued returns to Bitcoin going forward.

Moreover, with so many Bitcoin ETF proposals submitted to the SEC this year we start seeing a trend that is somehow concerning for our Bitcoin price forecast. As said, a physical Bitcoin ETF was rejected in April of this year. On August 22nd the SEC decided to reject 9 more Bitcoin ETFs. As per Bloomberg:

“The nine ETFs denied this time around came from three sponsors: ProShare Capital Management, GraniteShares Advisors and Direxion Asset Management. All of these funds sought to use futures contracts to get exposure, with several planning to short Bitcoin. The regulator had a hard-deadline to deny or approve all of these products over the next month; their requests to list had been pending since December and January. Investors’ hopes for a Bitcoin ETF now rest on just one fund from VanEck Associates Corp. and SolidX Partners Inc. The regulator this month pushed back a ruling on that product until at least September and could ultimately take through February to make up its mind.”

What we see is an emphasis on non-physical Bitcoin ETFs. The ETFs that are submitted are primarily derivatives. They can go short, or are correlated to Bitcoin futures. We don’t like this, at all in fact. Only physical Bitcoin ETFs are good for the Bitcoin market, derivatives bring a market to another state.

On the flipside, however, institutional investing is likely going to enter Bitcoin in 2019. Think of the Bakkt platform as well as the Nasdaq offering cryptocurrency investing to institutions. That’s a positive.

All in all we believe increasing derivatives in Bitcoin’s market will put pressure on returns. The $160,000 Bitcoin price forecast which we did set by 2022 is not realistic in current circumstances.