Bitcoin is about to play catch-up to other risky assets
bitcoin·@jrcornel·
0.000 HBDBitcoin is about to play catch-up to other risky assets
# Is it possible that bitcoin is about to play catch-up to other risky assets? According to Tom Lee of Fundstrat, that is likely going to be exactly the case. Since December 24th, equities have rallied significantly, bitcoin not so much. The premise is that since bitcoin has been mostly correlated with risky assets over the past couple years, it likely trades with them going forward, at least in the near term. Specifically that of Emerging Markets and Small Cap equities. # Why does Mr. Lee think bitcoin is about to rally? He bases these thoughts off of data science. Since December 24th, US equities have moved up roughly 2 standard deviations. Small Caps have moved up roughly 2 standard deviations. Emerging Markets have moved up roughly 1 standard deviation. As we mentioned, bitcoin is most correlated with Small Caps and Emerging Markets. In fact, we can see that bitcoin followed Emerging Markets very closely starting just before 2016: https://i.postimg.cc/FRJ2hyCK/D13fwb-BXc-Ag-Ls-Qn.jpg (Source: https://twitter.com/fundstrat/status/1107287109340200960) And since that time, bitcoin has been flat... # How much does this imply prices might rally? If we apply that same standard deviation move up that EM and Small Caps have seen we get a bitcoin price of $10k-$20k, respectively. That would be anywhere from 3X-5X current prices. Lee was quick to say that this is not their base case going forward, but he does think that bitcoin is about to play catch-up at least to some degree. Whether it "fully catches up" is anyone's guess, but if there is any catch-up at all there is plenty of upside from current prices. https://i.postimg.cc/XJ89Ghz1/D13fwt-X4-AIi9-AN.jpg (Source: https://twitter.com/fundstrat/status/1107287109340200960) # What do you think, is he going to be right? Personally, I think he is going to be proven right. With the FED no longer raising rates, the dollar not strengthening any more, and other risky assets performing well, not to mention strong fundamental developments for the currency, I think we have some nice tailwinds for bitcoin right now. I would not be surprised to see bitcoin test $6k within the next couple months. Stay informed my friends. -Doc
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