First Mover: Why Mohamed El-Erian Might Have Held Bitcoin at $19K – CoinDesk
“There is no doubt that $20,000 remains a barrier, both from a technical perspective and on an ideological level,” Simon Peters, an analyst for the trading platform eToro, wrote Monday in an email.
None other than Mohamed El-Erian, chief economic adviser for the German financial firm Allianz, which has €2.3 trillion euros of assets under management, tweeted last week that he had sold bitcoin after buying some two years ago at $4,728. The original purchase was made “not on a deep analysis but rather on the basis of technicals,” as well as to get “a feel for what’s becoming a more popular holding,” according to the tweet. The decision to sell was “again not based on any deep analysis,” he wrote. Based on a rough analysis by First Mover, El-Erian quadrupled his money on the round trip.
As discussed previously in First Mover, one of the problems with valuing bitcoin is that the cryptocurrency was just invented 11 years ago, so there’s no deep history of reliable analytical factors to key off, such as the stock market’s price-to-earnings ratios, bond-market yield comparisons or even the supply-and-demand forecasts used in commodities.
Greg Cipoaro, global head of research for NYDIG, an investment firm that recently raised $150 million for two new cryptocurrency funds, has authored a report arguing that growth in the Bitcoin network could justify a price range of $51,611 to $118,544 in five years.
“Given our view that, as an emergent successful money, bitcoin’s fundamental value derives from its network effects, bitcoin’s value should roughly adhere to Metcalfe’s Law,” according to the NYDIG report. “This may be an important insight for investment professionals who, understandably, require anchoring around a fundamental valuation framework as a necessary component of their allocation diligence and analysis.”
“People are trying to sell at this level based on what happened during the 2017 bull market,” Simon Chen, executive director of investment and trading at Hong Kong-based crypto lender Babel Finance told CoinDesk. Bitcoin peaked near $20,000 three years ago and fell as low as $6,000 by early February 2016. The bear market ended near $3,200 in December 2018.
Data extracted from the Bitcoin blockchain network backs Chen’s analysis. The number of accumulation addresses – a proxy for those who are buying and holding – has dropped to 495,000 from 514,000 over past four weeks, according to data source Glassnode. The decline suggests that some longer-term investors might be taking profits at these price levels.
Accumulation addresses are those that have at least two incoming “non-dust” transfers (representing minuscule amounts of bitcoin) and have never spent funds. The metric does not include addresses belonging to miners and exchanges and excludes addresses active more than seven years ago to adjust for lost coins.
According to some analysts, the cryptocurrency needs to make a quick move above $20,000 to avoid a drawdown. “I think the longer bitcoin continues to reject $19,500 and $20,000 with whale-induced sell-offs, the probability of some more consolidation/correction increases in the near term,” market analyst Joseph Young tweeted.
“We haven’t before had a technology with element-like properties, that emerged in a technology-rich era ripe for catalysts, at a time buffeted by so many other society-transforming trends and events,” CoinDesk Research Director Noelle Acheson writes in weekly column, arguing that another bitcoin can’t just be easily spun up (CoinDesk)
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