Adamant Capital is a Bitcoin alpha fund funded by Tuur Demeester, who is ranked by hive.one as the ninth most influential personality in the crypto verse. His company just published a new report featuring a bold conclusion on the current cryptocurrency market: the crypto winter is about to finish (but not yet), so this is the time to buy Bitcoin while is cheap in preparation for the ‘next’ bull run.
It’s not a first time for Adamant. It published similar reports in 2012 and 2015 explaining that Bitcoin was severely undervalued both times and they reported so.
“Now, at 75% below its 2017 all-time high, we believe the current bear market represents an exceptional opportunity for value investors,” write Mr. Demeester and another Adamant Capital expert, Michiel Lescrauwaet.
There is a jargon expression for this kind of thing. It’s called “accumuation phase” because this is when you buy (cheaply) as much as you can of an asset, and then wait for the market to turn upside down.
The current Bitcoin accumulation phase, according to Adamant Capital, will see BTC trading in a zone defined between USD 3k and USD 6.5k. The fund believes that the market capitulated (which is jargon for general panic) on Bitcoin during last November 18th. A lot of investors got out of the game, especially retail ones, affecting a 48% drop in price.
The report explains that retail speculators have fled the market several times in the past, and they illustrate and support their observations with several historical data points. And they left again about five months ago. Chances are they will keep away until the crypto summer begins.
It uses Google Trends data to show how retail investors are apathetic and disinterested based on the diminished number of Bitcoin-related google searches which are at a low ebb not unlike that of March 2017, at the time when the price was moving around the USD 1.5k level.
Decreased volatility also seems to show that retail investors are gone for now, according to the report, “High Bitcoin volatility can be a proxy for the involvement of trigger-happy retail speculators, whereas low volatility tends to coincide with phases of consolidation, apathy, and accumulation.”
The Hodlers make a comeback
Adamant’s report also boasts the market roles of long term Bitcoin holders. They’re known as hodlers. Standard crypto lore says they have the most significant influence on Bitcoin’s price. This notion was “officially” presented in a paper published in 2014 more as a technical resource than as an empirical fact. That being said, the idea is consistent with supply and demand and all we know (which is not all that much) about monetary theory as it applies to cryptocurrencies.
Hodlers stick to their Bitcoin tokens because they genuinely believe in the currency as a means to store wealth. But also because (some of them) consider in its future prospects as a genuinely viable option to replace fiat money all over the world while day traders just want to make a profit and leave. Another characteristic in the hodler’s attitude is that he’s not afraid of the dips.
For him, those are great opportunities to buy at the lowest possible price and then sit and patiently wait until the market goes back up. This crypto tribe is playing based on the fundamentals and strictly for the long run. Some of them are planning to keep their tokens out of circulation until they’ve made them rich.
Some others, until Bitcoin is ubiquitous and it better fulfills all the roles that authentic money is supposed to. Their lemma is “by the time we’re ready to cash out; we won’t have to sell.” That assumes that, by then, Bitcoin will enjoy wide mainstream adoption and it will be global and immune to politics.
It’s tough to pinpoint the hodler’s effect on the market price, but it’s not impossible. Bitcoin’s blockchain is transparent so, if you do your homework, you can figure out which wallet addresses are holding steady amid price panics.
So how do hodlers affect the market? By lessening inflationary pressure. Remember that Bitcoin was designed with inflation-control in mind since its very inception. That’s why only 21 million tokens will ever be mined. Hodlers take coins out of circulation hence producing deflation and increasing price. Yes, that remains highly theoretical, and nobody has been able to come up with a set of hard data that can prove this beyond any reasonable doubt.
In Adamant Capital’s view, hodlers were increasing their positions during most of 2018, taking advantage of dips, hoping for the prices to rebound. Then the whole market gave up. “That all changed in November 2018,” the report reads. “As the price dipped below $6,000, holders panicked and sold off coins. From November 14 to 16, over 70,000 Bitcoin days were destroyed, which was the biggest move of old bitcoins since February 23 of that same year.”
The report continues “Indeed, a lot of institutional investors got cold feet in late 2018, which we learned from talking to connected brokers and investment banks.”
Things seem better
The report sees an improved market sentiment. That happened as the new current year began. And it identifies something of a pattern that resembles those we’ve seen in previous Bitcoin roller-coaster cycles.
“We can see that the 2018 drawdown of 84% from the all-time high is on par with drawdowns from previous cycles (-92% in 2011 and -85% in 2014-15). In our opinion, the parallel with previous cycles is sufficient to validate our thesis that we are back in undervalued territory.”
Adamant identifies this as a natural process by which Bitcoin’s operations are mutating from high-volatility cycles to more stable ones in which volatility is not as bad (but not lacking either, at least until it achieves its final stability state, which is not going to be anytime soon).
“While the markets could dip back down for a re-test of the November lows (or lower still) to further digest the hundredfold run-up of 2015-17, we feel strongly that Bitcoin is undervalued at these prices,” says the report.
The report’s information and conclusions are quite impressive. It’s not overly optimistic as it’s not saying that the already protracted crypto winter is over, which has become something of a rule among a few analysts over the last couple of weeks. Rather than encouraging readers to get back in the Bitcoin game because of the potential short-term profits.
It instead explains that there’s still an uncertain period ahead that’s not a bad thing at all as it allows buying relatively cheap tokens that will go up in price significantly as the new bull run arrives. It’s optimistic, but it keeps the reader’s head cool.
We encourage anybody seriously interested in the state of the Bitcoin market to read this document with the utmost attention. It will be useful even if your cryptocurrency of choice is other than Bitcoin because the status it holds as the mother and father of all digital assets makes it exceedingly influential. When BTC price goes up, it drags the whole market upwards and vice-versa.
But also keep in mind that the cryptocurrency market is still very young and it’s not mature yet. The stock exchange has been around as a market for centuries, and even experts are still not sure how it works, and those very same experts don’t dare to mess with Bitcoin, for the most part, because it’s even harder to predict.
So when it comes to the crypto verse, nothing is written. There are no guarantees. Risks are there, and they can be very high. But that’s why it’s so much fun too, right?
Image courtesy of Pixabay.
Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.