Bitcoin recovery receives dreadful warning from a top financial analyst

Ever since that mysterious Asian investor (or a group thereof, nobody knows for sure so far) placed that big buying order for Bitcoin last April 2nd, the Bitcoin market has experienced something that looks like a bullish run, but that could still not be. The effect hasn’t been limited to Bitcoin.

Because the mother of all cryptocurrencies is so influential in the cryptosphere by being the largest one and also by being the main base-currency in most crypto-to-crypto exchanges, what’s good for Bitcoin is good for almost all crypto coins. So the whole market has been going up for seventeen days now.

Bitcoin’s price grew at epic proportions during 2017. During that same period, the ICO mania that seemed to take over the crypto verse pushed the price of most tokens up to never before seen levels. The peak came on December 17th with Bitcoin above USD 17.000,00.

And then the next day arrived. With it came the bearish run that gave us a crypto winter that has taken away about 85% of the market’s value and that’s lasted for more than 16 months. The 2018 events forced many reputable (if over-optimistic) analysts to swallow the words they said or wrote over how good 2018 would be for crypto.

And that’s where we stand right now. At a point in which the last few weeks have been good for the market, but the harsh winter’s memories are still too fresh to be too optimistic. Is the current market status the beginning of the next big bull market or just a reaction to that now legendary buying order?

An expert opinion

One of UBS’ main tech analysts has something to say about the current situation, and while he’s not prophesying any doom scenario, he’s not all that optimistic either. In his analysis, the recent recovery (which has been modest, anyway) doesn’t mean that Bitcoin will recover its previous high levels in the short term. Not even if it’s gained about 40% for the last four months.

While Bitcoin’s price lost a lot of value during 2018, it gained in another critical aspect: stability.

That’s an essential feature for analysts because it tells them (or so they tell us) that we are going through a bubble-busting phase. “The argument here is that bitcoin has gone through its bubble phase and is ready to rise phoenix-like from the ashes just as other assets and indices did in the past,” wrote Kevin Dennan (the UBS analyst) in a research memo for customers.

Mr. Dennean drew parallels between Bitcoin’s 2017 bonanza with previous (and notorious) bubbles such as the Dow Jones before the Great Depression, the 1989 Nikkei fiasco, the dot com bubble in the ’90s, oil in 2008 and China’s most recent stock calamity.

“We’re struck by how long it took other asset bubbles to recover their peak levels (as long as 22 years for the Dow Jones Industrials) and how pedestrian the annualized returns from trough to the recovery often are,” Dennean added.

If Bitcoin follows on the Dow Jones footsteps after 1929, Bitcoin holders would need to wait 22 years before they can recover their December 2017 investments. With an added problem. It was World War II and its aftermath which prompted that recovery, and no such catastrophic event insight would boost Bitcoin back up.

Mr. Dennean referred to several asset classes that lost more than 75% of its value after peaking. Only two of those ever went back to their highest levels.

Perspective

The kind of analysis presented by the UBS expert is quite valuable insofar as it promotes prudence. Too many optimists are already persuaded that the bearish winter is already over, and that’s a dangerous position to be in, especially if it turns out to be incorrect.

That being said, the crypto verse is an entirely different animal from the stock market, forex, commodities, or any other traditional financial market. Over the decade Bitcoin has been around, we’ve seen it go down by 80% or more about four times already. Each time it’s bounced back with a vengeance to reach even higher levels.

So we do not doubt a recovery. It will come in the future, and it will make 2017 look like small potatoes. When will that happen? We have no idea whatsoever. But you should keep in mind that neither does anybody else.

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.