Nearly two years into the pandemic, COVID-19 cases continue to ebb and flow, playing a central role in global economic activity. Nonsynchronous peaks and troughs of pandemic waves across core EMs have meant that the recovery is proceeding at varying and choppy speeds.
Activity appears to be rebounding strongly across EM Asia to begin the fourth quarter following a weak third quarter. The virus wave in EM Asia has receded sharply since our September publication, while manufacturing activity picked up substantially–as we had expected–in October as several countries emerged from lockdowns. Indonesia and Malaysia stand out among their regional peers, given their strong manufacturing recovery following a sharp contraction earlier (see chart 1). The region is a key part of Asia’s trade network and is integrated into global electronic and autos supply chains. Lockdowns here scrambled suppliers’ delivery times of components for production and final goods to other parts of the world.
After nearing $50,000 earlier this weekend, BTC/USD is now back around $48,000 — still down 16% in a week.
Against all-time highs of $69,000, the maximum loss overnight on Friday is so far 39% — significant, yet by no means record-breaking in Bitcoin terms.
What Influences Bitcoin’s Price?
Normal economic factors influence the price of cryptocurrency just like any other currency or investment — supply and demand, public sentiment, the news cycle, market events, scarcity, and more.
As price predictions dry up, attention is now focusing on a revival into 2022.
“For what it’s worth, my base case is that we consolidate/range till EOY, carve out a regime of mixed-negative funding rates/premium, before bullish Q1,” William Clemente forecast in a Twitter discussion.
A focus when it comes to the sustainability of price recovery will be derivatives markets after their cascade of position liquidations.
Friday’s events managed to somewhat “reset” open interest on Bitcoin futures to levels last seen in September at similar price levels to the pit of the dip.
New CPI data, new Inflation woes
Macro markets are already on a knife-edge, but this week may add some familiar fuel to the fire in the form of fresh consumer price index (CPI) data.
Due for November, U.S. CPI readings are tipped to outstrip even October’s shock 6.2% year-on-year reading.
Economists’ prognoses were noted by Lyn Alden, financial commentator and founder of Lyn Alden Investment Strategy. She added that housing, a lagging indicator not as present last month, would likely be a factor in the results.
Inflation already hit the headlines again last week after Jerome Powell, Chair of the Federal Reserve, appeared to imply that “transitory” was no longer an apt description of it.
Bitcoin immediately reacted, and bulls will be keenly eyeing the new CPI data in the hope of a similar knee-jerk response to that from October.
The cryptocurrency, despite recent volatility, is argued to be the best possible workaround for purchasing power protection, not least as inflation is in fact much higher when assets not covered by CPI are factored in.
“Everyone has double-digit inflation if they measure it correctly and needs Bitcoin more than they realize,” MicroStrategy CEO Michael Saylor, a well-known CPI critic in Bitcoin circles, warned late last month.
Central bank money printing, notably by the Fed, meanwhile recently attracted public criticism from the head of another sovereign state.
“Can you guys just stop printing more money? You’re just going to make things worse,” Nayib Bukele, President of El Salvador, responded to Powell’s “transitory” speech.
“Really. It’s a no brainer.”
Mind the gap!
Bitcoin faces a “giant” futures gap this week — one so large that it may not close immediately, but traders should not forget about it, says Cointelegraph contributor Michaël van de Poppe.
With derivatives traders only adding to downside pressure at the weekend, futures may nonetheless form a target for positive momentum.
CME futures closed Friday at $53,545 — a full $5,000 higher than spot price levels at the time of writing.
In line with tradition, BTC/USD may well rise to “fill” that gap, paving the way for at least a reclaim of $50,000 and support and possibly even its $1 trillion market cap.
“There’s going to be a massive CME gap to $53.5K later today,” Van de Poppe forecast Sunday.
“Quite often, like 99% of the time, they close at some point. At least an important level to watch coming weeks if the market continues to bounce for Bitcoin.”
The dip meanwhile succeeded in closing a previous gap to the downside which appeared at the end of November.
“Some minimal movements on the markets during the weekend, but I expect the real volatility to kick in when the weekly opens and the futures for USA launch again,” Van de Poppe added.
