Having Lost $15,000, Bitcoin Has $2,000 More to Go; Here’s Why

LONDON (Capital Markets in Africa)  — The Bitcoin price has fallen by about $15,000 since its Dec. 18, 2017 peak, hovering around $3,400, and key indicators give us reason to believe it has another $2,000 or so to slide. There’s little to stop it from revisiting the $1,000 range, about where the 2017 frenzy began. 

Highly correlated to Bitcoin (BTC), estimated dollar-transaction value has declined to levels last when the cryptocurrency’s price was about $2,400. For most of 2018, the measure flashed warnings that BTC was priced too high. It still is. May 2017, when BTC first traded above $2,400, was the last time the 30-day average of dollar-based transactions from Blockchain.com was at current levels. Despite this average measure of past transactions, the scale of our graphic shows it acts as a leading indicator.

Clearly in a downtrend, with prices briefly dipping below the white transactions line in December, BTC should drop a further $1,000 just to catch up with plunging transactions. When 180-day volatility bottomed in October 2015, transactions were in a clear uptrend. We expect new lows in volatility for a similar indication. (01/29/19)

Unique Bitcoin addresses used may be stabilizing, but they’re at levels last associated with much lower prices. One of the most consistent BTC overvalued indicators last year, addresses used remain close to the 2018 lows that were previously associated with 4Q16’s price range of $700-$1,000. The 30-day average of Bitcoin unique addresses used from Blockchain.com showing comfort below the 2017 lows indicates the crypto’s winter is unlikely to be over until that full rally is retraced.

for volatility and the network value-to-transactions (NVT) ratio — akin to stock-market P/E ratio, but for Bitcoin — indicate lower prices. Both are heading down, but remain far-above the levels that have typically marked price bottoms. The end of 2015 was the last time these measures marked a nadir. That near-simultaneous trough set the stage for the bull market, when prices surged to $19,000 from about $300. The indicators should breach the 2015 low, if history is a guide, notably volatility.

Natural maturation of the nascent asset class, and increasing ways to participate, should pressure 180-day volatility to new lows this year. At about 200, the 10-week average of network value-to-transactions from Blockchain.com is more than double the average since 2010 and well-above the 2015 bottom of about 40. 

Source: Bloomberg Business News