Bitcoin To Tumble To $900; Silver To Climb 30% - Bloomberg Intelligence
(Kitco News) - Bitcoin is likely to mean-revert towards January 2017 levelsof around $900, paving the way for precious metals like silver to prosper,according to research from Bloomberg Intelligence (BI).
In a recent webinar, Mike McGlone, senior analyst at BI saidthat he remains bullish on blockchain technology, but the digital currency marketappears to be overvalued. He added that the speculator frenzy around bitcoin isnot reflective of the coin’s original purpose as a peer-to-peer electronic cashsystem, which has now become a “conduit to other cryptos.”
“The space is not what it’s designed to be, at least notright now,” McGlone said in the webinar. “A peer-to-peer (P2P) electronic cashsystem is exactly what it’s supposed to be, and it’s really transmogrified anda bit more of a speculative, frenzied way to get to other cryptocurrencies.”
McGlone noted that the entire crypto market is plagued byoversupply, with the 12-month rate of change of cryptocurrencies outstandingcurrently at over 8,000%, while on the demand front, the number of uniqueaddresses for bitcoin has dropped at the greatest pace since inception in 2009.
“The only way to reduce [excess supply] is prices,” he said,citing the emergence of forks and “copycats” as a main reason for bitcoin’sincreasing supply.
Bitcoin’s price is likely to “gravity pull” towards $900,which is the mean price since bitcoin sustained above $1 in 2011, the senioranalyst at Bloomberg Intelligence said.
The largest digital currency last traded at $6,794, down 65%from all-time highs in December, 2017. $900 would represent a further 87%decline from current levels.
Silver and bitcoin have historically held an inverse relationship,as risk-seeking retail investors flocked to the largest cryptocurrency when itrallied and took money out of silver, which is often called leveraged gold.
“The most recent parabolic cryptocurrency stretch (2012-14)coincided with the opposite in silver as the metal plunged from a three-decadehigh in 2011,” McGlone said in a recent report by BI.
Silver has been trading range-bound, but is set to test the$18 an ounce resistance level, said McGlone.
“Silver's 52-week range is the most compressed in 15 yearsand appears unsustainable,” the report said. “Silver's extreme compression projects a revisit of 2016's high.Sustaining below the December low would indicate failure.”
The report added that silver is poised to break out higher,following traditional drivers such as the Bloomberg Industrial Metals SpotSubindex, which gained 20% since November, and gold, which is up 6% for theperiod.
“Similar velocity changes in these key drivers equate toabout a 30% 12-month rate of change for silver,” the report said.
By David LinFor Kitco News
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dlin@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.