Bitcoin and Alt-Coin Markets Adjust in First Week of 2018
Bitcoin sits near $17,000 at the end of the first week of 2018’s trading, setting the tone for a year which will include volatility, intrigue and rising prices. The trading and investing world will identify Bitcoin for what it is – the core crypto currency – in our lifetime. But the important thing about Bitcoin or any digital currency in this early phase of the cycle is price.
Bitcoin, Litecoin, Ethereum, Dash or Ripple get attention because of price. The explosive media cycle coverage revolving around Bitcoin is due to price, and when an asset moves from $1000 to $17,000 in 1 year writers will write about it, editors will post information on the front page, and investors will invest. We live in a world of capital markets, and capitalism at its core is about money, regulated or unregulated.
It is important to consider that the higher prices will dictate everything. If Bitcoin trades $22,000 in Q1, every time it makes a new high you will hear about it. Also consider that when the price goes down you will hear about it, and investors will buy Bitcoin and other currencies on pull-backs, and they should.
I expect Bitcoin to trade $50,000 by 2020 and then settle into a price range that reflects its valuation as a viable currency versus the speculative investment it is now. Only a handful of investors knew that Bitcoin was (essentially) a penny stock in 2015 while languishing between $200 and $300 per coin, and hardly anyone knew it would become the most important financial instrument of our lifetime. Most tech guys thought it would be a cool way to pay for things outside of fiat currency in a potentially decentralized world. The essence of tech geekdom is the freedom to operate outside the norm, the ability to not report to bosses, or not clock in at the office. Most geeks are happy sitting in the proverbial basement writing code in their pajamas, eating Captain Crunch at lunchtime. At night they unplug and assemble digital miners that loudly mine Dash, or Litecoin.
This is a world that has existed beneath the surface, and now the geeks are rich, but still delightfully awkward in any environment where they must communicate with anything except the hardware or software. This world has been building since the 70s and garages all over the world host the brightest minds amid the quiet of a purring computer fan. You know these men and women, you run across them all the time, but you never really know them. Digital Currency will enable you to know them because they know the value of the assets they mine and own, or intend to own.
Bitcoin prices will remain volatile, and all of the Alt-Coins (anything other than Bitcoin) at lower prices will close the gap with Bitcoin over 2018 in valuation. This is happening already. Have a look at the top digital currencies by market cap (please get to know this term and appreciate that it applies in digital currencies just like it applies in equities) and what you see is the combined Bitcoin ($284B) + Bitcoin Cash ($46B) valuation is more than half of the total $650B of the Top 10.
So Bitcoin dominates as the benchmark (think S&P 500 Index) with these other midcaps and smallcaps rising and falling as they hit investors’ radar. This is a period of discovery in Alt-Coins, as they cross into the $10B valuation stratum and fall in and out of the top ten like a College Football ranking, and it is cool to watch.
Let me give you an example. When a strange coin called TRON (see #10 below) vaults above the $10B ceiling every investor clamors to get in on the coin gold rush, and this momentum itself propels the valuation even higher. It is the equivalent of microcap investors piling into a thinly traded OTC security causing volume and prices to skyrocket – though the key difference between the OTC pump and dump analogy and the rush into Alt-Coins is that there is no dump.
The coins are not getting dumped, they are just going up. There is no nefarious trader waiting to pull the plug. The coin has a future spot in the digital world and the market has just begun, and there are more investors wanting to buy than there are ways to get in. It is a great day when I sit at my computer and IOTA and TRON are symbols on my mind versus IBM and GE. But in the end they are all just symbols. Thank You for reading and Happy New Year.
Steve Kanaval
Portfolio Manager/Writer/ Market Analyst
Can be reached at [email protected] or LinkedIn
Steve began his career in the Trading Pits in Chicago making markets at the Chicago Mercantile Exchange (NYSE:CME) the Chicago Board of Trade and the CBOE in the early 80’s. He ran the Morgan Stanley Derivative Prop Trading for the firm specializing in Index Arbitrage. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90’s managing large portfolios. Steve is known as an expert in MicroCap Technology Stocks and the emerging Digital Currency markets as a Portfolio Manager for his Family Office. Steve has managed portfolio’s in volatile asset classes for 3 decades as a commodity trader, hedge fund manager and digital currency trader and miner. Steve publishes his views on the asset classes in a public forum and has published more than 10,000 articles simplifying these complex and volatile assets for readers. His work is published on multiple sites including Bloomberg, Equities.com, Hacked.com, CryptoCurrencyNews as a paid contributor. His work includes research, journalism and archived video on important market volatility related to stocks, digital currency and other volatile misunderstood asset classes. He offers a humorous, unique insight and the related back stories and drivers for readers interested in volatility and emerging market assets.
Full disclosure Steve is long 25 digital currencies and sits on the board of multiple public companies involved in digital currencies, and owns shares in these companies from time to time.
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