Fresh echoes of March 2020 as sentiment hits 5-month lows
Despite being just months after September’s price wobble, last week’s mayhem is drawing the most comparisons to the events of March 2020.
Then, as is now, Coronavirus formed the backdrop to instability, with BTC/USD selling off dramatically in a run that totaled 60% over the course of a single week.
This time around, the stakes were not as high, leading to descriptions of a “mini” re-run this month.
One key difference lies in market composition: 18 months ago, leveraged traders and their influence on the markets were a much smaller phenomenon.
“This Bitcoin dip was NOT driven by sentiment,” Danny Scott, CEO of exchange CoinCorner, said in a series of tweets Saturday.
“It was driven by gamblers leveraging and being liquidated. Sentiment is still very Bullish.”
While sentiment remains intact, Scott argues, the timing is serving to upend the positive mood and hopes that 2021 will finish with a boom rather than a bust. March 2020 saw a slow recovery from the lows which only accelerated around eight months afterward.
A look at the Crypto Fear & Greed Index meanwhile highlights the shock among many market participants, with 16/100 marking both “extreme fear” and its lowest score since July.
“The fear hasn’t been so low since May’s crash,” Van de Poppe added about the Index.
“The sentiment is literally comparable to a funeral. I like it.”
Hash rate de facto at all-time highs
One aspect of Bitcoin which is looking anything but bearish? Network fundamentals.
The panic among spot traders and doomsday mainstream press headlines made no dent in Bitcoin’s key network activity, underscoring miners’ long-term perspective.
Even a dip to $42,000 was not enough to compromise performance, and hash rate — a measure of the computing power dedicated to the network — remains near all-time highs.
Bitcoin Price Predictions
Conservative predictions of Bitcoin say the cryptocurrency will reach $100,000 by 2023.
Some experts are more bullish. “The most knowledgeable educators in the space are predicting $100,000 Bitcoin in Q1 2022 or sooner,” says Kate Waltman, a New York-based certified public accountant who specializes in crypto.
Others are hesitant to predict a number and a date, but rather point to the trend of increasing value over time. Investors should expect a “pretty sustainable” rise in Bitcoin’s long-term value driven by organic market movement, with the $100,000 threshold in near-sight, predicted Jurrien Timmer, director of global macro at Fidelity Investments, last month.
“What I expect from Bitcoin is volatility [in the] short-term and growth [in the] long-term,” says Kiana Danial, founder of Invest Diva and author of “Cryptocurrency Investing For Dummies.”
Unsurprisingly, you’ll find widely varying opinions and predictions on how high Bitcoin can go (and when) from well-known crypto investors, evangelists, and public commentators. Here are some more predictions we found, ranked from low to high over the next year:
- Point of View: Bitcoin investor and founder of crypto research and media company Token Metrics
- Prediction: $75,000 by the end of 2021
- Why: Technical data certainly proves $100,000 isn’t out of the question, but Balina told NextAdvisor he prefers to take a more conservative stance.
- Point of View: Technical analysis and blockchain data analyst
- Prediction: $250,000 by January 2022
- Why: Bitcoin crossing the inevitable $100,000 threshold will catalyze a euphoric bull run, Hyland has said on his Twitter account. Hyland cited as evidence the 150% move back in 2017 where Bitcoin rose from $8,000 to $20,000 right after Thanksgiving of that year.
- Point of View: Founder and CEO of the digital assets marketing and consulting firm Parallax Digital
- Prediction: $307,000 by October 2021 (now passed), and $12.5 million by 2031
- Why: Inflationary pressures after COVID-19 will drive interest in cryptocurrency, pushing the value of Bitcoin up higher than previous projections estimated. In an interview earlier this year, Breedlove also pointed to how the last quarter of 2021 is roughly 510 days after an event called “halving,” in which Bitcoin’s algorithm changes the reward for mining transactions on the blockchain. Breedlove said past halving events have been followed by new highs roughly 500 days afterward.
And it isn’t just crypto insiders who are making Bitcoin predictions. Big financial institutions have made their own predictions, as well, with JPMorgan predicting a long-term high of $146,000 and Bloomberg predicting it could hit $400,000 by 2022.